- Jon Ungerland - CIO, DaLand
POOF! Financial Institutions Just Lost (another) Couple Billion in Loans and Deposits!!
And the Trend is Just Getting Started ...
Tesla announced today it has recently filed with the SEC to purchase $1.5B (that's right billion, with a B) in BITCOIN, as part of a plan to allow consumers to buy Tesla products (cars, etc.) with crypto:
Now, if you're a 'banker' keeping up with times and if you're 'in the know' on the real risk to the entire financial services industry represented by digital assets, crypto, and decentralized finance, then you'll likely wonder this: "why would Tesla need to own Bitcoin to accept them as payment for their cars?" Answer, they don't need to own them to accept them as payment; but, Tesla would need to own/hold Bitcoin if they want to LEND them out, or allow consumers to leverage them for financing as part of a new economy of digital payments and crypto-commerce.
Anyway, back to our headline: POOF, just like that on a seemingly mundane Monday morning in February a couple billion in lending just evaporated from your traditional FI and banking system (and deposits ... ouch ... double whammy!). What's worse, there's plenty of blockchain stats data to suggest this trend is just getting started!
So, perhaps you're interested in leading your traditional financial/banking institution away from the epicenter of impact in this meteoric adoption of cryptocurrency and digital assets.
Don't panic. DaLand has been prepared for this type of news since 2019; and we exist for the single purpose of teaching your trusted and worthy financial institution how stay situated at the nexus of community and commerce - without expensive, unnecessary, and strategically stupid bolt-ons (which won't fix these kinds of problems anyway!).
Today's Tesla news is about banking irrelevance ... not electric cars!
If you're one of these institutions looking to remain relevant, here's a brief bit of history to offer some perspective on best paths forward. It's worth noting a history lesson is appropriate here ... because crypto isn't entering our atmosphere and burning up the air we breathe in the banking/finance world instantly and/or out of nowhere. This "ELE" has been on approach for a LONG time. However, the tools nearly an entire industry uses to remain 'sound' and 'safe' (rearview looking regulatory metrics and a plethora of platform vendors who hock online/mobile banking, core processing, and loan origination platforms) weren't coded to detect the inbound world-killer; and they certainly weren't positioned to keep your financial institution plugged into the future of commerce and cash!
Financial services as we know it wasn't built to evolve beyond the dollar and its (at best) day-to-day processing dreariness plaguing the internet economy ... problem is, real digital transformation doesn't care about arbitrary nation-state currencies stored in outdated centralized core systems! No amount of careful shopping or clever contract negotiation for shiny online/mobile banking platforms will make consumers/users desire to stare at their static deposit balances yielding shamefully less than digital assets have for the past 10 years. Nor will any best laid plans for 'digital transformation' via a new loan origination or core processing vendor pull your community's perspective back to accepting slower, more expensive payments and origination in a world where they're now seeing the efficiencies and value of decentralized finance. Fact is merchants and markets create value and move merchandise. It's what economies have done for the entirety of history since the emergence of the modern era of conjoined industrialization and banking. However, 'modernity' is relevant; and the truly modern tech of the digital commerce and asset economy means merchants/consumers don't need banks to support that singular focus of value creation and exchange.
That's what today's Tesla news is about ... banking irrelevance, not electric cars!
Anyhow, back to ancient history in an attempt to orient ourselves in this moment. Nearly a decade ago (or so) I spoke with a room full of financial institution execs and suggested 'tomorrow's consumer isn't going to derive optimal value and return from a banking relationship with a financial institution (traditional deposits or loans); their primary value network and their path to wealth and flourishing will be merchant wallets and digital, non-dollar assets.'
That was in a board room of a quite large financial institution in the U.S.
There were approximately 12 execs in the room. 'Experts' with backgrounds in retail, lending, payments, information technology, etc. One of them was interested in the 'theory' we were present to discuss; and the practical digital solutions packaged with strategies and philosophies which we were offering to support the theory. That individual had read a book on the possibility of 'complimentary currencies' arising next to the dollar. That singular, well-intentioned soul attempted to engage in some dialog with us about how our tech and strategy could help insulate against that. I hope they're still at that institution; that bank will need that person's talents in these coming months and historic moments!
The other 11/12ths of the room were uninterested in the future of money; as leaders of a bank!
Instead, they wanted to ascertain whether we were interested in debasing our digital solutions and repurposing it as a better mobile banking for them. We were not.
At DaLand we were more passionate about local financial institutions and their relevance to/engagement with deserving communities. And we're aware deserving communities are becoming desperate for value and modernized commerce [...]
Don't get me wrong; our company likes contracts and revenues and we value true partners. However, we are more passionate about local financial institutions and their relevance to/engagement with deserving communities. And we're aware deserving communities are becoming desperate for value and modernized commerce. We genuinely believe local financial institutions can enhance the financial flourishing and democratic access to financial services for communities and consumers. However, we're unrelenting in our belief that such value and engagement is derived from controlled digital delivery of data; including an understanding that commerce and cash are now digital.
