Wajahat Qazi/WION, India:
As disruptive technologies shake up and rejig the business and commercial landscape, upend business and financial models thereof, somewhat exponentially, established and incumbent firms are finding it difficult to “catch up”, so to speak. (It may be pointed out here that disruptive technology was a term coined by coined by Harvard academic Clayton Christensen and refers to technology that displaces an extant one and creates new industries and even markets).
While Artificial Intelligence (AI) and the Internet of Things (IoT) might constitute examples par excellence of disruptive technologies, there are other lesser known ones too that jostle and jockey in the domain of business, finance and technology. So far, it would appear, a pronounced impact of disruptive technology has been on what has been termed as “Fintech”, that is, an assortment of financial technology that promises to redefine the financial services industry. In this respect, what appears to be an inevitable concomitant of disruptive technology and Fintech, Facebook, the social media giant has asked banks and financial institutions to share customers data with the firm, to basically help improve customer service.
Before dwelling on the nature of Facebook’s offer and its implications, it might be prudent here to put the impact of disruptive technologies into perspective. Traditionally, the business and commercial landscape used to be somewhat staid and predictable. Firms, in a given environment and landscape, developed and cultivated strategies that corresponded to this predictable environment. In this milieu, Michael Porter, another Harvard academic, held to be a business guru, developed an industry analysis, which many firms held to be a peg of developing and sustaining competitive advantage. Other also developed their strategic concepts and models but, in the main, could be said be variations on this very theme.
Enter disruptive technology
However, with the entry and elevation of disruptive technology on the scene, so to speak, what is happening is a dramatic shift both in the nature, conception and design of business and strategy thereof. The bevy of start up’s , which could challenge incumbents, and develop a new ecosystem, constitutes one glaring example of this. However, the trend or development poses a challenged to incumbents and, at this point in time, the impact is perhaps more pronounced in the financial services industry which, among other things, is experiencing “deverticalisation”.
As more and more people migrate to the online, virtual world, nimble fintech start up firms, are taking on the functions , that were traditionally the domain and even prerogative of banks, like the payments systems , for example. (Now, it would appear, the new frontier for fintech firms is consumer finance). As more functions of traditional financial institutions get cannibalised by fintech firms, the choice before these institutions is to either develop these technologies themselves and compete with fintech firms or collaborate with these.
(The development also has implications on banks’ business and operational models and corporate strategies. Say, for example, should a given bank’s focus be on its cost structures , or brand and then collaborative “outsourcing” of its retail or consumer finance divisions to fintech firms?)
It is here that Facebook’s offer to banks and financial firms becomes relevant. The putative dramatic shakeup of the financial services industry carries the potential of making real and rendering true the mantra, “customer is king” ( generally , a somewhat elusive and glib cliché till now), by taking service to the consumer(customer), even in terms of mass customiser service. But, there are obvious issues with Facebook’s offer. The firm’s ungainly and unethical dalliance with Oxford Analytica is still fresh. And, by the standards of Oxford Analytica scandal, the data and information that lies with banks, is humungous. How, the question is, can Facebook be trusted with this data and personal information? How can it be known that the ostensible reason that Facebook has trotted out is its real reason?
There, at this stage, can be no clear answers to these questions. Yes, Facebook has the advantage of scale and depth which might make firms tempted to take up its offer. But, unless there are no firm and clear cut guarantees that there will neither be data and privacy breaches and that this data would not be misused, financial institutions and banks must look at the offer carefully and with due diligence. In the meantime, disruptive technologies are set to shake further the world of business, finance and commerce. It is going to be a world where past paradigms are going to be radically upended and will have obvious social implications. The best or most prudent response would be to brace for the coming change and be ready for it, lest it overwhelms societies and polities , in ways, that could be irreversible.