Survival of the Fittest: Banks Struggle Against Tokenization, Stablecoin, and Fintech Disruption

Increasing digital financial inclusion is fintech's highest calling

Among the most famous works of Charles Darwin is his sketch of four variations in finch beaks, as depicted in Darwin's “On the Origin of Species.” This interpretation of the famous sketch was reinterpreted in the style of Andy Warhol by Ideogram. I think Warhol would have loved it!

Thanks for reading the “Cashless” newsletter, an insider’s view on Asia’s fintech, CBDC, and AI for anyone striving to understand “the Asia Century.” I’m Rich Turrin, and these are my hard-hitting insights designed to educate and inform. Subscribe to get these emerging trends directly in your inbox every Sunday. Every week, I scan thousands of articles to find only the best and most valuable for you. Subscribe to get my expertly curated news straight to your inbox each week. Free is good, but paid is better.

Topics:

• Bottom Line: Forget Banks—Crypto & Asset Managers Rule Tokenization

• Banks Bleed Revenue to Nonbank Fintechs—AI Can’t Stop It

• Stablecoins: Crypto's Killer App Until Banks Crash the Party

• How To Increase Digital Financial Inclusion In Developing Countries

• Bonus Read: Welcome to the Post-Web Revolution—Are You Ready?

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Happy Sunday!

Today’s art comes from an illustration in Charles Darwin’s “On the Origin of Species” that I modified with GenAI it to create an homage to Andy Warhol. Darwin used a similar illustration of finch beaks to show evolution at work, which I think is a perfectly analogous to banks

Banks need to evolve to keep up with changes in their environment, and so far they aren’t evolving fast enough to keep up with other animals who are now outcompeting them.

We start with tokenization, an environment where asset managers and crypto are outcompeting banks. Banks don’t perceive that there is much to gain from pushing forward with tokenization, and are more worried about losing existing revenue from fees and services than outcompeting competitors for a larger new food supply.

Speaking of the food supply, banks are also losing food, or in this case, revenue, to nonbank fintechs at an alarming rate. In 2023, banks lost around 16% of their revenue to fintechs that were simply not part of their ecosystem a decade ago. This loss in their traditional ecosystem is particularly painful and will only increase.

All is not lost for banks, and while stablecoins would seem well-positioned to leave banks even hungrier, it appears that at least some banks will launch stablecoins and may be strong competitors. Banks have a real advantage with user trust over crypto ecosystem players, making this an ecosystem where they might succeed. This would certainly surprise the crypto world, and it can’t be discounted.

Leaving banks aside, we look at fintech’s greatest contribution to society, digital financial inclusion. Digital finance has done wonders across the developing world, and we’re just beginning. While there is more to be done to improve the delivery of digital finance, one area that stands out is financial literacy. Inclusion without financial literacy is dangerous, as shown in both China and India.

Finally, our bonus read is about the “post-web” era. Web3 promised that blockchain alone would bring us to this internet nirvana. It will take a lot more than blockchain alone, and AI, stablecoins, and open source tech are helping us get there. Think of Web3 as a journey, not something that is turned on all at once.

👉I’m on holiday for the next few weeks and will produce one newsletter over the next two weeks, or perhaps two shorter ones. I’m looking forward to a bit of underwater digital detox! 🤿

Thanks once again for reading. I appreciate each and every one of you taking the time to open your inbox for me!

Rich

PS

Thanks for sharing with your friends! It’s a great way to say thanks.

PPS Written in the airport, expect typos

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Bottom Line: Forget Banks—Crypto & Asset Managers Rule Tokenization

Banks have too much to lose to drive the tokenization revolution.

Tokenization is coming, but not from the direction you think. Asset Managers and crypto exchanges are diving in, leaving banks once again on the sidelines as crypto exchange Kraken begins offering 24/7 trading of tokenized US equities.

The WEF presents a refreshingly hype-free report on tokenization, which goes into fabulous detail and is worth your time, but it doesn’t capture the battle on the street.

See why we’re all waiting for tokenization, but we’re looking in the wrong places.

Banks Bleed Revenue to Nonbank Fintechs—AI Can’t Stop It

AI is seen as the miracle cure to all ills, but it can't help banks staunch the bleeding.

Banks are bleeding market share to a new generation of nonbanks born in the fintech revolution, to the tune of around 16% of their total global revenue for 2023 and growing.

Who are these nonbanks? The list is long, but the key players are wealth management, retail trading, private credit (BNPL), and payments. The problem for banks is that these competitors are beating banks’ low annual growth rate of 10-15% by many multiples.

See why banks have no chance to staunch the bleeding.

Stablecoins: Crypto's Killer App Until Banks Crash the Party

Banks may be disruptors, but are they willing to sacrifice payment revenue?

The stablecoin market is on fire with the expected passage of the GENIUS Act, and FT Partners has released a fantastic new report with company profiles of the leading companies driving the stablecoin revolution.

Read why the current crop of stablecoin leaders may very well be disrupted by banks!

How To Increase Digital Financial Inclusion In Developing Countries

Digital payments and financial literacy are go hand in hand.

Whether it’s MPESA, WeChat, stablecoins, CBDC, or QR payments mobile payments are fintech’s greatest achievement as they continue to bring financial inclusion to the world’s vulnerable.

This great paper by GFTN and the FutureMatters Centre of Excellence shows how collaboration between government and financial institutions plays a pivotal role in financial inclusion.

See why financial literacy is critical to avoiding debt and sorrow.

Bonus Read

Welcome to the Post-Web Revolution—Are You Ready?

The Post Web - The Web is Disappearing

18.8MB ∙ PDF file

Download

Web3 has always been just over the next hill, tantalizingly out of reach and perhaps viewed by many as a pipe dream. Could we be closer than most think?

Download

Web3 with its ideals of decentralization and sovereignty still seem far away and the concept that blockchain would solve everything is naive.

Still, that doesn't mean that Web3's dream is dead. In fact with AI, open source code, and stablecoins, we may be closer to being realized than many, myself included, give it credit for.

What is key is that Web3 won't be turned on overnight, it is a journey, and one that most of us should look forward to taking.

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• Future-Proofing Digital Asset Custody: Why Asia Pacific Banks Must Act Now

  Stablecoins are big in APAC, getting bigger, and need custody solutions. How big? In 2024, the Asia-Pacific region accounted for 29% of the global digital currency value received, surpassing North America (19%) and Western Europe (22%).

• Grey Market Report: Becoming a Smarter Bank

  This is a “grey market” publication that I can only share with Premium subscribers, and I hope you enjoy it. In line with my message on banking evolution today, this paper by XXXX provides readers with guidance on how to become a “smarter bank.”

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