Chris Skinner wrote an interesting post a while back entitled ‘Where is the Uber of banking?‘.
And then we have this widely shared piece of insight from Tom Goodwin
‘Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.’
And he is right it is but what I want to take umbrage (uberage?) with is the way this headline/trend is being used by the ‘fintech thought leaderati’.
We now see lots of platitudinous use of ‘Uber’ as the bogeyman for banking. Finally the thing we have been reckoning could happen to banking (a player comes out of nowhere to disrupt an entire industry globally) now has a name and a face so it is obvious the very same thing will happen to banking.
Maybe it will. This move to no ownership by the controlling company might continue to play out to the advantage of the few. What happens when the model of ownership it is built upon collapses? Matt Webb wrote a great piece on the change in ownership structures around this new breed of companies. It looked at an example of just such an ownership scheme going belly up in the form of UK courier network City link. He talked about a Coasian flip…
‘TaskRabbit workers paying the cost of the company pivot. Neighbours of Airbnb hosts soaking the externality of strangers in their space without choosing to accept it. Drivers who used to be employees being encouraged to be independent Owner Drivers – still in City Link livery – bearing the risk of the company’s capital expenditure and future success… without seeing any of the potential upside.’
Matt spoke about both the bad and the good of this flip but also around the models that might be needed to make this more beneficially to the ’employee’ of these kinds of networks. Dan Hon also said a thing that stuck with me on the rhetoric around Uber et al. Software eating jobs.
‘What irks me is when companies like Uber take that software-eating-jobs position and then distort it into a “we’re providing jobs” message. That’s not fulfilment. That’s not helping people succeed. It’s meat-puppetry.’
Who owns the network itself if the company providing it goes titsup? If Uber burns through all that funding and has to switch it off? Will the customers and drivers be picked off by other players such as Lyft and Hailo and their ilk? Do we have easy driver / customer portability between networks? Do your Uber ratings go with you?
The big focus should be on the networks. It is clear that Uber and AirBnB have built networks of need and intention. Allow an easy flow of people needing a car to get them from one place to another or an apartment for a weekend.
Banks are of course networks but the customers have no easy way of speaking to each other. They have no real way of declaring those needs to the network only to the singular owner of each banking network. Also the needs are multitude not singular (well they kind of are). An ecosystem of service providers also has no way of interacting with that network because of a lot of laws and regulations. Can someone make a network of money needs open to all where before there was none? Perhaps. Perhaps not.
Bernard Lunn went into detail on ‘Why the Uber of banking Fintech model is a mirage‘ looking at what this network would mean from a delivery / manufacturing point of view.
‘Uber of banking is a mirage because of two fundamental differences:
- The commoditized service providers (aka Banks) have more power than freelance taxi drivers.
- The full banking service is more complex than getting a passenger from point A to B.’
So the rules are complex and doing an Uber like thing within banking would be very difficult. Maybe the blockchain is the answer? Decentralised disruption! We could build a decentralised network of needs and intention to buy. The intention economy powered by the blockchain. My hippy ways think this would be a lovely thing indeed. No one has yet managed to really crack the whole decentralised thing for X at any sort of decent scale and adoption. I bloody hope they do soon though. If not we will continue to have the likes of very well designed and funded business models that play around with ownership and transferral of risk without necessarily providing the benefits of real customer control and power.
It is frictionless! It is like the payment is not even there, it is so frictionless I did not even feel like I was paying for my £50 limousine trip! Maybe I get a bit miffed about Uber being the be all and end all because it feels like it started off as a service for rich folks on their smartphones too lazy to leave their champagne and caviar and walk outside to flag a taxi or to have to actually speak to a human being at a cab company. But what about Uber X? That is not for rich people, it is launching in Newcastle. Yes, I know. Uber and Hailo etc solved a real last mile (well, ten yards) kind of problem. Is my taxi nearby/outside right now? If the price can be made good enough to benefit both the drivers and the wider public i.e. not just those who can spend £50 on a single journey then I am all for it.
‘But what about the sharing economy?! It points to new forms of ownership, no one will need cars anymore.’ Usually said by people in massively expensive to live and drive cities with impressive public transport infrastructures or ‘free’ shuttle buses to their giant donut shaped offices. I guess this ties in well to the banking for rich people by rich people, which is always going to be an attractive market.
Of course like any other low powered middle manager I think I would like to see some Uber style disruption in banking…just the good side of Uber not the bad. But maybe there is no such thing as good disruption? You don’t make omelettes without breaking a few eggs, hey?
There is a need to understand the network dynamics and ownership models that enable these new wave of Internet behemoths to disrupt all the things. Don’t just judge on growth alone though. What are those new models of ownership doing for the way the world works not just from the incumbents being disrupted but those that work within both the old and the new.
Having the Uber bogeyman will hopefully make some banks do interesting things in response other than spout missives like we will be the ‘Uber of this bit of financial services’ or ‘We are the AirBnB of mortgages’ but please be careful what your platitude wielding thought leaders scare you into doing.
Update 19/05/15: A couple of people have asked isn’t P2P lending the Uber of banking? Well I guess it could well be. A network of people and their money being used to fund needs and wants of folk. I guess the fact that P2P lending institutions still need to keep capital in reserve should it all go wrong means the ownership model and transferrral of risk is not quite as high in some regards of meat puppetry but investors can still make losses. An angle for a future post certainly.