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@JamesP:

TY for your clarification. Ever since I read about the KKR-led LBO of RJR Nabisco in the late '80s, I've been aware of public companies going private. The knowledge got refreshed when I read the old classic "Barbarians At The Gate of Dawn" belatedly a couple of years ago.

But there are huge differences in that model:  

• It's done by PE, which operates specifically in the Series C through to IPO and beyond phases. Which is totally different from VCs who operate in pre-IPO stage. 
• Semantics apart, the basic thrust of public company going private is almost diametrically opposite to that in VC investment. 
• In the case of public going private, management wants to do something without being answerable to Wall Street on a quarter-by-quarter basis; or PE thinks company has a lot of ineffficiencies or hidden nuggets of value or is worth more when broken in pieces and sold off separately, etc. 

Therefore, IMO, PE investment is totally different from the current context of VC investment. 

You're right about India, ANZ etc. I see many examples of innovation from banks even in the USA viz. Mobile RDC. If it's not as rapid, it has nothing to do with banks' capabilities related to tech. For example, why do FPS when you can enjoy T+3 float and the regulator seems to be looking the other way? (Personally, I don't consider EMV, Chip+PIN, 2FA as innovations but that's another topic!)

I'm sorry @BrettK, you're living in a confused state. A fintech company that sells to banks is their supplier, not disruptor. It’s silly to claim to both work with banks and drive them out of business.

The Finovate list of fintech unicorns is neither accurate nor supportive of your claim that VCs are disrupting financial services (although I’m delighted to see the names of a few customers on it!):

• Housing.com (a customer) is neither fintech not a unicorn (or fintech). The market cap of this Indian real estate portal is $250M (Source: http://articles.economictimes.indiatimes.com/2014-11-19/news/56265742_1_helion-venture-partners-soft-bank-indian-realty-market);
• Dataminr, Kofax (another customer) and Zuora are not fintech companies;
• One97 (another customer), Powa, Square and Stripe are in fintech but they work on top of banking rails. Before them, transactions happened in cash and banks earned no interchange revenue. After them, many of the same transactions happen via cards and banks earn interchange revenue. Which makes these fintech companies resellers of financial services. If banks / cards / card network access are not there, these companies won’t be there. Period. They absolutely don’t have the potential to disrupt financial services.

Coming finally to the handful of companies like Klarna, Lending Club, Lumax and Transfer Wise in this list, they independently do what banks do and can therefore aspire to disrupt financial services. But, as WSJ points out, they’re currently bottom feeders that “fill the gap left by banks that have dialed back loans to consumers and small businesses” (Source: http://www.wsj.com/articles/chinas-lufax-valued-at-nearly-10-billion-in-recent-funding-round-1429164241). Therefore, it’s highly delusional to think that these companies will drive banks out of business anytime soon.

@ColinC:

TY for your comment.

Far as I know, VCs can't / don't invest in post-IPO companies. In any sector. Period. Have you heard any VCs announcing investments in Apple or Amazon, for example?

At least in India, banks provide the most awesome, tech-mediated banking experience. Maybe they were late to get started with their offerings but take any hot field in fintech - social media or online account opening or mobile banking or P2P payments, to name a few - banks offer the most complete solutions in the market today e.g. Kotak Jifi, Kotak Instant, ICICI Pockets, HDFC Chillar, etc. Nonbank tech companies made a lot of noise and attracted a lot of VC funding , but very few of them have gone past their original offering, which is nothing more than lead generation. While banks still can make a lot of improvement by making their solutions more frictionless, I'm convinced by developments over the last 2-3 years that customers can get the most awesome banking experience from banks, not nonbanks. Whatever be the underlying reason, that's what I see on the ground. (The jury’s still out on how many customers really want an awesome banking experience).

Five years ago, I'd have agreed with your views about what constitutes fun. But, by now, enough VC funding has already gone into enough fintech companies and enough realization has struck enough people that overcoming barriers of charter, capital adequacy, KYC, and all that requires far more money, skills and patience than the VC industry is capable of mobilizing.

To me the real fun is to see how VC funded, ex-wannabe-bank-disruptor fintech companies reconcile themselves to merely providing self-proclaimed awesome technology to banks and how, in that role, they’ll fare against more deeply entrenched, financially-sound, traditional IT companies who got where they are without threatening to kill banks. The arena has shifted to good old competition in the tech industry.

