In recent years, ubiquitous broadband internet access coupled with mobile communications, cloud computing and AI have combined to enable a new breed of online businesses and services unimaginable a decade ago. These new, disruptive businesses are often collectively referred to as “The New Digital Economy”.
In the retail sector, for example, the new digital economy has massively eroded traditional barriers to conducting business. Distance, lack of trust, high prices, restricted opening hours, high marketing costs, reliable product reviews, and the ability to pay using multiple electronic means have all been overcome by online digital solutions which allow instant, reliable purchases between anyone from anywhere with just a few clicks.
And yet this sector is still in its infancy. In the retail market currently there is only one online retail company among the top 10 retailers in the US — Amazon, Inc. And even then, it ranks only 7th in retail sales, behind bricks-and-mortar competitors such as Walmart, Costco, and Walgreens. In the financial sector, online banks still only generate $8.9 billion in revenues, a small fraction (0.12%) of the total $5+ trillion revenues generated by the world’s 82 largest banks.
The caveat is that online businesses such as these are growing much faster than their bricks-and-mortar counterparts; 22.6% and 19% CAGR for these two examples of the new digital economy respectively, vs. 5.3% and 8% CAGR for their corresponding sectors overall.
It is no wonder that this new megatrend is being called the “third wave of capitalism”, superseding the “Corporate Capitalism” of the 20th century, and “Industrial Capitalism” of the 19th century. And we are only at the beginning: the Amazon, Netflix, Intel and SalesForce of the next decade are emerging today, as fledgling startups.
A traditional barrier to a non-traditional sector
The new players in the new digital economy are creating new, often disruptive business models quickly based on existing, proven technology platforms: broadband global internet, blockchain and crypto technologies, AI, 4G/5G mobile communications, cloud computing, Big Data, unlimited storage, and ubiquitous global positioning.
The one platform which they cannot access quickly and easily is an old and traditional one: a corporate bank account providing core financial services. As mundane as this may sound, the difficulty in obtaining basic banking services can sound the death knell for startups as well as existing new digital economy companies whose banking services are being curtailed due to ever-increasing banking regulatory pressures. Being able to obtain a corporate bank account is a basic requirement for any company trying to establish themselves in any country in the world.
Although the entrepreneurs of the new digital economy are leveraging the newest technologies to provide new and innovative products and services, the financial crisis of 2008 and dot-com bust of the early 2000’s have sent bankers running in the opposite direction: new, cutting-edge but non-traditional businesses are too often met with scepticism and mistrust. Companies are vetted based on extremely conservative monetary policies, or are dismissed out-of-hand based solely on business sector or current revenues.
Initium: a bank for the New Digital Economy
The global financial community needs to align itself with the requirements of the new digital economy. This requires a break from the past, while retaining a deep understanding of the risks and rewards associated with new, disruptive business models. Unlike the run-up to the dot-com bust where there was no precedent for what happened, experience from that era can be applied to today’s new digital economy.
Initium Group was founded by a seasoned, experienced Bank CEO Daniel Spier, specifically to address this market. With 20 years of experience including 12 years at IDT Financial Services Ltd. as Managing Director as well as Finance and Treasury Director, Daniel has observed and experienced first hand how new business in the new digital economy struggle to obtain basic banking services.
By launching Initium Group as a multi-domicile bank specialising in providing financial services to firms in the NDE, Daniel will provide the missing element which innovative firms need to grow and thrive: a financial services platform for the New Digital Economy.