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Meet the banker who wants to make less money

Things you don’t expect to hear on a Thursday morning part 1: The CEO for Corporate and Investment Banking at Barclays Africa arguing that financial services need to make less money.

And yet, remarkably, that’s exactly what Stephen van Coller spoke about in his keynote presentation to the My World of Tomorrow conference in Sandton Convention Centre today.

Mr van Coller wasn’t, of course, saying that banks should give up their profits altogether. Rather, he was pointing out that as the cost of transactions in the digital world approach zero, banks and financial institutions have to be willing to give up on the massive margins they’ve made from basic services in the past, because if they don’t, someone will come in and steal their business.

Citing We Bank, the peer-to-peer lending service that has grown dramatically in recent months by matching borrowers and savers directly and cutting out overheads, van Coller explained that:

“As technology gets into service-based businesses, you have to start charging for the value you add now rather than the value you used to add. So you need to think about how your models are going to deal with this. Because the actual cost to do the business goes down and every time you leave a bit of daylight, that one or two percent, someone will drive in there.”

According to van Coller, financial institutions of the future will win business based on their ability to innovate and present a brand that people trust. Right now, people are rightly skeptical of the huge margins that banks make on transactions, he said, which often doubles the cost. The rise of social media and the power that it puts in the hands of customers, however, will change all that.

“Social media, the ability to like or unlike means your brand is how people perceive you,” van Coller said, “Social media keeps you honest, and that’s not how businesses have been brought up in the past.”

van Coller’s talk was unintentionally timely. Just down the road, Joburg’s universities are closed as students protest against the cost of education – a cry of #FeesMustFall which has resonated with colleges around the world. It adds an extra urgency to what van Coller called “my favourite slide”, which showed that 41% of the world’s wealth is held by just 1% of the population using the latest stats from Credit Suisse.

“Capitalism has been very good at generating wealth,” van Coller said, “It’s been very bad at distributing it.”

Not a common refrain from within the investment banking community.

Touching on the high cost of sending money over borders in Africa, where remittances make up some 55 of sub-Saharan GDP, van Coller almost sounded utopian.

“Think about how much money is spent on financial services to move money across borders,” he said, “And what kinds of societies we could create if that wealth was released.”

Unexpected indeed.

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