The Uber Bank of Lagos

The Uber Bank of Lagos

One of the most fascinating trends in modern commerce is the concept of technology-enabled modularity. Like the Cambrian Moment, modularity enables the combination and recombination of technology elements and primitives to achieve different objectives. Yes, when a company has invested in a category-crossing core technology infrastructure, it is possible it can use that platform to do many other things. With the fixed cost in the books, modularity opens vistas to build new technology layers upon the core infrastructure. That vision is not bounded by the industrial-age mantra of core competency because these modern species of tech companies are “unboundable” because they live in the unbounded Internet! I had since argued that the concept of core competency has been wounded: Amazon could be a health insurance firm in months even as Google could become your local attorney!

They taught us in economies that companies have to specialize and build core competencies.  They need to do things really well and be the best possible in the domains. But today, we think that does not make a lot of sense. For technology companies, everyone is doing everything, even at top-level. Alphabet, Google parent company, is a car company, a search company, a medical company, an advertising juggernaut, etc. Amazon.com is an e-commerce firm, a publisher, a movie producer, a drone maker, and soon a car maker.

Anyone can do anything because most of these firms operate on the internet where distribution is unbounded. And if distribution is not bounded,  vision must not be bounded. Amazon wants to sell to the world anything. If you expect it to stop on books, fashion and kitchenware, it is your risk. Facebook assembles its own servers for running its data centers. Google parent company, Alphabet, is a car company, internet service provider, and [pick your interest].

This trajectory is heating up, not in U.S. but also in China, where category-king digital empires are evolving. The news is this: Didi, Uber-clone in China which became more competitive than Uber in China, is now a fintech (financial technology) company.

China’s top ride-hailing app today expanded its repertoire by selling financial services to its 550 million users. Didi this morning announced the rollout of its first two financial products available inside its app: car loans and personal insurance. Other options, such as wealth management and more forms of credit services, are coming later, the company said.

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The US$56 billion startup last year made some financial services available to its drivers, but today’s move expands its fintech ambitions to everyone across China.

Just imagine how its banking partners would feel: this company used to focus on its ecosystem members, but now wants to offer financial services to the broad citizens of China. So, it is fair to call Didi a fintech even as you are free to recognize it as a digital transportation company.

Why This is Possible

Technology has become so efficient that the capabilities to enter into territories have been reduced. To be a financial service firm these days would not require hiring many experts on compliance since someone had built most compliance elements in software. So, you can pay for that software and within days you are ready to go. Simply, the barriers of entry are falling and it is easier to enter into new domains. And as you move into that domain, technology gives you productivity gain that even if you are not really great, you would be fine to a large extent.

So, in the near future, Uber can wake up one day and apply for a banking license to offer financial services to customers in Lagos. For Uber, it makes no difference because it is another layer on the core technology which Uber had already built. Also, one day, it can add insurance because it is another layer. The most important part has been built. What remains is new market and territory to add new layers of applications. It is not hard to see as Facebook Inc through WhatsApp and Instagram is a fintech, money remittance company, ecommerce company, and meeting place.

This is an interesting future because internet is liberating markets from traditional custodians, and consumers will benefit. No market or sector is immune from this drug called ‘destructiv innovationi”.

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