Banking Fintech

Augmenting finance is far more interesting than disrupting it

Augmenting finance is far more interesting than disrupting it. Image: Copyright:, Shutterstock
Written by Chris Skinner

Why is fintech considered cool? Chris Skinner looks at the clues, and suggests augmented finance is a better alternative to ‘disrupted’ finance.

I had a realization this week. The realization is that banks have always been hot on technology and innovation. If you don’t think so, check out this blog from April 2008 (eight years ago), where I talk about the rise of innovation in banking. The context was talking about how banks had created a new role – chief innovation officer – and had pumped up the innovation ratchet massively since 2001. It goes back even further than this, however, as I’ve spent all my life in technology in finance, starting a long time ago (don’t go there) and there’s never been a time where banks haven’t been hot on tech.

By way of example, a quote I often use is from Walter Wriston, former CEO of Citibank, who in the 1970s bet the bank on technology based on his belief that ‘information about money is becoming more important than money itself’.

So tech and finance isn’t new at all, which makes me ask why fintech is so cool. I guess fintech is cool because we’re moving from banks using proprietary tech to cut costs, build efficiency and create straight-through processing to placing all of this on the internet. In so doing, it’s creating a challenge for our banks – how to move from legacy proprietary physical structures to open, internet-based digital structures – but it’s an augmentation and refreshment of the bank rather than a disintermediation and replacement.

This is why I continually smile when people talk about bringing down the big, bad banks with technology. I smile when they say this is disruptive, that banks are dinosaurs and the roof is about to cave in on their legacy system. I smile when people talk about Google, Apple, Facebook and Amazon, along with Alibaba, Tencent, Baidu (and more) decimating the bank system.

Yet, they’re not. They’re all having an impact for sure, but nothing is decimating, disrupting or disintermediating the system. They are augmenting it.

Augmented finance and new players

Augmented finance is very different to disrupted finance. Augmented finance – the theme of Brett King’s next book – is all about adding to the financial system, not replacing it (though Brett doesn’t necessarily agree with that assertion). I make this assertion because disruption and change has been around all of my life, working in banking and technology, and today is no different. It’s the banks that adapt to these changes that will win out and lead, and that’s why banks are investing in the change. They are not ignoring it. Ignoring technological change in a financial system based on technology is like a mouse starving to death because someone moved the cheese. The mouse knows that the cheese moves every day, which is why it always looks for food everywhere, and the bank knows that technology changes very day, which is why they are always tracking IT.

So technologies of today are changing banks – blockchain, cloud, analytics, APIs – as well as augmenting it. Augmented finance is why things such as bitcoin and mobile wallets become interesting, as they add a dimension to a system that couldn’t cater for the people who were historically outside the system. For example, most Africans who have a mobile subscription are opening a mobile wallet, because they didn’t have access to finance before. The big bet is that if you combine a mobile wallet with a cryptocurrency, you could create a huge opportunity for financial inclusion. Bill Gates is taking that bet by investing in creating a mobile financial inclusion program for Africa and other developing economies, to ensure that the five billion people who are unbanked or underbanked can be served by a networked financial system that’s cheap and pervasive. In other words, a new financial system that includes those who were previously too poor to serve.

Augmented finance also sees new players focusing on segments that banks underserved before, such as students (SoFi) and SMEs (Funding Circle). The new players add to the systems and complement it. This is also true of offering more ubiquitous points of sale (Square), checkouts (Stripe) and transactions (PayPal), all creating internet-based complementary structures on top of historical structures (Visa, MasterCard and Amex).

Being actively engaged

Where there is replacement of the system from proprietary to open, banks are actively engaged. IT is why so many are running hackathons, open API days, startup challenges and more. Why would banks invest in startups if they thought the upstarts were going to bring them down? That would be stupid. They’re investing because they get early learning on the startup’s ideas, have a stake in a future business model, and if successful have a lead in absorbing that startup’s idea into their own operations.

Therefore, being brutally honest, banks have never shirked from the technology challenge. They’ve always been up for it. Some banks don’t have the leadership to deal with it, which is another story. In fact, I could point to many banks that are failing to step up to the plate when it comes to transforming their operations to the internet, open-sourced world of 2016, but I would rather point to those who are stepping up to the plate, and would probably cite Bank of America, Barclays, BBVA, BNP Paribas, BNY Mellon, Commonwealth Bank of Australia, Citi, Credit Suisse, Danske, Deutsche, Intesa Sanpaolo, JP Morgan, Nordea, Santander and Wells Fargo to name just a few. Funnily enough, they are the names of just a few of the banks who have joined the R3CEV consortium. And there’s the rub. Just as in the past, when technology has created challenge, banks create a consortium to rise to the challenge – Swift, Visa, EBA. This is no different.

So, the net:net is that fintech is cool because it’s creating the internet of value, the ValueWeb. ValueWeb is based on augmented finance to serve markets that were historically underserved or overlooked.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image: Copyright:, Shutterstock

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.


  • Thanks Chris, nice piece. You mention in another of your posts that startups in Fintech ‘enable P2P transfer of value in real-time for 100 basis points -0 the costs of their software and servers’ and ‘banks with today’s structures cannot compete’. Agreed. I also like to see an expert as yourself mention Africa and M-payments #financial inclusion. Little income is not no income, right? You then write ‘In other words, a new financial system that includes those who were previously too poor to serve’. IMHO I think they are still ‘poor’. What has changed is that tech (now led by MNO) and what you call ValueWeb. I think a bank plus an MNO is a great combo, starting in Africa. Banks enjoy less strict regulation – they learn, bring trust in a still cash-in-cash-out M-payment network, gain customer traction, while MNOs gain new clients and de-risk the finserv business. Look at BBVA: some 17 million mobile accounts. In Africa, there’s 50% of world mobile accounts. Look at Orange latest deal to use m-payments in francophone Africa for remittances. Does this make sense or sounds crazy. Anyhow I learned from a couple of your posts. thxs

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