The banking world has become a world of building blocks

Capitalism is dead, long live dataism. Data are what capital has been for decades. They are the main currency in our economy. An example? A farmer can buy his seeds cheaper today if he reports data about his harvest. This helps both the supplier and the government to refine their sustainability policies.

That data are crucial is certainly true in Europe, where we have realized that by exploiting it ourselves we can evolve into a data economy. Gaia-X has been a very important step towards this. The collaboration between business, science and politics has led to a new generation of data infrastructure.

Regional Leader Public Sector EMEA Microsoft

Such a paradigm shift naturally also has an impact on the financial sector. It is a lot more complex than it was 10 years ago. There has been a clear convergence between the financial sector and other sectors, not least the technology sector. The financial sector has broken down into a series of building blocks that you can offer separately or together: basic financial services, loans, investments, but also controlling, intermediary services, etc.

This has made it easierfor non-traditional players to enter the market and claim a specific slice of the cake.

Banking-as-a-service and insurance-as-a-service are well established and, in some cases, new players clearly have the best assets. Take the example of Tesla. That company has so much data about its cars and the driving habits of its drivers that it can offer the most applicable car insurance.

The fact that other players are operating in the financial sector does not mean that Microsoft has also become a bank or insurance company. Our role has been to serve as an enabler, to help other players develop themselves based on the technology we provide. We provide opportunities for co-innovation and co-creation.

But of course it also works in the other direction. Technologies like blockchain and bitcoin also allow traditional financial institutions to further broaden their offerings. The Kate Coin launched by KBC in 2022 was just a taste of what is possible today.

However, it looked oppressive for a while. Crypto currencies took serious hits at one point, calling the whole technology into question. But people forgot that bitcoin stands for three different things: first, it is a technology – and it has more than proven its value to us in the meantime – second, it is an asset class and third, it is a means of payment. It gives people in a lot of countries access to financial services and products. As an asset class it is a tool for extra return or risk hedging. Obviously, this can fluctuate.

If you want to be competitive today, you have to be a technology company. It‘s as simple as that. Quantum computing and 5G have accelerated and enabled so much. But one element that is even more important is cloud. Cloud has made scalability and innovation possible for everyone. Blockchain and bitcoin are cloud embedded as platform-as-a-service. This has allowed big banks to compete with companies like Google and Meta. But it has also benefited smaller players, such as Tier 2 and 3 banks. Developing applications with blockchain or artificial intelligence is so easily accessible to them now.

Another major innovation in recent years has been the concept of trustless transactions. This is what the crypto evolution has taught us. Trustless means that no third party (a bank, a person, another intermediary, etc.) is needed anymore in a transaction. This is of course due to the digital identity, which we all have. This enables a trustless environment, which by the way is not only valid for financial transactions, and more disintermediation.

A final important evolution has been in the profiles operating in the financial sector. Since successful financial institutions have now also become technology players, there are many more digital profiles active in the sector than there were ten years ago.

But they are hypergeneralists. This is due to the breakthrough of artificial intelligence. It is better at replacing specialized tasks. The radiologist has disappeared, but the general practitioner is still there. It‘s the same in the banking world.