Web3 is coming for the banks, and it poses a much greater threat than the neobanks did

There was little comment from Australia’s incumbent banks on the incoming neobank threat when it first appeared in 2018. But, in those few comments, their message was clear:

‘We know there’s an elephant in the room and we know he’s the enemy. We don’t want to acknowledge him — lest we validate him. We don’t want to welcome him — lest we embolden him. We don’t want to label him our enemy — lest we validate our fear of him. And, we certainly won’t take our eyes off him, lest we lose sight of him.’

For four years, bankers and industry observers have been watching that elephant very closely.

When Xinja failed, he grew smaller. When 86 400 and Up were sold, the elephant shrunk some more. 

But, last week, when Volt announced its exit from banking, that elephant simply got up and left the room. 

A sense of relief, and perhaps a quiet victory, would have been felt by industry heavyweights when they heard the news. At the very least, Australia’s incumbent banks probably feel ever so slightly safer this week; as if a thunderstorm forecast to hit them had weakened, and then passed them by as a mere gust of wind.

There was fear of the neobank elephant (and the fintech one) whether anyone wanted to admit it or not.

Even those who openly denied the threat of his presence were still anxious about him being in the room.

Because, no matter the forecast, they felt change in the air, and while bankers often profit from it, they’re certainly not accustomed to being in its way. 

Both the incumbents and the neobanks fought well — admirably, you might say, until the end — with the industry uniting last week to posthumously award Volt its highest commendations: ‘Vale, respected foe, vale.’

Whether it was their strategy, superior force, or, as is the case with many victories, a great deal of luck; the incumbents prevailed. And, while there may be another, younger neobank elephant about to stomp into the room, with a new wave of entrants about to take the stage, the incumbents are arguably better placed now to endure his presence than before, and will likely prevail again. 

A new enemy in the room

But still, there’s change in the air. It’s palpable. Ask around; for some reason, banking feels less certain than ever.

So where is it coming from?

Perhaps it’s the new enemy in the room. The one that entered in silence. The enemy the banks seemingly cannot see, or, that they don’t want to.

It crept into the room out of sight and is eating away at the fibre of the walls, burrowing into the furniture and threatening all who reside within. And, it’s nothing at all like an elephant. 

The neobank elephant was a conventional enemy. He took the form of something well known, he wore a uniform and couldn’t be missed. The incumbents could comprehend him, analyse him, watch him closely and adapt to his sudden moves.

He fought by rules and followed battle strategy that they all knew how to follow, and, how to counter. He adhered to a higher code — he had to, the rules of war, or, APRA, hung over him — threatening swift recourse against him if he didn’t fight fair.

A conventional enemy can be adapted to because he can be seen. A plan can be formulated against him because he can be understood, and, if there are enough of you, it doesn’t matter how big or strong he is, you have a good chance of fending him off. 

But what about when the enemy in the room doesn’t wear a uniform? 

When he isn’t even a he or a she, or even a they?

What about when ‘it’ doesn’t take the shape of anything you’ve known or seen before?

What if that enemy doesn’t follow the rules? What if it doesn’t adhere to a code that can be enforced?

What if that enemy is actually made up of thousands of enemies, out of sight and each deploying their attack of choice using strategies that defy what you know or understand of battle? 

What if, when you stop one, at great cost to your fighting force, another simply takes its place, as if you offered no fight at all?

How do you address the enemy in the room when you can’t see him and have no idea how he, or the thousands of his peers, will act, or, when?

That’s a scary question, for anyone.

A Web3 reckoning

But, fear be damned, Web3 is coming, and it’s coming for the banks.

It wears no uniform, fights without rules, and if you think for a second that the neobanks were a threat, you’ve no idea of the reckoning that’s coming. 

There will be casualties, on both sides; failures, embarrassments and a multitude of expert predictions that Web3 and decentralisation is dead. And, much of it will die. But, there will be thousands of forms and only one of them has to break through the front line for the banks to lose. It’s an infinite battlefront, and it’s impossible to defend. 

Web3, decentralisation and crypto is not about technology, or specific companies, or tweets from titans of industry. 

Suffer any illusion but that one. This is a reckoning of people; a revolution, not innovation. 

It is a groundswell up, not a trickle down. And it’s a damn big one.

I am as big a critic as there is of Web3, Defi and crypto. In infinite ways, they disappoint me. But that’s the thing — there will be infinite iterations of them, and one of them won’t. 

You can be a critic of change all you like, but I pity the fool who fails to see the revolution hiding in this particular innovation.

The future of money

There is a battle coming unlike any we have seen. A battle for the future of money, the lowest common denominator, the linkage between us all. It will be a battle of who controls the strings, and who benefits. And, from it, everything will change.

Having learned battle strategy as an Officer in the Australian Army, and having been in financial services for eight years, my advice to the banks is this: mobilise. Everything.

Call up every reserve. Activate strategies that are a long shot, that scare you to the core.

Fight as if you have nothing to lose, innovate, risk, partner and adapt, and do it as if you’re already dead, because from what I see of the enemy, it’s likely you already are. 

And, if you’re inclined to think you’re too big to lose, that it won’t happen, that the enemy is too disorganised and undisciplined, that they don’t understand battle like you; I might ask if I can tell you a thing or two about how the Vietnamese defeated an empire by shedding their uniforms and ignoring the rules.