Yesterday, I wrote that ICT anchored the competitive evolution of Nigeria’s new generation banks, by unleashing productivity in the sector. I made a case that Internet, through its unbounded distribution, will destroy some of the banks, if they fail to adapt.
While ICT provided unprecedented productivity in the Nigerian banking sector, Internet is seriously “destroying” value. This is a “problem”. ICT made them, Internet could destroy some of them. Internet is bringing the construct of creative destruction in the Nigerian banking sector where values are destroyed and new opportunities unlocked. But those new opportunities are not going to be, exclusively, within the controls of the banks.
What Internet is doing today is expanding distribution of banking services thereby putting pressure on banks to control pricing on their own terms. Before Internet, they could charge huge fees to transfer money for clients to foreign accounts via their treasury departments, but today, with internet, there are options. The customers could simply use their debit and credit cards to settle the bills without first spending money on bank fees.
What Internet is doing to banking, it is doing in other sectors. I noted the redesign in the airline, entertainment and other industrial sectors. Internet is commoditizing many elements of commerce.
Now, I make a case that for some financial services, we may not even have a need to have firms. In other words, if Internet can link supply and demand efficiently, the core essence of firms will collapse. Companies exist to handle the friction which exists between supply and demand, as noted in the refereed piece above.
The essence of firms is to make sure that demand and supply have lesser friction. If you can use internet to remove that friction between demand and supply ( i.e. they can come together, with ease), you do not need firms. For example, if a saver can efficiently find a borrower, there is no need, partly, to go to a bank to put money to earn interest. If Internet attacks that, the heartbeat of most business sectors will be damaged.
Why Internet Will Destroy Fintech
At maturity level, Internet could enable seamless linkages between sellers and buyers in many industries: the implication is that many companies will disappear. Who needs an accountant when all transactions are powered by blockchain? Many areas we see in fintech (financial technology firms) will disappear; some include:
Remittance: As internet matures and the core elements developed, the world will have one “currency” and the elements of remittance will not be needed. Besides, the transfer of funds, if necessary, can be done without fintech in the midst. We already have companies doing remittance for free between U.S. and Europe. In future, that will not be a service because technology will make Internet to get all nations and their currencies to converge.
Payment: In a blockchain, no one will need a bank or fintech to facilitate payment. The buyer and seller can exchange blockchain transactions to effect deals. It is going to be an advanced mPesa where buyer pays seller through the mobile number, except that mPesa is not owned by any corporate entity
Lending: With most frictions gone, lenders will lend to borrowers and all contracts sealed in the open general ledger of blockchain. The need for fintechs and banks will be limited.
As I noted in the piece, anyone that thinks that because it is a fintech, that the wave will flow in its direction could be wrong. Internet will redesign and even destroy the companies it had made possible. Internet is making today’s fintech possible and it may not spare them. When consumers have unbounded access through unlimited distribution channels to immense product supplies, made possible by Internet, business will be totally different from the way we see it today.
As the distribution happens, IT utilities like Google, Amazon, and Facebook will be the clear winners. They will continue to tax advertisers or partners for access to web users who will see the world through their lenses. And with limited efforts they will make that linkage between buyer and seller easier displacing other entities. If you live in the Amazon universe and your neighbor does, you can shop for more than 80% of your life needs. Who needs a currency, when Amazon currency will suffice? Extend that to the top 10 digital firms, you will have a different world. They can lock the ecosystems making it extremely hard for any other firm to participate. They can take us to that friction-less commerce, except now the digital universe is within their domains.
All together, prepare for an unconstrained future. Fintech cannot be talking of disruption because they are also vulnerable, if the very pillars of Internet remains: unbounded distribution and commodification of value. The services would be endangered if blockchain becomes the pillars of modern digital economy.
Jumia parent company, Rocket Internet, is buying back its shares. This is certainly surprising for a company that is known to be raising new funds to start new digital companies or pump into current ones. Buying back its shares means that it is turning everything on its head. It wants to return money to investors? Not really, I do think it wants to boost its share price, which is not a bad thing.
The Management Board of Rocket Internet SE (“Rocket Internet”), with consent of the Supervisory Board, has resolved to carry out a share buy-back program with a total maximum consideration (excluding ancillary costs) of up to 100 million Euro and a maximum volume of up to 5,000,000 shares, representing a maximum of up to 3.03% of the outstanding share capital of Rocket Internet (the “Share Buy-Back Program”). The buy-back will be executed via Xetra trading on the Frankfurt Stock Exchange and will begin on August 14, 2017 and end on April 30, 2018. The repurchased shares are intended to be redeemed, and Rocket Internet’s share capital is intended to be reduced accordingly.
