The Backbone of Finance is Going To Change

Most people deal with finance by filling out forms.  They go to the bank, fill out a form and get an account.  They go to the bank, fill out a form, get a loan.  They go to the insurance company, fill out a form, get a policy.  I wish it was only one form, but the reality it’s usually a lot of forms and disclosures.

The biggest innovation in that part of finance is that it’s gone virtual.  You can do it in your pajamas.

There are plenty of apps out there that teach you how to save, monitor spending, do lead generation for banking, insurance and brokerage companies.  There are apps that track your expenses and put them in reports.

The next action in finance is going to be in the backbone.  It’s going to be behind the scenes and it is going to be huge. It’s going revolutionize how banks and institutions interact with each other.  There will be several different areas which will radically change in the next ten years.

  1.  Risk Assessment and Risk Mitigation
  2.  Compliance and Regulatory
  3.  Capital Efficiency and Management
  4.  Transparency, Information, Data
  5.  Payments
  6.  Reporting
  7.  Back Office Functionality

To 99% of investors, these areas are not exciting to work with.  You can’t go to a cocktail party and show someone the new Reporting app on your phone.  But, they are really exciting to me because the markets are so big and so ripe to be transformed.  It’s also very hard to understand how big the markets are unless you have been in them.  It’s just not sexy to most investors to write a check to a startup that looks like it’s going to sell for anything less than a billion dollars.

Interestingly, the Midwest has a lot of local DNA in all these different areas.  I was talking with a person that recently started a company here attacking the Financial Services space and they said the amount of talent here, and the cost to get that talent was a significant difference for them.  They couldn’t imagine building their company anywhere else.

When we get to the other side, the cost of financial services will go down significantly, allowing more people to take advantage of them.  The marketplace will be more transparent and much easier to transact in.  Hopefully, the amount of actual forms that someone has to fill out will go down or be eliminated.


  • JustanotherCabDriver

    I Started my career in Financial Services in the Midwest though I’ve been all around the country since. There is an ENORMOUS reason that Financial Services firms have located their offices to the Midwest: Education and Quality of workforce and Cost. CIGNA moved it’s employee benefits offices to DeMoines, right next to The Principal Financial Group, largest 401(k) processor and vendor for a reason. Lincoln National is in Ft. Wayne IN, Union Central and Ameritas are in Nebraska and Cincinnati Ohio, Fidelty Investments Broker Dealer investment processing is in Kentucky just across the bridge from Cincinnati. You can make a house payment there for $1200 -$1500 a month and one day own the place. In San Francisco that gets you maybe one room in a two bedroom dive flat in a bad neighborhood that takes 40 minutes plus to commute from on bad buses to down town. All this automation is of course going to eliminate a lot of jobs and maybe all those financial services workers can go over to the Tyson Chicken plant or to the Hog processing plant but they’ll have to accept a lower standard of living, because well those jobs they’ll be competing for against new “Citizens” and Democratic voters from Latin America. Some of those people will be out of work for long periods, maybe they’ll take up blogging.

    Automation, doing the jobs Americans don’t want to do. S

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