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Just how personalized can finance become?

“The Great Transition” by Emmanuel Daniel is an acerbic look at how finance will change in spite of fintech.



Emmanuel Daniel has something to say.

Quite a few things. The founder of Singapore-based trade publication The Asian Banker, now relocated to Beijing, has always infused his conferences and articles with visionary takes on finance.

Now he’s got a book out that aims to describe financial disruption, how the fintech industry has failed, and why financial models are bound to change anyway.

In The Great Transition: The Personalization of Finance is Here, Daniel argues that “finance will become the ‘operating system’ of the personalization of society as a whole.”

There are tensions and contradictions throughout the book. An underlying theme is Daniel’s revulsion at unbridled US-style cowboy capitalism, and his acknowledgement that US individualism remains the greatest driver and template for the personalization that he predicts and (partly) champions.

That’s fine. A black-and-white conceptual approach would not work anyway. The world’s messy and complicated and contradictory. So let a book be that too.

And there are flaws. The opening chapters jump around a lot, throwing one spaghetti noddle of a theme at the wall after another. Daniel leads with a metaphor about the old ice industry that, um, melts when taken too far.

He tantalizes readers with the assertion that “the personalization of finance is here” but his examples and talking points usually punt solid descriptions of this personalization into the future.

The heart of his vision is that the only way to alter the power of incumbent institutions is to advance that of individuals, with technology the enabler. Again, Daniel is ambivalent about what this portends, noting that the meme stock proponents (to cite one example) were merely using the power of crowds to mimic the predatory behavior of Wall Street firms.

But he reckons that the power of APIs to democratize finance is being wasted by banks, which will rue their inability to adjust to open-finance models and own their own future. The personalization factor will ultimately run them over.

He may be even more correct now than when he wrote these passages. “Today, we talk about individuals being able to do their own coding,” he says at one point, “but even that will be made much easier when individuals are not even required to do any coding.”

ChatGPT hit the market around the time the book was getting printed. While Daniel was polishing his final edits, advances in artificial intelligence transformed the future of writing software. Generative AI’s ability to put coding in the hands of ordinary businesses only reinforces Daniel’s arguments about the potential for networks of APIs to interact among one another, creating vast troves of data outside of any one institution’s proprietary database.

The Great Transition is a refreshing cri de couer for fintech to return to its origins as a disruptive force, and a condemnation of the talk of being “partners”, “enablers”, and other weasely B2B businesses. Daniel makes clear that the more that fintech tries to complement banks instead of attack them, the more this favors the banks and renders fintechs impotent and unprofitable.

The strongest passages deal with the failures of fintech to change the fundamentals of financial markets, products, and how banks operate – for good and ill.

Here are a few choice quotes from the book:

  • “Innovations in finance can be characterized as innovation only when they take place on the balance sheet. Many so-called innovations pursued by fintechs today in fact undermine the balance sheet by way of subsidized loans and deposit rates, funded by VCs who are able to absorb the losses generated.”
  • “The real challenge is that traditional financial institutions are still haunted by their ‘front office, middle office, back office’ demons, and are trying to retrofit blockhain to support this outmoded way of thinking.”
  • “Applying too much technology to an incumbent system only reinforces the status quo.”
  • And the piece de la resistance: “The bank deposit account is the Kodak equivalent of the financial services industry today. This is the one product that banks can’t imagine giving up, ever.”

Daniel follows this last one by exploring all the ways people don’t need deposits anymore, or how fintechs are providing better substitutes – and the dangers that would result if banks lost hold of deposits. It is another example of the ambivalence that pervades this book.

Daniel framed his book around the metaphor of how the early industry of transporting ice from New England to Florida was gradually undone by technology like refrigeration.

Another way to purpose this idea is to note that water can be hard and brittle, supple and liquid, or intangible and gassy, depending on external conditions. In this innate transformability reside the contradictions of technology, financial markets, innovation, stagnation, institutions, people. The same damn thing, completely reimagined.

The Great Transition: The Personalization of Finance is Here, by Emmanuel Daniel, World Scientific Publishing: Singapore, 2023.

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