Banking
Four reasons why disruptors cannot truly disrupt the banks
Published by Gbaf News
Posted on September 1, 2018
6 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Gbaf News
Posted on September 1, 2018
6 min readLast updated: January 21, 2026
By Dan Houlihan
It’s true – disruption is getting more common. Data from Google Trends shows interest in the term “disruption” has risen over the past decade.
Every industry has been impacted, including finance. A recent PwC report said that fintech firms are now “attacking some of the most profitable elements of the financial services value chain.”
This is an important trend, one that is at the top of industry conference agendas and a popular topic in the media. But I wonder if the headlines and Twitter hashtags obscure an inverse argument: Banks have many advantages in the race to innovate.
Over the past year, through speaking with colleagues and peers at large institutions, I have noticed four areas where banks hold the advantage over start-ups when it comes to disrupting financial services.
Scale. Technology firms start with a product, then develop a client base. These new companies may need to support a product for months or years to achieve a sustainable size, building networks and creating an ecosystem for their services. In comparison, most banks already have a large, established client franchise. This means actual users can be consulted throughout the development process. Banks also typically leverage annual capital spending plans – maybe even in a dedicated research and development budget – to fund and implement their initiatives.
Dan Houlihan
Brand. When it comes to the management, administration and safe-keeping of money, people are justifiably cautious in making decisions. Even though recent surveys have shown a growing willingness to explore working with technology companies in banking, when pressed, people still feel more comfortable with established financial institutions. Banks have spent decades, sometimes centuries, earning the trust of institutions and investors. These strong brands cannot be replicated in the short-term by an upstart.
Feedback. Banking is a relationship business, and banks have developed sophisticated ways of tracking and measuring how client relationships are working. Digital surveys, relationship manager reporting and controlled studies can help banks understand the evolving needs of their clients and how to better serve them. These systems are frequently backed with years of user data and the very latest in customer service technology. These can be deployed during the development of new products, allowing banks to understand the strengths and weaknesses of their products in ways that disruptors cannot.
Expertise. Banks often employ thousands of people, including professionals with a breadth of experience that can help in developing and implementing complex projects. Banks are already building teams with expertise in artificial intelligence, machine automation and other materials that are critical to the next wave of financial services solutions. This infrastructure fosters collaboration and the creation of new services leveraging expertise across multi-disciplinary teams.
Disruption should not be viewed though a binary or winner-take-all lens. Good ideas are coming out of start-ups and technology companies, while banks have also proved to be more nimble than once thought. We know disruption will continue, and banks absolutely need to adopt an ‘R&D first’ mindset to thrive in this changing environment. The industry will be better off if firms recognize and utilize their inherent strengths to move towards the future.
Dan Houlihan leads Northern Trust’s Global Fund Services business in North America
© 2018 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For legal and regulatory information about individual market offices, visit northerntrust.com/disclosures.
By Dan Houlihan
It’s true – disruption is getting more common. Data from Google Trends shows interest in the term “disruption” has risen over the past decade.
Every industry has been impacted, including finance. A recent PwC report said that fintech firms are now “attacking some of the most profitable elements of the financial services value chain.”
This is an important trend, one that is at the top of industry conference agendas and a popular topic in the media. But I wonder if the headlines and Twitter hashtags obscure an inverse argument: Banks have many advantages in the race to innovate.
Over the past year, through speaking with colleagues and peers at large institutions, I have noticed four areas where banks hold the advantage over start-ups when it comes to disrupting financial services.
Scale. Technology firms start with a product, then develop a client base. These new companies may need to support a product for months or years to achieve a sustainable size, building networks and creating an ecosystem for their services. In comparison, most banks already have a large, established client franchise. This means actual users can be consulted throughout the development process. Banks also typically leverage annual capital spending plans – maybe even in a dedicated research and development budget – to fund and implement their initiatives.
Dan Houlihan
Brand. When it comes to the management, administration and safe-keeping of money, people are justifiably cautious in making decisions. Even though recent surveys have shown a growing willingness to explore working with technology companies in banking, when pressed, people still feel more comfortable with established financial institutions. Banks have spent decades, sometimes centuries, earning the trust of institutions and investors. These strong brands cannot be replicated in the short-term by an upstart.
Feedback. Banking is a relationship business, and banks have developed sophisticated ways of tracking and measuring how client relationships are working. Digital surveys, relationship manager reporting and controlled studies can help banks understand the evolving needs of their clients and how to better serve them. These systems are frequently backed with years of user data and the very latest in customer service technology. These can be deployed during the development of new products, allowing banks to understand the strengths and weaknesses of their products in ways that disruptors cannot.
Expertise. Banks often employ thousands of people, including professionals with a breadth of experience that can help in developing and implementing complex projects. Banks are already building teams with expertise in artificial intelligence, machine automation and other materials that are critical to the next wave of financial services solutions. This infrastructure fosters collaboration and the creation of new services leveraging expertise across multi-disciplinary teams.
Disruption should not be viewed though a binary or winner-take-all lens. Good ideas are coming out of start-ups and technology companies, while banks have also proved to be more nimble than once thought. We know disruption will continue, and banks absolutely need to adopt an ‘R&D first’ mindset to thrive in this changing environment. The industry will be better off if firms recognize and utilize their inherent strengths to move towards the future.
Dan Houlihan leads Northern Trust’s Global Fund Services business in North America
© 2018 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For legal and regulatory information about individual market offices, visit northerntrust.com/disclosures.
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