09 August, 2014

In Defense of Banks and Bankers | Finsurgency

In Defense of Banks and Bankers | Finsurgency: The good news, for bankers, is that there is a way forward. There is a role, or a set of roles, for banks in all of these business that may not be exciting, high growth or particularly sexy, but can be high margin and massively defensible. Banks should a)manage regulation and compliance; b)manage security/fraud/identity and c)steward depositor capital into risk managed pools. Each of these roles demands a separate blog post, but suffice it to say that each is a critical infrastructure layer across the core segments of banking, and banks are uniquely situated, in terms of current regulation, technology assets, brand identity and culture, to own each layer. By focusing on these roles and not trying to compete with nimbler foes, banks could massively reduce overhead, value at risk and operational complexity. The banks themselves, and the bankers who work there, would go back to being perceived as pillars of the community, literally supporting the entire ecosystem of commerce. Not entirely incidentally (at least not for me), a thousand or more entrepreneurial flowers would bloom, as businesses sprung up around the banks, fulfilling the customer facing and innovation functions that so desperately need to be filled. I predict that companies like American Express (great at payments & brand), Capital One (great at marketing & credit risk) and Goldman Sachs (great at trading technology) would “de-bank”, and choose to partner with Citi, BofA, JPM and others, who would shed many non-core businesses. This restructuring of the financial sector would put the US back on the path to being the global leader in this area, as well as de-risking the global economy.