First, share buy-back “occurs when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors”. For Rocket Internet, there are three main reasons why this company will do this:
Rocket Internet shares are very cheap, so it wants to get many out there in-house. You buy back when you believe that your stock value is undervalued by the market
Vision is stunted, so buy-back can generate short-term share appreciation. You have no practical means (minus the share buy-back) to generate value which will move the shares.This comes after many frustrations that nothing has worked, over months and years, to get the stock going north.
Balance sheet is dislocated and some funds can be expended to pump up the shares. You have very terrible ratios and by reducing the number of shares available, you will magically improve many indicators like earning per share. Just like that, you will join some clubs, because the ratios will look good.
Many short-term investors will rush to the stocks to take advantage of this announced buy-back. As interests build, the stock will appreciate in value over the next few days, weeks or months since it expects to end it around April 2018. So you will see a decent price per earnings over the next few months.
Rocket Internet is doing well and it deserves a lot of commendation for even having this type of money to spend on buy-back. It does means it is generating cash. Over the last few months, they have listed a company (food logistics company Delivery Hero), sold companies (its Lazada stake to Alibaba), raised new capital, went to bond market and did all they needed to do to survive. The brilliance of the Management has seen the company holding excess of 1.7 billion euros in cash reserves. That is not a small feat.
As expected, the stock appreciated more than 6% in the German bourse where it is traded. The short-term investors are excited for quick gains. Yet, this stock position is still about half of its IPO value when it went public in October of 2014.
Rocket Internet has one big issue: HelloFresh, its meat-kit company, is undermined by the unfortunate performance of Blue Apron which went public and is turning out to be a disappointment. Amazon is rumored to be interested in this sector with the acquisition of Whole Foods. So, investors are careful in putting money in a company which may be unable to compete with Amazon, if it decides to enter the sector. With the performance of Blue Apron, there is no clear path to take HelloFresh public. This is partly one of the reasons why the stock is languishing. This share buy-back could help, albeit temporarily. They will get the rocket, in Rocket Internet, in-house, of course, nevertheless.
We have received a copy of the National Science, Technology and Innovation Roadmap (2017-2030). We are studying and will discuss contents later. Meanwhile, here is the Executive Summary, from the 197-page tome.
National Science, Technology and Innovation Roadmap (2017-2030) – Executive Summary
Nigeria is a country that is rife with talent and abundance of natural resources but is yet to achieve its potential in the development and application of science, technology and innovation (STI) effectively in national sustainable development initiatives. The deepest constraint has been non-implementation of effective schemes for propagation of talent and harvesting of the immense intellectual capital of Nigerians which if applied to Nigeria’s economic development challenges, would yield innovative systems and products for sustainable economic growth and competitive advantage over other countries. Oil dominates Nigeria’s trade, contributing about 90% of total export earnings as crude oil, an unprocessed material that does not contribute significantly to other industrial activities. The Nigerian industrial sector contributes only about 3% of Nigeria’s export revenue but gulps overs 50% of Nigeria’s imports, thereby ravaging the country’s balance of payments. It is well-recognized that there are some constraints to the attainment of Nigeria’s comprehensive development plans as well as sector plans, among which are inadequate power supply, limited financing, skilled mismatches and historical social system instabilities
Nigeria needs to diversify its economy by capitalizing on its huge talent bank and abundance of natural resources. This implies stimulation of productive activities and adoption of export mentality in other economic sectors such as agriculture, low-medium technology manufactured products, pharmaceutics based on local biological resources, processed minerals, and ICT services. Focusing on Nigeria’s 2014 Industrial Revolution Plan and many multi-year integrated and sectoral development plans, that targeted intensification of local manufacturing, the primary constraints have been inadequate infrastructure; shortage of skilled manpower; poor linkage to industrial subsectors; over dependence on export of raw materials; the subsistence nature of manufacturing activities without attainment of economy of scale. Inadequate investment in STI to generate new ideas, processes, systems and products that can compete favourably both domestically and in the global market has been a challenge that cuts across all the constraints stated above.
