Financial Institutions disrupted

Financial institutions begging to be disrupted

How is it possible that Financial Institutions are being disrupted at a time when consumers could hardly be less happy with their financial institutions?

There are a number of explanations, but the clearest and most convincing is net interest spread: the difference between the yield banks receive from money they loan and the rate they pay to borrow.

Today, the spread is larger than it’s ever been in its history. Banks are borrowing from their depositors and from the Fed at historically low interest rates – as low as 0.5 percent here in the U.S. and at negative interest rates in countries like Germany. They turn around and lend at as much as 10 to 25 percent interest, depending on the borrower’s risk profile.

Since the Fed won’t lower rates further, this spread will likely narrow, and the party that banks have been having for decades will be over. Of course, that incredibly wide spread has opened up an equally wide opportunity for new entrants.

Simplify what is complex

The companies best positioned to disrupt or even displace the incumbents will develop against four key elements, which consumers increasingly demand:

  • simplify what is complex
  • increase transparency
  • offer analytics
  • reduce friction

like we do to help companies in need of instant liquidity at Advanon.

The possibilities number too many to count, but the market opportunity measures in at $2 trillion per year. Advanon also expects to be able to use it’s position as a technology company to gain market-share. We share this article as we hope to also inspire others to innovate in the FinTech, hence providing an alternative to the incumbent firms. As Charles Moldow points out – even though the incumbents might seem too big to fail, all signs point to them being too slow to react.

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Katharina Boehringer

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