Similar conversations ensued for the next 8 years. Throughout that time our firm has learned from countless conversations with industry 'innovators' and 'leaders,' almost all of whom tragically dismissed opportunities to modernize their strategy and digital solutions in favor of picking a 'better' LOS and an 'improved experience' for online/mobile ... typically because in their informed and prescient opinion 'digital assets would never amount to anything more than the Dutch Tulip Bulb Crisis.'
I wonder how many tulip bulbs one bitcoin can buy at this moment!? I guess it doesn't matter really, b/c a mere couple Bitcoins can buy a Tesla! Far more fun than a tulip bulb, I would think; at least it would seem Tesla is banking on that being the popular verdict!!
Fast forward a decade or so from the start of these passionate and storied discourses between DaLand and industry innovators, our storied and noble industry finds itself (yet again) in the all-too-familiar territory of reaction to true digital innovation beyond the horizons of banking and resultant dependence upon third parties for desperately desired 'resilience' (a particular conversation characteristic of this trend 2018 comes to mind, between our firm/myself and an anti-crypto industry stalwart who has since conveniently flipped to consulting on 'solutions' for the crypto-moment).
Thing is, the old tricks don't work anymore. The gig is up; consumers and communities are done with centralized powers [...]
I suspect an entire array of 'innovators' and the the predictable profiteers are about to appear with a plethora of bolt-on solutions to foster 'digital transformation' for your institution. Most of these players will tragically confuse financial institutions into anachronistic misinterpretations of the new world of decentralized finance; probably proffering platforms to perpetuate the very expensive and unsustainable 'duct tape and bailing wire' technology 'strategy' of the past 30 years.
Thing is, the old tricks don't work anymore. The gig is up; consumers and communities are done with centralized powers; they're starting to resent big tech and big banks(were you paying attention to the Robinhood and Gamestop fiasco?); and they're increasingly aware of ready-made solutions to circumvent even the shiniest and most expensive bolt-on platform our industry might muster to feign relevance for a few more years.
Tesla knows it (hence today's news). Tesla leader Musk is also fomenting a populist currency uprising and shift; Square is betting on merchants will unplug from banks in search of value and consumers; Micro Strategies is hedging on the future of money being the internet (not your internet banking!); and apparently some big banks are starting to hedge against themselves because even they're confronting the possibility the dollar and traditional assets won't deliver desired returns to their shareholders; and in case you still believe your communities and consumers aren't catching on to all these 'subtle' suggestions from the market, even well-informed economists are starting to realize the entire legacy system amounts to 'pushing a string' and we just may need an alternative to the banking system!
The banking industry doesn't have another 8-10 years to burn on figuring out the future of money and finance; 2020 just flung ten years of innovation and digital adoption into the consumer and commercial sector. In 2020 bank branches and the industry's 'best' digital 'experiences' became tantamount to DVD disc rental kiosks; and Tesla's announcement probably cemented most banking strategies into the the category of Blockbuster's 'plans' circa 2006.
You have two choices; buy something and outsource 'experience,' or use your data to connect to modern communities and commerce.
So ... welcome to 2021. 2020 and COVID have just pulled forward 10 years of industry transformation into a single year, 'money is morphing,' is your institution ready to formulate a real strategy and control its digital services driven from your only remaining asset: your data?
If your #localbank or #creditunions plans for this year don't include EDUCATING yourself about plugging into the future of finance, this latest news release from Tesla should be a wake up call. It heralds an approaching wave of such news, all but ensuring you can bank on merchants and manufacturers to educate your consumers about the fact digital assets/crypto will provide better value, greater return, and fast/cheaper payments than your current centralized institution.
If you're #bankingandfinance exec or board member still focusing on 'strategy' as online banking/mobile banking switch, chartering plans for a magical loan origination platform or vendor to save your loan growth, or 'investing' into core processing systems in the hopes of realizing #digitaltransformaton and remaining #relevant in #bankinginnovation ... you're missing THE point. Merchants, like Tesla (and others fast to follow ...) are showing/giving consumers places to spend digital wealth and value; and are creating ways for consumers to leverage their new digital wealth/assets. WITHOUT YOUR INSTITUTION.
If a place exists in the future for local, trusted, financial institutions, it will be only those who build bridges NOW to the future of commerce. If you're looking for such a bridge, we're here to help - with strategy and solutions.
Fortunately, the passionate few at DaLand already have the blueprints and the materials communities and financials institutions need to remain in control of the their collective finances and future relevance in digital commerce ... and we've had the expertise to use them for quite some time.
However, your institution has to act. You have two choices; buy something and outsource 'experience,' or use your data to connect to modern communities and commerce. Now is the time to move to control your relevant connection to the future of finance and commerce. If you're not sure how to develop and protect a strategy to connect your traditional financial institution to the distributed and decentralized money and finance universe, our FinTech is here to provide strategies, solutions, and to help safeguard them against traditionalist thinking and prejudices which are sure to put your institution at the epicenter of the inbound meteoric event and impact of decentralized finance and digital assets!