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Banking is not dead thanks to Fintech

According to the first part of the book, banking is being broken down into its smallest components as a result of progressive digitization and media change. It atomises and settles on the big digital platforms and ecosystems. The function (banking) is looking for a new form (platform / ecosystem). Further, less centralistic forms are conceivable. Despite all the signs of dissolution, a renaissance of banking is beginning.

The transition

In the past, an economy drew its strength from its production base, its capital stock. Machines, buildings and raw materials were the mainstays. With the transition to post-industrial society (Daniel Bell), theoretical and practical knowledge became the most important resources.

The Informational Zeitaler, whose theoretical foundation was laid in 1948 by Claude Shannon in A Mathematical Theory of Communication, began. Production processes could be described mathematically and mapped / coded with software. In networked production (Industry 4.0), machines receive a digital twin. Which, if you like, digital twin of man is his digital identity. Both belong to the group of information goods.

Today, a digital twin can be created for every asset

Digital twins can be equipped with rights and obligations. To a certain extent, they can carry out transactions independently (orders, payments)”.

The next step is the Tokenization of Everything. i.e. Assets are virtualized and their value divided into small tradable units (tokens). The digitization of assets is therefore considered the biggest challenge and opportunity of the financial industry (See: The tokenization of assets is disrupting the nancial industry. Are you ready? & Digitization of property).

A few days ago, Bitbond was the first FinTech startup in Germany to receive BaFin approval for trading in security tokens.

Software robots expand their field of activity

Robotic Process Automation (RPA) has entered banking in recent years. So far, their use is limited to the completion of routine activities. However, that could change in the foreseeable future, as Brian Arthur points out in The second economy. According to Arthur, the increasing intelligence of automated systems is the biggest change since the industrial revolution.

The muscle system of the industrial revolution is replaced by the nervous system of the digital, networked economy. The intelligent automated systems are designed to detect and respond to changes in the outside world through the use of sensors. Multi-agent systems are also conceivable that are able to handle even complex tasks – both in production and in banking. In 2017, the head of Deutsche Bank at the time, John Cryan, caused a sensation by saying that, after people who behave like robots work in the banks, robots will behave like humans in the future. Great potential lies Udo Milkau, in the combination of Artificial Intelligence and RPA.

Vaporization leads to the race for the Universal Identity Graph

As already mentioned, the vaporization captures the digital identities of people and machines. Both humans and machines leave data traces in the network, which can be combined into one image, the identity graph. Even today, companies like Tapad, drawbridge and ThreatMetrix offer their own identity graphs. The added value of the Identity Graph is that it allows him to visualize the diverse interplay of people, devices and interests and to assemble them into a meaningful image. The real pioneer is Facebook with its social graph.

Facebook’s social graph is a matrix that captures relationships with friends and contacts for each user, with cross-references to common interests, memberships, affiliations and locations. At the intersection of friends and interests are the attributes that marketers most crave: enthusiasm, commitment, priorities, goals, and identities.

Ralf Keuper, Bank Style Ralf Keuper is a banker and graduate in business administration and has been working in various positions in the banking sector for around 15 years. He advises banks on digital transformation and FinTechs on their market entry. Keuper worked as Senior Consultant Banking at COR & FJA AG and Senior Consultant Banking & Financing at Steria Mummert Consulting AG. He comments on his blog is a bank and business administration graduate and has been active for around 15 years in various positions in the banking sector. He advises banks on digital transformation and FinTechs on their market entry. Keuper worked as Senior Consultant Banking at COR & FJA AG and Senior Consultant Banking & Financing at Steria Mummert Consulting AG. He comments on Industry 4.0, the Internet of Things (IoT) and Digital Identities, which have major implications for banking, on his blog Identity Economy. What’s more, banking becomes part of the data and platform economy. He has taken up position in various contributions and events. All posts by Ralf Keuper can be found here

Banking is looking for a new form

The one vendor that can produce the most meaningful graphs that has access to most devices and users – like Apple, Google, Facebook, WeChat, Amazon and Alipay has a great strategic advantage. This continues to explain why Google, Apple & Co. are moving their sensors towards all device classes, such as houses, cars and machines. This can be used to create cross-references and to map contexts in a breadth and depth that significantly exceeds the possibilities of retailers, automobile manufacturers or banks (see: The Race for the Universal Identity Graph). However, unlike Facebook, Google & Co., banks have verified identities. A lot of the effort that Google & Co. drive to determine the identity of the users, accounts for the banks. In itself a not to be underestimated competitive advantage. So far, banks have no idea how this advantage translates into new data-sparing products and services.

Although the number of bank branches is falling and banks, as we know them, will disappear from the cityscape, it does not follow that there will no longer be “banks” in the future. They will simply fulfill other functions, such as Personal Data Banks, Identity Banks, Data Cooperatives or Digital Asset Managers. Above all, they will fulfill their traditional role as information processors and risk managers of the economy, as with banking secrecy 4.0. (See also: Digital banking secrecy 4.0 – a new business field – banks as protection against total surveillance). This signifies nothing less than a renaissance of banking.

Social and technological innovations go hand in hand

In the future, the new banks could provide their customers with personal digital assistants who act on their behalf on the Internet. Or in the words of Dirk Helbing:

It is conceivable that each one of us has an artificial intelligence based personal digital assistant who over time learns which companies or institutions are so trustworthy that one can leave their data to their use.

Since the race with the US and China in terms of Artificial Intelligence and Big Data has already run anyway, Helbing considers it much more promising if we focus on the topics of Informational Self-Determination and Participation (see: “It’s time for a digital reinvention of democracy and capitalism. “).

The answer would therefore be less on the technological, but on the organizational, institutional level – as with the redefinition of what a bank is or what forms banking in vaporized society can accept and whose interests banks want to represent. ”

Decentralized technologies, such as Blockchain or Distributor Ledger Technologies in general, could be a means of achieving the goal. Technological and social innovations go hand in hand.

Published inFintech

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