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How to disrupt financial services  

For those of us with links to financial services (and in London, there should be quite a few), Chris Dixon posted a list of starting points for disruptive ideas in FS. This is an area where London (as well as New York) can very effectively compete with Silicon Valley, and even beat it thoroughly.

Here are Chris Dixon's suggestions:

  1. Disrupt retail banks by giving people more incentives to keep their money with you.
  2. Disrupt credit card companies by starting a payment system that doesn't depend on existing banks. (Paypal has done this already, to some extent, and Apple seems to be on their way there too).
  3. Disrupt the profits that banks made from, basically, out-trading unsophisticated investors, perhaps by convincing those investors to not invest in specific stocks.
  4. Disrupt broker/exchange profits by reducing the number of trades done every day (each of which results in a small fee).
  5. Disrupt investment banking by offering companies better way to deal with M&A's, IPOs, and other corporate finance activities.
  6. Disrupt research, simply by offering better research.
  7. Disrupt mutual funds by offering better returns through simple index-tracking funds.

The list is not very actionable, however.

Those points are all, without exception, fiendishly difficult to implement. There are many forces at play to maintain the status quo in each of these areas, and much easier money to be made (for those on the right side of the fence) in playing within the current system than in changing it. All those fields are already very competitive - the reason why this disruption is lagging behind isn't for lack of trying. I wouldn't recommend to anyone to target these powerful special interests with their startups.

If you do pursue one of those, expect a tough ride, fighting very cash-rich competition with the money and connections to throw both legislative and competitive hurdles in your path. If you manage it, though, the prize is huge.

More from the library:
Start-up vs consulting vs corporate vs all three
Sell the emotional benefits first
Which metrics do Valley investors tend to check first?