When You Think Disruption, Think Beer

That might sound a bit odd, but it’s true. The disruption happening in the financial sector now, with neobanks, fintechs and e-banks - not to mention business development companies and private equity firms and real estate investment trusts on the commercial side - a lot is changing in the staid, conservative world of banking.

That’s where beer comes in.

No, not to drink to drown your worries about being left behind in the fintech movement.

This is about coming to the realization that what is happening in the financial sector with fintech in all its many forms is just the next iteration of the trend toward digital productivity and customization that tech is spreading across all sectors of the economy.

The beer industry is a pretty good analogy of a very strong business that was run by a handful of large firms that dominated local and national markets. It chugged along just fine, tweaking recipes to maintain margins and buying out smaller players in local markets - or forcing them out - to increase market share for stockholders.

And that was fine and good for decades. Business as usual you might say.

Then, craft brewers started popping up. The big players scoffed at them. I remember when the trend started a couple decades ago, craft brewers represented 1% or 2% market share when Samuel Adams started getting press, and broader distribution. Gnats in the grand scheme of things.

The big brewers did nothing about it. ‘Let them have their miniscule niches’ was the view from the boardrooms. As a matter of fact, the big players started to look for growth not down market but up market, eating their own. Huge mergers consolidated the beer market even more than it already was, now on a global scale.

That left local and regional markets open to smaller breweries who were taking advantage of tech-savvy brewers and more sophisticated logistics and marketing techniques. And more and more customers were being exposed to what beer can be when it’s not brewed by the accounting department of a multinational conglomerate.

According to USAToday, craft brews now account for more than 24% of the $114 billion market. What’s more, beer sales year over year are relatively flat yet craft brew sales grew about 5% in that year.

They are to be reckoned with. And now the big brewers are scrambling for growth by buying small brewers to get a piece of the action. The hubris of ‘bigger is better’ thinking has been disproven by technology.

Fintech is the same kind of disruptive force. Some smaller banks and credit unions dream of being acquired, to avoid rising efficiency ratios and dwindling net interest margins. But fintech is a way out, where the little guy can outmaneuver the big players. 

Fintech provides smaller banks and credit unions the same powerful tools that the big banks have, and allows these financial firms to leverage their local knowledge and connections to local customers and businesses much better than larger banks.

So, when you read that next article on some new neobank or fintech, think about how you can use it to your advantage, don’t see it as a threat. And remember how craft brew Davids have put the Goliaths on their heels.