—Tech companies are all about marketing, but we’re all about consumer safety.
—Nobody’s regulated like we are.
—We’re investing in digital startups because we need to know how to reach customers.
Sound familiar? If you work at a bank, an insurance company or another big financial institution, these comments are straight out of your playbook.
But they weren’t made by bankers. They were spoken by senior executives from the automotive industry.
Last week I attended the Asia version of The Wall Street Journal’s annual technology conference, D.Live, held in Hong Kong. The content was more about tech in general, with no special focus on financial services. Instead the hot topic was autonomous driving.
But as I watched on stage the likes of Chi Youngcho, chief innovation officer at Hyundai Motor Company, and Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, I experienced a strong feeling of déjà vu.
Here are some reasons why.
- Chi spoke at length about how incumbent automakers are focused on safety, at a time when tech challengers are disrupting the car industry with the prospect of driverless cars.
- Chi noted that carmakers have recently embraced open-source development, after a long history of keeping R&D proprietary – it’s a response to aggressive tech entrants such as Uber, Waymo and Didi. Although incumbents are skeptical about tech CEOs’ grandiose claims, they are also partnering with, or investing in startups for specialized knowhow and customer experience.
- Carmakers are not interested in investing in things like artificial intelligence, big data, payments, cyber-security or the other things that go into an interconnected world. But, like banks with their quest for “ecosystems”, all of these external inputs will become vital to incumbents.
- As banks do, car makers have established serious corporate venture arms – Ghosn says Nissan alone has a $20 billion warchest and a $1 billion venture investment fund.
- Incumbents feel they can outlast tech challengers. Ghosn noted that startups are dependent on constant fundraising, which could be shut off if there’s a financial crisis or liquidity crunch. Chi, meanwhile, says Waymo and others are announcing fast deployment of driverless vehicles because they are desperate to get products to market – but automakers are not in a rush. “We’re already making cars,” Chi said.
- The incumbents are shaped by regulators. Emissions and safety standards are pervasive, creating a barrier to entry that automakers enjoy against tech companies. “If any industry is regulated, it’s ours,” Ghosn said.
So what to make of this? Well, the automakers’ remarks show that financial institutions are not nearly as special as they think they are. Banking is not the only complex, globally connected, highly regulated industry facing disruption.
Digital technology has a way of flattening industries, which at least means F.I.s can probably learn as much from Hyundai and Nissan-Renault as from one another. Carmakers are learning how to leverage their incumbencies to stay relevant.
But this comparison is also a warning to those who scoff at fintech and all the changes it imposes – agile workflows, chatbots, blockchain, mobile, good heavens customers what are those?
I get it: you’re tired of seeing twenty-six year olds HODLing to get their LAMBO. Too bad. There will be failures, reversals, and excesses, but digital finance is not a fad: it’s just one expression of a much bigger change. The tech shifts are real, they are impacting all industries, and they will just get more intense.