This National Science, Technology and Innovation Roadmap (NSTIR 2030) has been developed after detailed review of Nigeria’s challenges and opportunities since independence in 1960 and with fair assessment of future scenarios, to serve as Nigeria’s strategic plan for creation and deployment of STI utilities to national development initiatives, programmes and projects. The overall aim is to use STI as the catalyst for Nigeria’s long term sustainable development in consistence with the National Policy on Science, Technology and Innovation that was developed in 2011. The primary objectives of NSTIR 2030 are: to provide a long-term science and technology framework and support mechanisms for industrial revolution in Nigeria; to facilitate the creation and acquisition of knowledge for production, adaptation, replication, and utilization of technologies to support Nigeria’s technological and sustainable development aspirations; to support the establishment and strengthening of organizations, institutions, structures and processes for rationalization of decisionmaking; coordination and management of STI activities within an institutionalized national innovation system; and to encourage and promote the creation of innovative enterprises that can beneficially utilize Nigeria’s indigenous knowledge and technologies to produce marketable goods and services that compete with others in the global market. Additional objectives of NSTIR 2030 are to coordinate and support the development of science and technology infrastructure to enable significant research for production of methodologies, models and data to support Nigeria’s socio-economic development plans; to devise and implement systems for identification and pruning of STI talent at all ages and educational levels in Nigeria through support and incentives to build a strong long-term workforce; to coordinate the planning and catalyze the implementation of strategic projects such as those of space exploration, advanced computing, telemedicine, robotics advanced navigation systems and, nanomaterials that can accelerate the emergence of Nigeria as a technologically developed country. NSTIR 2030 congeals the STI elements of past and current national and sectoral roadmaps and plans. Among them are those of Vision 20:2020, the National Economic Empowerment and Development Strategy (NEEDS 2004-2007); 2017 National Economic Recovery and Growth Plan (NERGP); Roadmap for Growth and Development of the Nigerian Mining Industry (2016); the Nigerian Industrial Revolution Plan (2014); the Agriculture Promotion Policy (2016-2020); the National Renewable Energy and Energy Efficiency Policy (NREEP, 2015); the National Health Policy (2016); the National Communication Technology Policy (2012); the Draft National Transport Policy (2010); the Nigerian Water Sector Roadmap (2011); and the Roadmap for the Nigerian Education Sector (2009).
Although NSTIR 2030 is a long-term plan, short-medium term events can generate necessary adjustments in the overall plan while the major targets remain relatively stable. Essentially, shortmedium term opportunities to congeal systems toward attainment of NSTIR 2030 will not be ignored. On the other hand, the strategic nature of NSTIR 2030 will aid and factor into the configuration of tactical systems to address short-medium term needs. One of such short-term plans is the National Economic Recovery and Growth Plan (NERGP, 2017-2020) that focuses on the following objectives: macroeconomic policy improvement, economic diversification, competitiveness improvement, social inclusion, and Jobs creation. STI is an enabler of the planning and implementation of the NERGP 20172020. Apart from the analytical components such as models, simulations, designs and monitoring systems that can support the first three objectives, science and tech-supported entrepreneurship can generate ventures which when given the right policy framework and financing, can create jobs and promote inclusion. The year 2015 was the sunset of the UN’s Millennium Development Goals (MDGs) programme. Nigeria was active in the programme and used it to frame some of its socio-economic development programmes and projects as described in the 2005 report. Its successor programme-the Sustainable Development Goals was initiated in 2015 to cover the period up to 2030 which is incidentally the timeframe for NSTIR 2030 as well. There is then the opportunity for SDG 2030 programmes to overlap beneficially with this plan.
With respect to implementation, NSTIR 2030 is divided into 7 categories of objectives, each of which comprises several initiatives and projects. The 7 categories which align with the Roadmap’s objectives are Science Policy Support Programmes and Activities; Science and Technology Improvement; Research and Development Intensification; Training and Talent Deployment; Technology Deployment and Commercialization; and Science Literacy Improvement and Public /Stakeholders Engagement. NSTIR 2030 will be implemented in three time segments, namely: Short Term (2017-2020); Medium Term (2021-2025), and Long Term (2026-2030). NSTIR 2030 covers many high-utility projects that will be implemented by the various institutes/centers of FMST in collaboration with industrial partners, universities, other government entities and NGOs. Examples are commercialization of locally invented equipment and products, establishment of the National Science and Technology Agency/Fund, implementation of artisan training programmes, manufacturing of another set of satellites with expanded involvement of Nigerian scientists and engineers, establishment of advanced analytical laboratories and fabrication of several equipment and their components. Research and development support will be given by FMST units to steel development, automobile production, implementation of renewable energy technologies, telemedicine, local drug manufacture, processing of agricultural products, development and application of new materials in infrastructure and individuals processes, and development and economy-wide applications of ICT techniques, as well as several other STI advancements.
