This week’s equity markets’ drama will forever be memorialized in the annals of financial history. Fortunately, as a non-participant observer who couldn’t peel himself away from CNBC, I don’t think the denouement is coming any time soon. It wasn’t too long ago, perhaps last week?, when in most American households, RobinHood referred to Sir Walter Scott’s Locksley from Ivanhoe, and Reddit evoked a response of “say what now?” from any household member over 35. Yet, here we are, witnessing a non-inconsequential populist, main street revolt against the storied Wall Street brokerage establishment and its clientele of hedge fund titans, perpetrated by (as characterized by the media) a bunch of degenerate, on-line, retail trading rabble-rousers.
The one takeaway I want to focus on (there are simply too many to write about here) is the means by which this group of retail investors took on, and as of this writing, bloodied, a formerly “untouchable” class of incumbent financial institutions, and the parallel to financial technology’s open banking movement, which is utilizing the same means to effectuate a similar outcome against incumbent banking institutions, albeit minus the sensational headlines and epic story.
In both cases, whether or not we’re aware of it, we (not just Americans, but global citizens) are witnessing and participating in a societal sea change in our ability to access and share information, limited only by the upload and download speeds of our internet providers. This democratization of information through technological innovation is the means by which WallStreetBets is leveling the playing field with the Street’s establishment, and how a mainstream, and historically disenfranchised consumer base, along with a burgeoning class of fintechs, are doing the same to incumbent financial institutions through open banking.
It would, however, be a mistake to conclude that financial inclusion through fintech innovation is not on par with this week’s equity market turmoil. It’s BIGGER. What happened on Wall Street these past few days affected a few equity securities, and the buyers and sellers thereof. What’s happening with open banking is affecting the way millions if not billions of people will conduct commerce, banking, and investing in the future. Open banking is conducted digitally and does not require access to the physical strongholds of the incumbent banks of yesterday. Open banking is freeing up the sharing of personal data to provide amazing new value-added, customizable services to consumers through traditional financial institutions, and aptly, non-traditional, newer financial institutions (neo and challenger banks) – all virtual, and all accomplished through open APIs. And most importantly, the combination of open banking’s virtuality, the ubiquity of the internet, and technological advances in mobile devices, is opening the historically inefficient and exclusionary financial system to EVERYONE, including the world’s under-banked and unbanked.
The events of this past week captured the power of leveraging the democratization of information to storm the storied strongholds of high finance’s brokerage houses and hedge funds. It was a blitzkrieg against the incumbents. Open banking, using the same democratization of information, is effectuating a similar campaign against incumbent banks, but its execution more resembles a slow and calculated siege.
It’s worthy to note that the week concluded with a story on Friday about the race between incumbent banks JP Morgan and Goldman Sachs to offer “digital-only” banking in the UK. Followed up on Saturday morning with a story about incumbent brokerage house Fidelity investing in neobank Starling Bank. The democratization of information has emboldened the masses and placed them on equal footing with the incumbent financial system. They’re storming the castles of yore with modern-day, virtual pitchforks and torches in the form of technology-enabled, real-time access to information, and fintechs facilitating the sharing and usage of the same. Are the incumbent banks going to boil the oil and ready the cauldron? They can try, but for my money, the outcome is a fait accompli.
– Adam T. Hark, Managing Director, Wellesley Hills Financial, LLC