Last month, Apple announced that they planned to launch a P2P payments capability using the ApplePay infrastructure. What was compelling about the story was that the plan might involve bypassing the traditional payment networks (MasterCard and Visa). This has been a common theme over the last few years as technology companies (and other players leveraging technology) methodically move into the consumer financial services space. Whether this involves peer to peer lending, robo-advisors, alternative payments, or virtual banks, the story is the same. By cutting out “the middleman” and/or dramatically improving the user experience, these disruptors aim to take over the market. But does this really mean doom for the industry’s bellweathers?
Yesterday, I stepped out of Union Station in Washington DC and seeing the long line for taxis, I opted for Uber – one of the few poster children for tech disruption. I’ve used Uber many times before and have found it to be a compelling alternative to taxis (for all the reasons that have been rehashed in every story about disruption). This time, my experience was a bit different. The driver couldn’t find me at first. When I got in the car, I learned that I had inadvertently hit the “pool” option – which means that the driver was supposed to pick up another rider. I didn’t want that and neither did the driver, so he kept driving even as his Uber phone kept beeping, telling him to turn around. Like I always do, I ask how the driver started working with Uber, and his story was different than I had heard in the past. Less a hungry entrepreneur, and more a semi-retired guy who got in because “everybody’s doing it. Therefore, he wasn’t quite a professional as others I’ve had – very nice, but it felt like my friend’s dad had picked me up at the airport. Then the fun started. He really didn’t know where he was going. The GPS on his Uber phone was acting up, making him miss critical turns. He got flustered. A 20 minute ride turned into 40. The apologetic driver continued to mention that I would have to grade him and he was hoping I understood it wasn’t his fault. In the end, not a terrible experience, but not the one I expected. I’d still use Uber because most of the time, its not a mission critical transaction.
My money, on the other hand, is a different story. As usage of tech disrupters grows, we will undoubtedly see more and more holes. A late taxi is one thing, but a missed payment, a loss of funds, or a mistaken hit to a credit report is another. The clear advantages that the big players have are the well-tested infrastructure they have in place and the comfort with a vigorous regulatory environment. These are not easily replaced. As industry incumbents continue to make strides in customer and user experience, my thought is we’ll see the balance tip away from the disrupters. That said, infrastructure alone cannot protect them. Tech disruption will be the force that parses winners from losers with the winners embracing a new relationship with customers, empowered by technology. As we continue to move from a “me” perspective to a “we” perspective, the firms which use technology to offer personalized, helpful, and memorable experiences will be tomorrow’s leaders.