The Napsterization of Banking
There’s a documentary on the festival circuit right now (it played in a few theaters earlier this year) and, as Hollywood hype would have it, it’s generating buzz. Called Downloaded, it documents the stunning rise and precipitous fall of Napster, the independent peer-to-peer file-sharing service that allowed anyone and everyone to post anything and everything they owned in the audio world. The music industry has never been the same since.
Even back then, it was an anomaly. Most entrepreneurs were launching dot-coms with dreams of high-value IPOs, while Napster seemed to encourage outright theft with nary a profit in sight. It wasn’t even around very long—Napster effectively functioned only between June 1999 and July 2001—but in that short time it signed up millions of members, revolutionized the way most people get their music and serves as a giant milestone in the online world.
So what does all this have to do with banking? Ask Peter Sands, group chief executive of international banking conglomerate Standard Chartered and a long-respected industry veteran. In a new and much talked-about piece for the Financial Times, headlined “Banking is heading towards its Spotify moment,” he asks a distinctly uncomfortable but vital question: Will the rise of new technologies do to the banking industry what file-sharing services did to music and book retailers? (Hint: It destroyed them.)
While it seems like a stretch to link the intricate workings of the financial industry to unauthorized downloads of Lady Gaga, it’s really not. As the piece points out, actual money constitutes only a tiny fraction of financial services. Most of it has to do with deposits and mortgages, or information and transaction. In other words, it’s eminently ‘digitizable,’ just like the new album from Jay-Z. Technology has radically transformed every industry and every practice built around exactly these commodities, and the traditional pillars of those industries have paid the price (think Tower Records, or the Borders bookstore chain).
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