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Are Corporate and Investment banks to be replaced by tech-only financial companies?

Bruno Poggi

There are many examples of bankers moving into different directions at the moment. Is banking over? Bruno Poggi, Senior Banker with 25 years experience in the industry and newly appointed Non-Executive Director at Quipo is not totally convinced... yet.

Why I joined Quipo Network?


Last summer, I thoroughly enjoyed three months’ gardening leave, spending time with the family, and riding my motorcycle from London to Menorca and back. Gorgeous, but I digress... the trip is for another day.

Since my return, I have had a few themes on my mind, some of which I would like to share.

Not that long ago, I was in a regional banking role. I was hired to grow new business in territories close to my heart and my upbringing: South Europe, the once so-called ‘peripherals’ – or, even better, the ‘PIIGS’. (This includes the Irish, who have lots in common with my Spanish compadres, but sadly I didn’t have any Irish clients at the time.) So while I do miss the energy, the regular client contact and my teammates, I am enjoying the opportunity to take stock of my career, the market, current trends and to ask myself: is fintech all hype? What do clients really want and how likely are we to satisfy them in the next 5–10 years in the UK, in Europe and around the world? 


I do not pretend to be an expert in just three months and to have all the answers today; but one thing I have learned is to keep a strong network, and, with this in mind, I have captured information – and, more importantly, sentiment – in the past months through various discussions. I have spoken to bankers, corporates, headhunters, investors, blockchain and cloud experts, founders, consultants, business schools, customers, artists and even motorcycle fanatics... you have to diversify your pool. 😊


Which all leads nicely to Quipo... but let’s pause for a second. I literally just watched the 11FS documentary, a cool piece of work that looks into fintech and how post-financial-crisis London has opened up to a new wave of creative companies in financial services. It is quite extraordinary that in a short 7–8 years, what we (old-school bankers) thought impossible is actually happening… no matter what you hear and what current bankers say, the transformation in the sector is not moving fast, but ultra-fast. I recommend watching this documentary.


Is it really that fast? Hasn’t JPMorgan just published another record third-quarter result? Surely its top line should be slowing down, right? Not just yet. At least, not everywhere. Some financial institutions do a much better job than others. The point is elsewhere, looking at the revenues generated by big banks such as JPM or Citi versus fintechs, we are still seeing a mammoth gap. How can Monzo, Revolut, OakNorth, Checkout.com and the like catch up to those levels?


Shall we ask our good friend, CAGR (compound annual growth rate)? Let’s keep it simple and assume a global bank has revenues of $100bn, with an average CAGR flat for the next few decades, and a top fintech company has revenues of $100m. The fintech firm needs an average CAGR of about 33% for the next 25 years to hit the same mark, but in Year 10 it is already reporting $2bn (not bad) and can merge with another $2bn revenue player. That shortens the distance by five years. In other words: in 2040, we will all be in self-driving, electric vehicles, waving our hands to pay for our double espressos via Checkout.com, thanks to our digital salaries paid into our Revolut or Monzo accounts. Our current accounts show digital mortgages at OakNorth bank, which helped us buy our top-notch homes with drone landing-pads from... you guessed it. All of which is of course blockchain-secured and in the cloud. Not so unreal after all?


Now – banks. Banks must evolve ‘yesterday’: aggressively, shake up their organisations in a manner that they have never done before, invest in tech – a lot. If they can afford it, buy a promising fintech (well, if fintech wants to sell, and even then, I have my doubts… but that’s for another day, we need more data). Banks are obviously not all equal. And they don’t have the same purpose. Only last week I was reflecting on the leadership position of US banks in investment banking league tables. After the financial crisis, US banks regrouped and were quick to recover, taking no prisoners. European banks, on the other hand, were behind the curve, expensive to run, not reactive enough… and they hoped the market would turn, that interest rates and spreads would help them absorb decades of inefficiencies. Nope.


I am a European (fundamentally) who has worked in US banks for years and am grateful for acquiring leadership skills, although it is a shame to see US banks not having to fight that hard. But hold on! That is investment banking or corporate and institutional banking. Their targets are the large corporates with a turnover above $4bn. That is, at best, 10% of Europe’s GDP (i.e. $2trn of the $20trn, approximately). So the next big ‘transformation’ needs to happen not only in the 10%, which may take some time, but especially in the 90%, the mid-level corporate market or mid-market, where all the action is taking place in regional and global ecosystems, and where processing information, understanding the latest trends and applying them may not be that easy. European banks, domestic champions, are still predominant and have a strategic role to play in the mid-market. But careful – it is not only US banks that are entering this market (or trying again, for some). The fintechs will not let the opportunity go by, with their much faster onboarding processes and customer experience at the centre of e-v-e-r-y-thing they do... and not just on a fancy presentation slide. 


So hey, what’s with Quipo? 


Quipo Network is a class-act team created a while ago, by and for a community of fintech experts with diverse backgrounds, mostly focused on capital markets technology and with a ton of experience in regulatory frameworks. But, above all, with an understanding of where the conversations are heading, and how we can help large and smaller organisations ask the right questions. We may not have all the answers yet, but we are keen to join in, learn from others, collaborate and improve the ecosystem in a sustainable way. We are also working on interesting applicable ideas, but they will remain ideas for now until a client wants to use one, and then the next one... 


Big thanks to Jean-Fabrice and the Quipo team for the warm welcome, and more to come in the next fintech discussion…


Bruno Poggi

Photo by Sebastian Palomino from Pexels

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