In its early days, there were over 35 million users of America Online (AOL) according to the company. That number consisted of people periodically dialing into their accounts: “going online” at a particular time of day, emailing or IM’ing someone, then signing off once they finished — typically on a conventional landline. Today, not so many years later, we walk around with pocket supercomputers, always connected to a vast world of information through wireless networks. For the sake of comparison, there were approximately 1.2 billion daily Facebook users in 2016.We don’t “go” online anymore; we just “are” online.
This is transforming nearly every aspect of our lives, from how we shop, communicate, hail a taxi and entertain ourselves, to how we work, learn, invest and manage our finances. Just as massive, distributed computing power and persistent connections are transforming our personal lives, they promise to transform the accumulation and distribution of capital. We spend a lot of time thinking about this at Orchard. What do you call this next phase of always-connected financial services, this idea of persistent connections and the development of technology that provides new ways for capital to find its highest and best use?
Phase 1: Bringing Your Financial Life Online
When thinking back over the last couple of decades of technological progress, on the surface, the ways that we interact in our personal, professional and financial lives have changed dramatically. Indeed, most of us can barely remember what it was like to live and work in a world without email or social networks, or without real-time access to a seemingly infinite amount of information, near-instant global communication and productivity tools that simplify our lives. In financial services, though, many of the advancements to date have simply used technology to mirror in the digital world the same products and processes available in the physical one. That is an important step in innovation, but only the beginning.
Phase 2: Connected Capital
In financial services, the next wave of technology is just starting to take form and make use of this idea that we are “always on” and “always connected.” I call this phenomenon “connected capital.” Connected capital involves products, behaviors and experiences that are not merely online versions of offline practices, but rather are fundamentally new ways of interacting and transacting, enabled by abundant connectivity, computing power and access to data.
Companies building solutions in this area will aim to integrate with nearly every aspect of our daily lives and will design products and services that require minimal effort on our part to operate and manage. This will require us to truly reimagine the way we choose to interact with technology and, possibly more telling, how technology may choose to interact with us in the very near future.
Innovations such as online banking, peer-to-peer lending, marketplace lending and the like have been important steps in the history of financial innovation. The terms “online lending” and “non-bank lending” have enjoyed widespread use but somehow do not tell the full story. The distinction will not be bank versus non-bank, or even offline versus online, now that being “online” is mere table stakes and “traditional banking” has become a retronym.
The dividing line in a world of connected capital will be between the firms who merely utilize technology to deliver a traditional product in an online setting versus those who leverage the power of an always-connected world to deliver experiences that never could have existed before.
— Read Wealth Managers Using Tech to Catch Massive Asset Wave on ThinkAdvisor.