Everyone loves Uber – except for mistreated passengers, disgruntled drivers, local governments, certain tech journalists, and of course: the taxi companies disrupted by the popular ride-sharing app.

Okay, perhaps “everyone” is a slight exaggeration. But in spite of its controversial reputation and recent PR troubles, Uber is on a roll. By the end of 2014, it was six times bigger than it was when the year began, and it continues to grow. In just over a year, operations expanded from 60 cities in 21 countries to 250 cities in 50 countries. And by the end of 2014 it was valued at $41.2 billion, giving the five year-old tech company a higher market capitalization than venerable businesses like Delta Air Lines, Charles Schwab and Kraft Foods. It’s clear that one very important group of people really does love Uber: its customers.

Uber’s success has made it a poster child for the “sharing economy” movement, in which individuals trade, sell or rent goods and services through online, often mobile platforms. Powered by the explosive growth of smartphone access and processing power, the movement has spawned success stories that are reshaping entire industries. For instance, take Airbnb, the room sharing platform that has single handedly disrupted the hotel sector. The company is already worth more than the Hyatt or Wyndham hotel chains, and it is projected to book more rooms than the world’s largest chains within a few years. Meanwhile, a growing number of startups are enabling the peer-to-peer sale of everything from private jet rides to marijuana.

The sharing economy movement and successful early efforts to apply it to lending have sparked questions about whether an Uber-like approach could disrupt the financial industry. To answer that question, let’s take a look at three reasons an “Uber of banking” is unlikely to emerge – and one reason it could actually happen.

  1. Uber thrives in part by skirting the strict regulations that apply to its traditional taxi competitors, which it does by insisting that it’s a technology platform, not a transportation provider. This allows it to leave the financial and legal responsibility for ride-sharing activity in the hands of individual Uber drivers. This arrangement has given it more flexibility in its pricing, and has allowed it (so far) to largely sidestep the requirements for costly taxi medallions and insurance that its traditional competitors must buy. It has also led to lawsuits over accident liability and drivers’ rights, and efforts in city and even state governments around the world to crack down on the company. But Uber benefits from the fragmented approach to taxi regulation in most countries, in which local governments oversee most aspects of the business. If the company is regulated or banned in one city, it can still operate in countless others – often in the same state. That approach wouldn’t fly in an industry like banking, which is overseen by state and national regulators on the lookout for behavior that could destabilize the broader system.
  1. It’s not as easy to apply a sharing economy model to banking as it is to transportation. Practically any adult with a car and a clean driving record can become an Uber driver. But it would be much harder to replicate the diverse services of banks–even if an Uber-style online platform mobilized the efforts and combined capital of individual users. The one banking service that does align with the sharing model, small loans, has led to the emergence of successful peer-to peer lenders like Lending Club. But these companies actually depend on the system they’re said to disrupt. Lending Club, for instance, relies on regulated banks to originate its loans, and is actively expanding its partnerships with traditional financial institutions. By smoothly underwriting and automating the lending process for small loans, P2P platforms can fill a niche bigger banks can’t profitably handle. But that’s not enough to displace the major players.
  1. Even if an Uber-style model emerged that threatened to disrupt the financial industry, banks are well positioned to adapt to, co-opt, or crush it. They have far more money and political capital than taxi companies, and the tight regulations and high barriers to entry in finance would buy them time to respond strategically to emerging competition. Consider peer-to-peer lending again. Institutional lenders now far outnumber individuals on many platforms, providing up to 80-90% of the capital deployed through P2P leaders like Prosper and Lending Club. And, with a growing number of banks buying stakes in P2P platforms or partnering with them to serve certain client segments, the line between banks and their would-be disruptors is increasingly blurry.

But before they get too confident of their immunity to disruption, banks should recognize that Uber’s success isn’t merely due to its innovative sharing economy model. It flourishes by addressing universal customer pain points, with an intuitive app that eliminates the hassle and uncertainty of hailing a cab. Its seamless credit card payment option makes it quick and easy to settle bills and determine tips. Its driver rating system weeds out poor performers. Even its controversial surge pricing policy helps eliminate the inconvenience of transportation shortages during busy times.

Imagine if a new financial services provider followed suit, and removed all friction and frustration from the banking experience. Imagine an intuitive mobile interface that lets customers easily open low cost accounts and conduct all manner of transactions, without ever stepping foot in a branch. Plenty of aspiring disruptors are working hard to provide just that. If they succeed, the “Uber-ization” of the industry might not be so far-fetched.

 

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