March 5, 2021

Creative Destruction

Creative Destruction

Square, the digital payment processor, just announced that it will be opening its own bank. The company – known for its credit card readers for mobile phones and iPads – is now going to offer FDIC-insured deposit accounts and loans to small businesses that have been using the platform.

It’s a good example of how much change will be coming in the wake of the pandemic. With so much of life being lived online, the cast of characters in every industry is changing at an unprecedented pace. Some companies we always thought would be there are going to fall behind and disappear, and others will surge forward and take their place.

Will Square, founded in 2009, someday be neck and neck with Chase or Wells Fargo? In today’s disrupt-or-be-disrupted economy, it’s a real possibility.

Disruption was picking up steam before the pandemic, with one estimate showing that the average tenure of a company on the Fortune 500 will shrink from 24 years in 2016 to 12 years in 2027. That trend is only going to accelerate now, as the economy opens back up.

One of the most important jobs for business leaders is to be prepared for the possibility that, as the wheels of the economy start to turn more quickly, the institutions and systems we always assumed would be there could change dramatically, lose their relevance or even shut their doors. Very few of us anticipated a scenario that would leave millions of offices and schools closed for a full year, but we’ve just lived it.

And who knows what the future may bring? One recent survey found that 29% of Americans support the idea of breaking up the country into smaller “regions” because of the political divide. I doubt we’ll ever go the way of the old U.S.S.R., but it’s very likely we’ll see some changes in our country that many of us can’t even anticipate right now.

Change is inevitable, so I prefer not to worry about it. I prefer to look ahead to the opportunities it will bring to serve our clients, associates, and community. There are always new ways we can help them navigate changing circumstances.

Fortunately, entrepreneurial middle-market firms like ours are the ideal size to make the most of the “creative destruction” we’re seeing in the economy and the trends driving it – technological disruption, changing consumer behavior, and new government policies. We’re small enough to remain nimble but still have enough scale to have an impact.

I’m not sure how many small businesses will be rushing out to open a bank account with a fintech firm in 2021, but that could change once we see what Jack Dorsey and his team do with Square’s new bank. If the banking experience at Square turns out to be better than what other institutions offer, then the big banks could find themselves racing to catch up in the not-so-distant future.

Stay safe, stay healthy and remember we are all in this together.

P.S. As part of our firm’s celebration of Black History Month in February, Marcum associates and partners raised $7,000 (including an anonymous matching donation!) to support two outstanding programs of the National Association of Black Accountants, aimed at increasing the participation of people of color in the accounting profession. The initiative was the latest collaboration of our Diversity, Equity & Inclusion program and the Marcum Foundation. Stay tuned for more great things to come from this partnership.