“But the real danger, he argues, relates to new entrants not just stealing market share but reducing the overall size of the financial market pie — at least if we go by how technology companies have disrupted other sectors in the past. For example, he refers to Skype’s successful 30 per cent grab of the international phone-call market. It did not take 30 per cent of the revenue with it. The technology company instead made phone calls much cheaper for customers and shrunk the revenue pool available, while still making a profit.
But this technological threat, he notes, is being ignored by banks. They’re much keener to deploy technology to facilitate cross-selling strategies rather than bringing costs down. All of which, he notes, opens the door to new entrants using technology to diminish the overall revenue pool and leave banks with large fixed costs struggling to make returns on capital.”