As described in Nigeria’s Industrial Revolution Plan published in January, 2014, systems are planned to make industry the dominant job creator and income generator up to 2020. The specific targets are to make Nigeria the preferred manufacturing hub in West Africa; and become the supply source of low-medium-technology consumer and industrial goods domestically, and regionally. The plan which is outlined, covers the creation of 8 general-purpose specialized industrial cities in strategic locations along transport corridors, creation of 6 Technology Innovation Clusters and improvement of services at Nigeria’s 27 Free Trade Zones. These facilities will present more opportunities for scienceand technology-catalyzed industrialization and create jobs for Nigerians with improvement of the socioeconomic services to Nigeria’s growing population which is expected to reach about 289 million by 2030. NSTIR 2030 which has many entrepreneurship elements, will catalyze the production of goods that meet standards specified by international markets in trade agreements.
Budget estimates for the short term programme total N180 billion over the three budget years (4-year duration) with the distribution of Programme Configuration and Planning (1.5%), Stakeholder Engagement Processes (2.7%), Management and Personnel Support (11.6%), Facilities and Equipment (25.6%), Deployment and Diffusion of Deliverables (3.4%) and Project Operations (55.2%). NSTIR 2030 will be implemented in collaboration with a wide variety of stakeholders, including academic institutions, public and private research and development centers, the private sector, State and local government agencies, non-profit and community groups, development partners and professional associations using revised and more efficient structures and governance systems that have been ratified by the Federal Government of Nigeria through the Federal Ministry of Science and Technology.
One of my books, Nanotechnology and Microelectronics, made it into Clarivate Analytics’ Book Citation Index. This is part of an email from IGI Global, the publisher, informing me of the addition.
Greetings! I hope this email finds you well. I would like to inform you that your publication Nanotechnology and Microelectronics (https://www.igi-global.com/book/book/40290) was recently indexed by Clarivate Analytics’ Book Citation Index, a part of the Web of Science Core Collection. Please take a moment to view the IGI Global Newsroom post, “Web of Science Indexes 46 IGI Global Titles” at this link: https://www.igi-global.com/newsroom/archive/web-science-indexes-igi-global/3323/. We take great pride in receiving commendable endorsements and indexing and we appreciate your hard work and dedication!
….
Part of the Web of Science Core Collection, the Book Citation Index is one of the largest citation databases covering books in the sciences, social sciences, and arts and humanities. The index ensures that each reference is meticulously indexed and that only the most elite research is included. Inclusion in Web of Science, Book Citation Index provides greater discoverability, which leads to measurable citations and more transparency in the selection process. The new IGI Global publications selected for indexing include:
Information and Communication Technology (ICT) is facilitating the process of socio-economic development in Nigeria. It has offered new ways of exchanging information, and transacting businesses, efficiently and cheaply. It has also changed the dynamic natures of financial, entertainment and communication industries and provided better means of using the human and institutional capabilities of the nation in both the public and private sectors. Increasingly, ICT is rapidly moving Nigeria towards knowledge-based economic structures and information societies, comprising networks of individuals, firms and states that are linked electronically and in interdependent global relationships.
This ICT worked in the Nigerian banking sector. It brought into existence a new generation of banking institutions, about thirty years ago. About three decades ago, some Nigerian entrepreneurs saw opportunities that they could use better service delivery, anchored on technology, to redesign the structure of Nigeria’s banking industry.
But behind the mess, there is something good from that period. We ended up having great companies which are still very critical in modern Nigeria. Sure, most of those companies survived and flourished through innovation,…
These are some samples of companies starred during this time. In short, the phrase “New Generation Banks”, came into the lexicon during that era.
Diamond Bank Plc – born 1990
Zenith Bank – 1990
Fidelity Bank – 1988
Access Bank – 1989
GTBank – Jan 1990
(STB for modern UBA) – 1990
Access Bank – 1989
These new banks grew as they competed effectively in the sector. They anchored their businesses on the use of technology to accelerate productivity. They thrived and took market shares from the old banks like First Bank, Union Bank and the defunct Afribank.
The Power of ICT on Productivity
Before the advent of the new generation banks in Nigeria, people waited for hours to collect money from their accounts. Going to bank was largely an all-day affair. But through automation, the new generation banks brought productivity which reduced that time significantly. That process made it possible that people could get into a bank, and within minutes, they are out. By automating their routine banking processes with ICT, the new banks brought new dimensions of service in the industry. They won hearts, did well and created superior values, monetarily, for their investors.
