Banks Confront Kodak-or-Microsoft Test in Digital Shift

Clayton Christensen’s 1997 theory of the “innovator’s dilemma” explains how market leaders can fail despite investing in innovation, as profitable legacy businesses and established customers discourage disruptive bets. Kodak developed a digital camera in 1975 but remained tied to film economics and filed for bankruptcy protection in 2012. Microsoft offers the contrasting model, accelerating its shift toward cloud computing after Satya Nadella became chief executive on Feb. 4, 2014.

An analysis published on April 9, 2024, said regulation and aging core systems leave incumbent banks poorly positioned to disrupt themselves as digital rivals gain scale. Revolut had more than 40 million customers and a $33 billion valuation, while N26, founded in 2013, was valued at $6 billion in 2023. Wise has meanwhile built alternative cross-border payments infrastructure, sharpening the choice for banks between transforming their operating models and becoming regulated utilities for fintech platforms.