A16Z's Ambition: The Future of Banking

Editor's Note: This article comes fromDeBankView (ID: DeBankView)Editor's Note: This article comes from

DeBankView (ID: DeBankView)

, Author: Angela Strange, translation: Ma Buyan, published by Odaily with authorization.

Their partner, Angela Strange, has been focusing on investments in the FinTech sector. Recently, she published an article on her official blog, mainly introducing the current status of the US banking industry and trying to explain its causes; then she proposed the future development direction of the banking industry as she understood it. This article hopes to help readers broaden their horizons, understand the possible future evolution direction of the financial technology field outside of DeFi, and think about the positioning of DeFi in the future financial field from a more macro perspective.

status quo

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At present, the banking industry has been split into two different financial systems. One set is for the rich, and although the system is outdated and the experience is poor, it still works. The other system is for ordinary people, and the system for ordinary people rarely has bad experience feedback, because most ordinary people don't even have the opportunity to experience it. And the less money you have, the less banking services you can enjoy, and the corresponding cost of financial services is getting higher and higher. Therefore, Angela believes that the current financial system of the banking industry is farther and farther away from these ordinary people who really need financial services.

For this situation, the author is actually deeply touched. A friend around me used some small-amount loan apps because of urgent matters at the beginning of the year. The monthly bridge and the beheading interest of the platform, the interest paid in the last year has exceeded his loan amount at the beginning of the year. And I believe that there must be friends like this around the readers, who somehow become "negative". What happened to this kind of friends, on the one hand, of course, is due to their own lack of financial awareness, and on the other hand, it is the current indifference of traditional financial institutions that has driven them to these platforms step by step.

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big organization

In addition, the U.S. government always introduces some self-righteous bills, which only increase the compliance costs of financial institutions. In the end, banks have to pass such costs on to users. Compared with spending huge manpower and material resources on business adjustments, directly raising the service threshold is undoubtedly the lowest-cost compliance method, so it is becoming more and more difficult for ordinary people to get the attention of these traditional financial institutions. There are fewer and fewer financial services available.

Start-up companies

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Start-up companies

In short, under this old system, it is difficult for traditional banks to change themselves, it is difficult for start-up companies to operate independently, and it is also difficult to have enough interests to motivate both parties to cooperate. In the end, the current unsolvable situation was formed. In contrast, only the entrepreneurs themselves know how the domestic situation is.

future

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future

The status quo does not look very optimistic, and it is difficult for both start-up companies and traditional financial companies to change the current status quo. Since tinkering with the current system is useless, is it possible to rebuild a new system to support financial products in the Internet age? The answer is yes, Angela Strange combines her observations on the industry to give her optimistic future of the banking industry.

First of all, she believes that the most important thing is the construction of infrastructure, and the builders of the new system must operate around the "API economy". All emerging FinTech companies should APIize their expertise and services. Companies and companies cooperate efficiently through APIs, so that companies only need to focus on their areas of expertise. Then, based on these Lego-like APIs, any other company can simply and efficiently combine financial products suitable for its own business.

The advantage of APIizing the respective services is very obvious, it allows everyone to participate and play to their own strengths. Those who are good at handling compliance are responsible for compliance, and those who are good at making products to iterate products perform their duties. Moreover, people's demand for financial services is large enough for this market to accommodate hundreds of startups growing into large companies. And the competition among these companies will bring better and cheaper financial products to serve ordinary people who are ignored by traditional financial companies.

It also means that any company can provide banking services. The previous products had only two monetization channels-either take the route of direct charging, or take the route of free advertising. But it’s different now, and cash can be realized by providing users with financial services in specific scenarios. Moreover, these teams' understanding of users' financial needs in their own business scenarios is far beyond that of traditional financial institutions, so this will greatly expand the service model of the banking industry.

Not only that, because of the rise of various Internet applications, compared with the model of traditional financial institutions acquiring customers through offline branches, the cost for start-up companies to acquire customers by cooperating with Internet applications that fit some scenarios is very low. Traditional banks are limited by their own high customer acquisition and operating costs, and can only recover costs by setting high thresholds and high rates. The low customer acquisition cost of start-up companies combined with the above-mentioned API ecology gives these start-up companies a cost advantage, and can rely on low cost to expand the range of customers they serve and better serve ordinary consumers.

Data science and machine learning can help us build a new credit evaluation system. Now, in both China and the United States, companies are trying to use some more innovative data to help predict users’ loan repayment ability, such as the system update status of your mobile phone, the number of friends you often contact, and even whether you will give your mobile phone at night. charging etc. All of these innovations in credit assessment are helping to convert people not served by traditional banking into customers for FinTech companies. And when more people have equal access to financial services, income inequality will gradually decrease, thereby stimulating sustained economic growth.

Therefore, the current banking system is clearly biased towards the wealthy and privileged class, and most ordinary people have no choice. At the same time, neither traditional financial institutions nor startups have the motivation and ability to change the existing system. But in the future, combining the advantages of the API economy, new low-cost distribution channels, and big data, we can build a new system to overtake the car in a corner, and go beyond the limitations of the existing financial system to help start-up companies innovate and provide more common people Serve.

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Positioning of DeFi

Under Angela's understanding, traditional financial services are packaged into APIs, and the cost dividends based on the Internet and big data are enough to fight against traditional financial companies. By providing cheap financial services to ordinary people, the survival of FinTech startups is ensured. Finally, Rely on the continuous product innovation of these start-up companies to complete the final counterattack. The author agrees with most of the points in Angela’s article, but in my opinion, the future without DeFi is actually incomplete, and it is difficult to compete on an equal footing with traditional financial institutions.

In fact, the ultimate goal of financial services is trust, and the final settlement of any financial product depends on various legal contracts. People's trust in the government is the basis for the operation of the traditional financial system, and because the government trusts large financial institutions, it passes on everyone's trust to these financial institutions through licenses and other forms, and finally these financial institutions provide you with Serve. No matter how the current FinTech companies package APIs, this trust transfer mechanism will not change significantly, and the entire interest structure will not change significantly. In the end, these companies can only work for companies that have obtained licenses.