Pub. 5 2015 Issue 4

n “UBERIZATION” — continued on page 22 T H E TAXICAB INDUSTRY HAS BEEN HIT WITH MAJOR DISRUPTORS, FOREVER CHANGING THE INDUS- TRY. Investing in marketing instead of fleet vehicles and relying on crowdsourcing of a commodity: the common automo- bile, companies like Uber and Lyft have transformed a decades-old business model into something completely dif- ferent. Instead of a yellow cab showing up on your doorstep to take you to the airport, an average person shows up in their everyday car. Uber makes money without the same need for assets and capital investments, leveraging smartphone technology and consumer behavior instead of employees and fleets. It’s fascinating, with a level of success that completely stunned the industry it disrupted. IS BANKING ABOUT TO EN- COUNTER A SIMILAR FATE? Uber’s success could not have hap- pened without the mobile technology shift and consumer behaviors that fueled it, and those same things are impacting EVERY industry; including ours. Uber provides a technology driven platform that instantly matches a low-cost provider as a substitute for a more-expensive cab fare. It provides prompt fulfillment of a consumer need, using a system consumer’s prefer (mo- bile) at a cost-savings. Fintech* companies are leading our banking industry toward a similar fate. Instant competition to locally based financial services—branches--fintech companies make access to capital a fast online transaction – something VERY attractive to overwhelmed business owners who don’t understand the im- plication of their decision. They simply don’t realize online lenders aren’t held to the same levels of accountability and Truth In Lending laws that apply to brick-and-mortar banks. They don’t know what they don’t know, and we as an industry must do a better job of educating them to remain competitive. *What is fintech? This “financial technology” acronym references soft- ware businesses (usually cloud-based) that provide a financial service, often startups intended to replace paper- or location-based financial systems. For example, online-only loan processing companies. Not only are online lenders a grow- ing threat to locally sourced loans, but so is the upsurge in peer-to-peer lending. Crowdsourcing as a fast cash infusion alternative is gathering momen- tum, and seems especially attractive to small business owners who don’t realize the marketing expertise needed to suc- cessfully compete on a crowdsourcing platform. Crowdfunding matches the needs of a borrower with investors seeking a higher rate of return, in exchange for a different level of risk. It also opens the door to new investors seeking a smaller cost of entry. HOW DO WE COMPETE? Streamline The Process. Technology startups are founded on WILL “UBERIZATION” CHANGE BANKING FOREVER? By JERRY ERNST, PRESIDENT, HORIZON COMMUNITY BANK 21 FALL 2015