This week I am in London for a week bookended by two conferences:
Tues – the Barclays Accelerator Powered by Techstars Demo Day.
Friday – Ethereum MeetUp with a talk by Vitalik Buterin
In between meetings, I am virtually attending SIBOS in Boston (cheapskate conference attendee).
One topic notable for its absence at the Barclays Accelerator Powered by Techstars Demo Day – Bitcoin. This was a tech savvy bunch of leading edge entrepreneurs. So Bitcoin enthusiasts cannot dismiss this as a bunch of old fuddy duddies.
The Ethereum Meetup this evening will be all Bitcoin (with a Capital B, the underlying technology).
The discussion at SIBOS was interesting. It was a real debate. It was like having Republicans and Democrats in the same room and actually wanting to have a conversation. A lot of Bitcoin conferences is “preaching to the choir”. Some of the questions/issues being raised by bankers are real. Entrepreneurs take their action lists from the naysayers. If a question is raised, entrepreneurs want to figure out how to address that (not just assume that the “inevitability” of Bitcoin will make everything happen).
We will look back at this time as the point where big financial institutions and payment networks started to seriously embrace Bitcoin and hasten its inevitability by dealing with the real world issues.
Big companies facing disruptive change go through something like the 5 stages of grief – denial, anger, bargaining, depression and acceptance. I could witness some denial and anger at SIBOS, but I saw more bargaining. There was a pragmatic understanding that Bitcoin was happening and so the discussion was how to position to win in the new landscape. However I suspect that the depression phase is still to come. Previous waves of change decimated the revenues of the incumbents. I am using “decimate” in it’s precise term, meaning that it is cut by 10X. Think of what happened when VOIP (Skype etc) disrupted international calling. This means for example that the $492 billion global payments industry could become a $49 billion global payments industry. $49 billions is still very big (certainly big enough for the born-digital startups using Bitcoin), but that decimation means that most existing businesses will have to dramatically cut costs and many will not survive. The acceptance phase will only come when banks figure out where their new revenue is coming from.
Some of the born-digital startups may help them to do this.
The startups coming out of the SIBOS Innotribe incubator/accelerator are (not surprisingly) more focussed on partnering with Banks than competing with Banks. There are two companies that won out of the 280 that entered the Innotribe Startup Challenge:
- Epiphyte. In case you wondered the word means:“a plant that grows on another plant but is not parasitic”In other words (on their site, which is not easy to find):
Bridge the gap between established finance and cryptofinanceIn other words, make Bitcoin something that the Banks can make money from.
- Matchmove. This looks like a mature company doing many things, but it was this innovation that got them noticed:
“Launch your own e-wallet and virtual card with custom branding. The pre-paid nature lets you allow unbanked, non-cardable consumers the opportunity to use a payment card with no income proof or age requirements.
When the MatchMove Wallet is established, a corresponding physical card is optional. The product can be offered as a standalone product or as a companion product to existing customer’s debit and credit cards depending on market requirements.”
What both of these have in common is that they use a white label go to market strategy. They are not trying to create their own brand for consumers and businesses. They offering services that will be branded by the Bank and delivered by the Bank to their consumers and businesses. This is how the banks extend and embrace the digital innovation that would otherwise be disruptive.