Also, because the banks were using technology, they used lesser number of staff to execute their jobs. They employed fewer people, compared with the older banks, using business process automation systems. (Sure, the older banks had more branches and could have needed more hands.) The efficiency in their operations helped in improving their profits. Today, the most formidable banks in Nigeria are members of those new generation banks. Some of the old banks have gone while the remaining ones are shadows of their previous pedigrees. In this early part of the 21st century, the best of Nigerian banking is seen through the lens of the new banks.
Productivity is a very important business construct. In the banking sector, ICT has cushioned it in all dimensions of the business processes. One of the finest products ever launched in the Nigerian banking sector is Diamond Bank Integrated Banking System (DIBS). ICT made that product a possibility and that generated huge productivity in the industry as it was being copied.
For the realignment of this observation, innovation is very critical. In the early 1990s, Diamond Bank was one of the most innovative banks in Nigeria. Its pioneering Diamond Integrated Banking System (DIBS) which made it possible for a bank customer to put money in one branch and access it from any other Diamond Bank branch, gave it market share, from the old generation banks . That was a golden era in Nigerian banking with so many innovations, including in pricing. The invention of COT (commission on turnover) provided capital that funded growth and transformed the sector as they made good profits, and they invested in modern technology. But ever since, disruption has been muted and innovation is largely incremental.
The Challenge from Internet: Fintech
While ICT provided unprecedented productivity in the Nigerian banking sector, Internet is seriously “destroying” value. This is a “problem”. ICT made them, Internet could destroy some of them. Internet is bringing the construct of creative destruction in the Nigerian banking sector where values are destroyed and new opportunities unlocked. But those new opportunities are not going to be, exclusively, within the controls of the banks.
What Internet is doing today is expanding distribution of banking services thereby putting pressure on banks to control pricing on their own terms. Before Internet, they could charge huge fees to transfer money for clients to foreign accounts via their treasury departments, but today, with internet, there are options. The customers could simply use their debit and credit cards to settle the bills without first spending money on bank fees.
Internet created the fintech and that is not necessarily a good thing for most of the banks. Fintech brings competition to the banks. Fintech offers lending, remittance, payment, transfer and other services which banks used to be the only institutions handling. This means with expanded access, the absolute power on pricing moves away from banks.
Brilliance of ICT, the Burden of Internet
ICT provided huge value, through industry-level productivity in the sector. It was good business overall because the banks generated value by few employees to do many things. But by expanding the distribution, Internet offers many challenges to them.
It is not just the banking sector that is going through this value-shattering redesign. We have seen the impact of Internet is restructuring how business sectors operate over the last few years. I provide the following examples:
Movie Theater: By Internet making distribution accessible and also expanding its scale, the movie theaters have lost the control to dictate, absolutely, on when to release movies. This has affected their business models reducing their overall pricing powers and values. With companies like Netflix, iROKOtv and Youtube, the channels have since widened. That is why the industry is largely struggling.
Airlines: Airlines made so much money through information asymmetry. The travel agent and customer had limited scale to compare prices across airlines. But with arrival of Kayak, Internet has made the distribution of that pricing easier at scale. Immediately, the power moves to the users who have access to compare ticket prices, putting pressure on airlines to price to remain relevant
Library: We used to have libraries that had opening hours. Today, with Google and Wikipedia, we have expanded distribution, where from our homes, we can simply access dossiers of work. Libraries are losing their impacts and influence because of Internet
Education: Most people do not even bother spending money going back to school to re-learn. They take quality materials online to educate themselves. Most for-profit universities in U.S. have been collapsing because their demand has dropped significantly.
Media: I have written extensively on the law of diminishing abundance of Internet where having more readers does not mean more success. Internet has made distribution of content easier thereby making every newspaper and magazine a global business. With that, power has moved to the aggregagors like Google and Facebook who control access to contents.
In this videocast, I discuss what I am calling the Law of Diminishing Abundance of Internet. It is a construct that some companies become poorer even when they are growing in numbers of customers reached.That applies to industrial sectors like publishing and telecoms. The lesson here is that risk in any business model must be examined from the lens of this mirage abundance which Internet has provided in some sectors.
