[Originally published on Linkedin Pulse] New digital services based on SMAC (Social, Mobile, Analytics, and Cloud) are disrupting many of the traditional industries. As IDC is addressing the same as the 3rd Platform, they are predicting that by 2018 one-third of the market-share leaders in virtually all industries, including the FinTech industry, will be replaced by new and incumbent 3rd Platform players.

We all know what happened to the taxi industry when Uber hit the market. The taxi industry, as one of the established, saturated industries was, just a few years ago, considered as an industry where no big changes could happen. Uber – a great idea whereby taxi companies own no taxis and powered by SMAC technologies – has proved this dramatically wrong. Today, taxi drivers and companies have been sidelined as Uber drivers are taking the major part of their business. One of the main reasons for this is user experience i.e. simplicity and the transparency provided to Uber users.

Another example is the hospitality industry. One could say it has similar characteristics – a traditional, well-established, slow moving industry that takes the view that nothing could change the relationship it has with its guests. However, AirBnB has proved how wrong we all were. Again, it is a brilliant idea powered by 3rd Platform technologies which has shaken the fundamentals of the hospitality industry. People traveling around the globe are finding and reserving their lodgings through AirBnB. The reason – transparency, direct user reviews, simplicity and a mobile user interface.

Both of the aforementioned industries have similar characteristics, both were completely unprepared for the changes that hit them and both have been trying to fight back through legislation and regulatory acts. Of course, their struggle has proven unsuccessful, because they both forgot who the ultimate judge would be – their clients! Their clients who are looking for services which are flexible, user-friendly, transparent and mobile.


What about the financial services industry? When we think about it, it has very similar characteristics to the previous two examples. It is traditional, well-established, slow to change, one could say even rigid. It is very slow to adapt to clients’ needs and requests, constrained by legislation and regulatory acts, sometimes out of necessity – sometimes just as an excuse. Financial organizations are reluctant to adopt new trends from a technological perspective. Online banking is now becoming standard, mobile banking is under development for most of the banks; what about mobile payments, cash-free transactions, virtual branches, mobile and online insurance services?

As stated in the World Retail Banking Report, FinTech firms are making significant inroads into the banking sector and they have huge potential to disrupt the market:

  • Internet and technology companies have carved out a significant presence in the area of credit cards and payments.
  • Among all entities, banks themselves perceive that customers are comfortable with internet/technology firms, significantly more than the comfort level they have with banks.
  • While the threat from internet/technology firms is not expected to materialize in the next 36 months, they are perceived to pose the highest future threat to traditional banking.
  • The potential of the FinTech firms to disrupt the market comes from their agility and ability to leverage technology, derive insights from data, and develop simple and intuitive offerings.

While financial institutions are checking whether those new channels and approaches toward their clients would fit with the regulatory demands, there are new innovative companies out there that don’t limit themselves with regulatory issues. They are developing new products on new channels using the power of SMAC technologies to bring financial services closer to clients and in a way that clients will appreciate. This is already happening and financial service institutions should not be surprised to notice that their clients, and consequently their fees and revenue, are shifting towards the new incumbent players that are not from all the usual places. Having said this, in my opinion the financial industry sector is the next one on the list to be disrupted by the ongoing digital revolution.