Hardware remains a hard value
Take a moment to look at your smartphone. It has played an irreversible role in globalization. Remember that this device was only invented twelve years ago. Just a few years after its introduction, it is already a commodity. An expensive one: it is apparently that essential. This speed of change is our new reality and it won’t slow down. This comprehensively frightens people – just google ‘Teller curve’.
If I had to point out one personal hero for their role in this social change, it would be Bill Gates. He was the first to successfully generalize interaction with machines via software. I admit that my preference comes from my fascination for this working field. At the time, Microsoft turned computer hardware into a commodity without producing a single machine, leading to the profit margins we all know about.
An indirect and socially significant consequence of the generalization was that it became lucrative to stack software. Forty years later and every credit card can buy virtually infinite computing capacity from cloud providers that can be used to launch a complex machine learning algorithm by simply touching a button. In short: software makes it possible to ‘abstract out’ complexity. Therefore the value of knowledge, as in the old adage ‘knowledge is power’, changes too. It is quite clear why everyone states that data are “the new gold”. Yet in my opinion the latter is not necessarily true (but I will save that statement for another column).
Technology has made it possible to personalize customer experience on a micro level. The consequence of this development for services in general is that service of ‘average quality’ will increasingly lose out. This also applies to the financial sector and particularly to the retail segment. One may wonder what people gain in their contact with banks or insurers, except for specific needs such as a mortgage or the payment of a claim. The legislator has actually boosted this trend by setting up PSD2. In the long term, the domain of banks and insurers is simply too limited to exceed Amazon or Google in terms of client knowledge. After all, these companies do nothing but optimizing customer experience. That does not mean that they aim to take over business because – let’s face the facts – that is both expensive and subject to complex regulations. So that business is just being auctioned. Do you notice the parallel with the hardware industry of thirty years ago too?
Some expect governments to intervene to limit the power of the BigTech companies, just as they did with Rockefeller, but I am not so sure about that. Just look at the news: there is a huge geopolitical game going on between the US and China. Technological developments in China are – clearly – exponentially faster than in Western countries. The US will therefore not force its crown jewels to split up. At the same time, the sad but true fact about Europe is that it is too weak and insignificant to have any influence on these developments.
All of this does not necessarily mean that measures will be as severe as have been announced – on the contrary. After all, the hardware industry contains highly profitable companies. Moreover, another company could simply arise and stay ahead of the BigTechs in the battle for financial services.
Jeroen van der Heide is responsible for Zanders’ innovation desk and utilizing technological change. Would you like to exchange ideas with him? Then contact