I thought I made it crystal clear why VCs don't invest in banks when I said "financial services industry invested in VC funds." Fact is, financial services puts money in VC funds, which are invested by VCs in other sectors. It's not possible for VCs to invest in banks. 

In any case, who cares which sector gets VC funding? Does Amazon receive VC funding? Does Apple? Like these companies, banks are post-IPO companies that operate in the phase of investment cycle that is well past the pre-IPO phases in which VCs invest. When VCs themselves admit that only 20% of their portfolio brings them returns, investment by VCs means nothing except to the startups receiving the funding because, as I said, many of them won't be around without that funding.

Of course Financial Services is the most profitable sector. It's backed by facts from the hyperlinked FORTUNE magazine article. While you can find the full article here (http://ow.ly/d/3jtk), let me quote the relevant section:  

"the financial sector boasts the highest total profits of any industry group
in the 500".

@BrettK:

"VCs...investing in banks"? Ha ha. I thought the financial services industry invested in VC funds. 

Banks have been around for ages. Financial services is the most profitable sector in FORTUNE 500. When banks fail, the government bails them out. On the other hand, when fintech companies fail, nobody bails them out; for some fintech companies, being acquired by banks is their only way forward; for some others, continued VC funding is the only way to survive. In a frothy economy, there's nothing wrong with any of this but it's a major leap of faith to believe that banks need neobanks to survive!

@BrettK:

TY for the detailed clarification.

I never thought banking was as simple as a mobile app and always knew that it had many complications like charter, capital adequacy, KYC, cap rules and all that. I can bet that the same VCs who don't see charter as an asset in the hands of banks would call it a "deep moat" had it been in the hands of a neobank.

Since times immemorial, BFSI has been a large vertical for the IT industry. For some IT companies, BFSI is larger than all their other industry verticals put together. So, banks have always been partnering with tech providers to achieve an edge in their markets. Just that many IT companies have focused on playing the "faster, better, cheaper" card in a more finessed manner that has allowed them to operate cash positively and without VC funding.

Sorry but as far as I've experienced it, LinkedIn does not display business email addresses by default. Even people who have opted to have their email displayed generally use their personal email address. Therefore, I'm not sure how one can find out a person's business email address from their LinkedIn profile.

Furthermore, well before LI came into existence, people have been hacking company email structures (e.g. firstname.lastname@companyname.com) from CONTACT US / MEDIA RELATIONS / INVESTOR RELATIONS pages of companies' own websites. Even a search on Google - or Lycos / Alta Vista before Google was founded in ~1998 - often does the trick, as I've illustrated for a certain Top 5 UK bank here. So, why single out LinkedIn?

Launch by promising to drive banks out of business. Secure VC funding on the basis of the hype. Grow by selling company's products / services to banks. Exit by selling out company to banks. I thought that was the classical neobank playbook. Curious to know why Oracle is copying it. Oh, wait, I think I know: I got a LinkedIn message from someone recently claiming to start an exclusive Oracle VC company for funding startups.

@AlexN:

I was not hinting at any agenda-led bias. My point is more related to frame of reference and a limitation in research methodology. To continue with my example regarding method of payment / choice of channel, the way to evoke the full and correct answer is to frame the question thus: "If you're in the office with good Internet connectivity, which channel will you select for making a payment? On the other hand, if you're in your branch's neighborhood, will your answer be different?"

But not many MR agencies have the skills to recast this somewhat tricky question into a simpler one that captures the essence of the topic but can still be administered via their surveys. As a result, many surveys end up with simplistic questions masquerading as simple ones and we end up with snappy answers to stupid questions that sound paradoxical!

I don't see any paradox here. Customers simply like (or dislike!) multiple channels and if they select one channel today, it doesn't mean they'll reject all the other channels forever. It's only finsurgents and neobanks who think in terms of channel cost, "Borders" moment and "if you're not with us, you're against us".

Customers see different strengths for different channels and simply choose the one they find most suitable in any given context. From personal experience, assessment of suitability could also be very fluid: If I need to make a payment, I might choose Online Banking if I'm in the office having good Internet connectivity but choose to drop a cheque in the drop box at the branch if I'm in the neighborhood of the branch. I don't see any contradiction in any of this.