How banks can compete in the post-neobank era

an article written by Ron Shevlin, Chief Research Officer at Cornerstone Advisors

There’s a concept in the blockchain world called a hard fork, defined as:

“A change to a network’s protocol that makes previously invalid blocks and transactions valid, requiring all users to upgrade to the latest version of the protocol software.”

According to Investopedia, “forks may be initiated by developers or members of a crypto community who grow dissatisfied with functionalities offered by existing blockchain implementations.”

Banking’s Hard Fork

The “hard fork” is an apt analogy for what the banking industry is facing. Strategies focused on physical attraction (marketing) and distribution—where branches serve as customer attractors and points of service and delivery—are increasingly “invalid,” requiring banks to “upgrade to the latest version of the protocol,” i.e., digital marketing and distribution.

Banking’s hard fork is about more than just marketing and distribution, however.

Blockchain hard forks are often initiated in response to “dissatisfaction with functionalities offered” by the implementation.

It’s the same with banking. Consumers and small businesses are dissatisfied—or, at least, less than enthralled—with the “functionalities” offered by banks’ typical debit and credit products.

Banking’s hard fork will require financial institutions to create new strategies. Strategies that rely on: 1) branches to attract and sell; 2) geographies to determine who to sell to; and 3) customer experience to differentiate won’t produce acceptable levels of growth and return on assets.

Embedded is the new “protocol”—but banks must decide between an embedded fintech and an embedded finance strategy …

The full article here