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FinTech Disruptors Are Here. What Are the Incumbents To Do?

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Co-authored with Steve Krawciw

FinTech companies are changing business as usual for many established financial services companies. Companies like Money.Net are threatening to undermine the decades-long dominance of Bloomberg. Online lending platforms are coming out of the woodwork to directly compete with 100-year old banks. Money transfer firms are taking on established wire operations. All sorts of traditional financial intermediation, trading and even research are threatened by technology upstarts, with companies like Virtu electronically making markets and Kensho aiming to replace entire financial research departments with low-maintenance servers.

There is no doubt that such financial disruption is driven by the technology: automation, often prohibitively expensive some thirty years ago, and it is now common and cheap. Consumers are now wired to the global Internet through their omni-present devices. For the established people-heavy businesses, the new layout of the industry presents a particular challenge - how does one reimagine their universe to address the nimbler, faster competition with a lower cost base?

What are the incumbents to do? The most tempting solution is to follow suit. For instance, disruptors like Kensho are automating financial research by enabling natural-language Google-style queries. Kensho happens to be backed by Google (in addition to Goldman Sachs), and benefits at least indirectly from Google's expertise in this area.

Can a traditional bank build a comparable system in a matter of months? The answer likely is 'no': Google and the FinTech pioneers have invested billions into their technology over the span of the past few decades. For most incumbents, it is difficult to even poach someone from Google: Google's employees tend to be paid handsomely, and often a match in compensation and benefits is prohibitively costly.

Other, similar, examples abound in other areas. Banks are seeking to hastily build out instantaneous lending businesses, that often poorly manage risk, not to mention cannibalize their existing successful lending operations. Trading desks are looking to radically change the way they do business, uprooting successful elements in the process and risking the entire operation.

Another idea is possible: streamlining workflow. As much as the term may sound like a throwback, it actually has a special resonance in the age of automation, Big Data, and everything Internet. Much of the business today within large corporations happens to be a repetitive task, as much as super-star performers would like to disagree. Disentangling and streamlining business processes, aided with targeted selective acquisition of functions, is an exercise that is bound to both reduce costs and enhance business edginess without sacrificing present competitive positionning. Plenty of startups out there provide elemental features that can help established businesses operate leaner, faster and more profitably. Most importantly, this strategy will save the established firms a risky and often massive expense on in-house research and development in catching up with the likes of Google and its tribe.

Steve Krawciw [kro:sew] is CEO of, a market microstructure analytics platform, where he leads strategy and institutional sales. Prior to AbleMarkets, Steve led implementation of billion-dollar product development at Credit Suisse and CIBC. A career strategy consultant, Steve has advised Fortune 500 companies and governments while at his tenures at McKinsey and Monitor Group. Steve holds an MBA from Wharton and a BComm from University of Calgary.

Steve can be reached at

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