Markets by Trading view

Dinosaurs in the Forced-Digital Corona Age Economy

digital dinosaurs Ignatius Bowskill Dutkiewicz

If the coronavirus epidemic has taught us anything about our traditional economy (other than a healthcare industry being woefully unprepared), it is that the wave of digitalization that began decades ago should have been heeded more closely.

An example of complacency can arguably be found in Britain’s biggest building society, Nationwide.

Although Nationwide did start a fintech venture fund (NBS Ventures) in 2018 and launched the Open Banking for Good challenge, the investments into them were a paltry £50 million and £3 million, respectively. This is in comparison to the $225 billion in AUM the financial institution oversees.

From what can be ascertained from the NBS Ventures website, there are a total of nine investments in their portfolio. However, we do commend the team on that score, owing to the fact there only seems to be four of them.

But unless someone from the FI can bring our attention to other initiatives, this is a 0.023% dip (we use ‘dip’ in the lightest, almost nonexistent, sense of the word) into the fintech market.

Although all of these fintech investments seem useful, it is one question to have them and quite another to scale them to Nationwide’s infrastructure.

But under the strain of BoE near-zero rates, Nationwide has been forced to cut rates drastically. Under the strain of the coronavirus pandemic, Nationwide went from reducing branch operating hours to full on closing them and disconnecting non-essential call centre operations over weekends.

Then in a twist of fate that surely forced David Brear to briefly stop silently chewing in his remote lunch sessions, Nationwide then cancelled going into the SME sector (the same sector which three of the nine NBS Ventures’ startups support).

The UK-based building society (larger than the next 44 building societies in the UK combined) noted that “the impact of COVID-19, including assumption changes to short and long-term interest rates, has meant that the option of entering the business banking market is no longer commercially viable.”

But the pandemic and government response to the crisis has led to a whole host of issues cropping up, of which we fear the building society may not be fully prepared to deal with. Take cash.

Or the support the UK government has pledged to the self employed and SMEs, which naturally has to be distributed digitally. “Many people out there have fallen through the cracks,” Andy Chamberlain, head of policy at the Association of Independent Professionals and the Self-Employed (IPSE), told Yahoo Finance UK.

Is Nationwide prepared to guide their customers through those digital-only ‘cracks’? We hope their customers are not only getting directions via Twitter.

If Nationwide does not get fintech savvy and leverage the hard work their four person team has achieved over the course of the last two years, there really is a chance they will have fintechs “eat their lunch”.

Perhaps the FI should take a page out of the book of other community banks such as Cross River, Celtic or Evolve that do the mundane ‘plumbing’ for large fintechs such as Square, Stripe and Robinhood.

Nationwide might need a fintech partner to get through COVID-19 but in the longer term it would be wise to get fully on the digitalization band wagon.

Can you imagine what I would do if I could do all I can? – Sun Tzu

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