In a fireside chat at Slush 2015 with Toby Coppel - an investor who also has a financial interest in TransferWise - Kristo Käärmann discusses the role of the traditional bank. The two come to the conclusion the banks are dinosaurs and will soon be dead.
Disrupting the international payments world in 2010, TransferWise has grown into a $4.5 billion dollar company, but Käärmann believes there are many more areas of traditional banking waiting to be challenged. “Mortgages, and especially those long term banking products, I think are going to be the last ones that get disrupted,” says Käärmann, as a close observer of the banking industry.
Picking up on this interest, Coppel asks him what opportunities he might see for entrepreneurs working in the ‘fintech' space.
“I see a few trends happening,” Käärmann begins, “when you say the banks are dinosaurs, I would be more specific. There’s one concept whereby we put our money in the bank, and the bank tells us what to do with it: it’s fortunately going to die.” He sees the potential out there for fintech startups through the traditional banks’ failures: “Universal banking, where you have a bank account, and then your pension fund and everything else is provided by the same bank, this is just not going to work.”
Comparing banks to other disruptive international solutions, such as Uber, Käärmann adds: “Some of those services [will] just be offered so much better by one or two or three companies, rather than 20 banks in all of those countries trying to do everything at once. It’s very hard to be a banker these days, with old legacies and regulations. Tech startups can do many of those products much better, and be able to service much larger patches of people.”
As a final thought he confidently laid out his vision for the future of the banking system: “What’s going to happen is that, these universal banks that do everything are just going to be finished, we’re going to have payments companies that help people move money between accounts, saving companies that don’t take 2% of your money every year [like traditional banks] doing things my phone can do; thats just gonna happen!”
The future has never been so uncertain for the banking sector, it seems that both Käärmann and Coppel agree that only the innovative and forward thinking banks out there may survive; and as we know there are very few of those.