Commerce: As Amazon.com shows the world, Internet had demonstrated that it can attack any industry it wants. We have seen many U.S. malls gone because Amazon has made it harder for the retailers to compete. Internet has shaped commerce by making distribution accessible and that reduces competition to operational efficiency and pricing. It commoditizes many elements of our retail business processes, making it harder that retailers with huge real estate burdens, cannot compete against Amazon.
The Future: Unbounded Internet
Internet has unleashed competition in the Nigerian banking sector. They do not just compete among themselves, they are competing with global institutions. With Stripe, a Nigerian entrepreneur can bank with a bank in U.S. through the Stripe Atlas which makes it possible to operate a U.S. business bank account without even living in U.S. This would not have been possible without Internet. This unbounded capability of the Internet is the reason why the future, of financial services, could be uncertain because new challenges will come.
With Stripe Atlas, entrepreneurs can easily incorporate a U.S. company, set up a U.S. bank account, and start accepting payments with Stripe. Starting today, it’s available to developers and entrepreneurs globally.
The promise of the internet is that location matters less. However, geographic barriers and associated complexity make it difficult to start a global business in many parts of the world.
With distribution model that is technically free, Internet will continue to put pressure in the banking sector, as new models of competitions will keep evolving.
Yet, what Internet is doing today may be tip of the iceberg. There are still many ways we can see immense dislocation in the Nigerian banking sector:
Robotics/Automation: Nigerian financial sector, very soon, will begin the process of having robots do many lending decisions as they do in U.S. It could be the banks or the fintech that will do this, but irrespective, automation of lending using data from BVN and other sources will happen. The implication is that more workers will be cut. Most credit card applications decisions in U.S. are evaluated by machines. Internet will massively accelerate the scale of this automation.
Machine Learning/ Artificial Intelligence + blockchain: No one could bound the potential of these emerging technologies in the financial sector. There is the inherent risk that we may not even need banking the way we have it today especially if you combine AI with blockchain. With blockchain, the Central Bank of Nigeria may not have a lot of work to do because the people will be the custodians. This product of the Internet, blockchain, is another element on the possibilities and challenges of the future which Internet is bringing to the financial sector
Poor Value Transfer: Under limited construct, Internet is not good in transferring value. The money MTN is losing over Skype and WhatsApp is not going to the OTT services. The value is destroyed, in the industry. Sure the consumers save and can use it for something else. The implication is that Internet can destroy most of the value we have in today’s banking. And that is a possibility. How? read below
Removing Friction in Commerce: The essence of firms is to make sure that demand and supply have lesser friction. If you can use internet to remove that friction between demand and supply ( i.e. they can come together, with ease), you do not need firms. For example, if a saver can efficiently find a borrower, there is no need, partly, to go to a bank to put money to earn interest. If Internet attacks that, the heartbeat of most business sectors will be damaged.
The Winning Consumers
The good news about everything is that consumers will win. Financial services will become affordable owing to the Internet. That means the principle of creative destruction is working. That is one thing the Internet is sure of providing – great value to consumers. As I have noted, there will not be fintech without Internet. We are happy for that. The implication is that no one should wish that we go backward – everyone has to figure out how to survive and succeed in the new Internet redesign of the financial industry.
All Together
ICT provided productivity, making old banking business processes better. Internet is unbounded and no one knows what the future will bring. But one thing is certain: it offers huge expansions in distribution channels. That always puts pressure on incumbents on pricing power. Nigerian banks must ferociously redesign themselves to live in the age of Internet because what is constant is change and unprecedented level of competition, which is unbounded and unconstrained as none can quantity the future scale.
Simply, Internet commoditizes business processes in the financial sector. The implication is that price competitiveness is what matters. Any bank that cannot figure it out, i.e. how to price competitively within the abundance of Internet, will see erosion of values. When consumers have unbounded access through unlimited distribution channels to immense product supplies, price falls, because information asymmetry is gone. Add the fact that consumers can easily compare prices and product quality, at scale, you will see that commanding hefty fees will go.
For our banks, the future is full of possibilities. There is no going back to pre-Internet age. The promise lies ahead. But the challenges will be huge. The unbounded nature of Internet provides many factors no one can easily ascertain what the implications will be. The best thing to do is to be prepared: understand the trend and be on top of it. Just as Google became the most important “media” firm by aggregating contents online, while not creating any, thereby commoditizing whatever anyone creates online, as the only true gateway for people to discover contents, banks have the unique positions to also assert themselves that for whatever the web brings, banks will be paid their taxes. You become the entry point into the financial world for many consumers and that position has enormous strength.The future cannot be unborn tomorrow and yet dead yesterday.
