In 2015, Jamie Dimon, CEO of JPMorgan Chase made a statement that “Silicon Valley is coming.” What was left unsaid was that perhaps they may eat traditional New York financial services firms for lunch. The Silicon Valley firms loaded with cash—and most importantly, billions of active customers—were working on breaking down the barriers of the last doyen of traditional enterprise, the financial services industry. The primary weapon available to Silicon Valley firms was technology—and to be more specific, efficient technology that leveraged partnerships and straight-through processing rather than traditional manual operations.
Financial services firms have rebounded significantly, however, and this change has been driven by three major macroeconomic disruptions:
- Change in regulations leading to adoption of more open behaviors.
- Change in consumer behavior, especially the use of social media, the share economy, and nontraditional media for research and settlement of transactions.
- Technology change—especially the adoption of cloud computing—has made it economically viable to do millions of transactions with very little economic value attached to it.
Though disruptive, these changes are also serving to provide opportunities that were hitherto unavailable to financial service firms. Not only do these disruptions provide opportunities for revenue enhancement and cost reduction, but also for business model change especially around partnerships, sourcing, and engaging customers in their research/decision/buy cycles.
