While cooking with friends on a recent gray Belgian day, I fell under the spell of "The Artist." It's a 2011 film by Michel Hazanivicius, starring Jean Dujardin and Bérénice Bejo. I recommend it highly for its ideas, visual style and the beautiful performances, which collected the majority of Oscars at the last ceremony.
The story is of a silent movie star who is facing the advent of sound in movies, all in the context of the 1929 crisis. The character, George Valentin, does not understand the new technology, has not seen it coming and doesn't understand why the change is happening. His idea of the beauty and artistic value of silent movies is being stormed away.
It struck me that this is where the banking industry is today.
There is an established order, arguably for centuries, about how banks process money and loans as well as the products and services they provide. But the banks are under pressure today to change, due to several factors:
- The ongoing crisis
- The advent of the new, connected generation on social media, which is taking international persons to person transactions as a given
- The advent of complementary currencies (such as airline miles or Facebook credits) and digital currencies (such as Bitcoin and Ven)
- The advent of easy, inexpensive person-to-person international payment schemes (Paypal and others)
- The advent of new business models, dubbed banking 2.0 (Movenbank, Simple, Fidorbank), whose aim is simplicity, a fair or ethical or green ethos and customer focus.
- The advent of telecom operators as payment processors in mobile payments schemes not involving banks.
- The un-ending explosion of computing power, storage capacity, pattern matching and artificial intelligence technologies which together enable one to make sense of new applications from the gigantic amount of data being generated daily.
Exactly like the silent movie world of George Valentin. But George doesn't see it. Perhaps he doesn't want to see it. And so the sound movie "happens to him." In the same way, digital banking may "happen" to established banks.
I don't want to spoil the movie for you, so instead here's a very quick summary. Eventually George, with the help of Peppy Miller (played excellently by Bejo), realizes the predicament he is in. He can't cope with the full change of things, but he adapts and, in the end, rides the wave of change in his own and different way.
As you can imagine, this ending fits perfectly with my eternal optimist take.
I do think that if banks realize the massive change that's approaching, they can ride out the wave. They should propose new products and services for the connected generation to enable them to manage their digital assets (and not only money – think of everything from sensitive information like addresses and Social Security numbers to important documents like wills stored digitally) and help them be more accessible (through application programming interfaces), in order to establish themselves as core business intelligence processors.
Do you think I'm exaggerating by comparing the rate of change of today to the shift from silent to sound movies in the 1920s? I'm curious to know. Leave a comment below.
Kosta Peric is the head of innovation at the Society for Worldwide Interbank Financial Telecommunications. His team runs the Innotribe series of events and competitions. He previously was the head of securities market infrastructures in Swift’s sales division and the chief architect for SWIFTNet.