It seems everyone wants to talk about the bank of the future, from fintechs with their own very clear agenda to industry-wide bodies like the World Economic Forum. As if the subject ever went away!
As reported by CNBC, the World Economic Forum (WEF) weighed in with its belief that technology giants like Amazon and Facebook pose more of a threat to banks than any fintech start-ups. This may seem an obvious statement, but the WEF underlined that while fintechs define the current tempo and the new user experience, start-ups do not always understand the scale and scope of the USD 9 trillion banking industry they are attempting to disrupt.
The WEF admits that banks have lagged behind the tech giants in a number of areas, such as cloud computing, artificial intelligence and big data.
It’s not all worrying news for banks, though. There’s been plenty of talk around the subject of “the invisible bank”, which does not refer to the disappearance of financial institutions but how they will operate in the future. To quote a report by Brilliance, the Massachusetts Institute of Technology believes the “digital banking edifice” of the future will have IT and analytics at its foundation.
That said, banks have been slashing headcount and will continue to do so, reducing jobs by about 30% between 2015 and 2025. This has coincided with the rise of technology investment, up from a ‘mere’ USD 1.8bn in 2010 to a staggering USD 19bn by 2015.
While the banks continue to embrace digitalisation, the cashless society has been taking root. Brilliance says that this trend will accelerate as banks adopt more fintech services. The bank of the future will still own balance sheets, security and custody of access but the way customers interact with the products will differ. The customer will have the power to define their experience, integrating a rich ecosystem of applications that sit in front of the bank's infrastructure to serve their individual needs. These applications could be the bank’s own or those developed by third parties, including technology companies like Facebook, Apple and Google.
But the new order is all about sharing, according to GTNews. Although tech-savvy banks and non-bank providers are eating into the profit margins of traditional banks’ payments activity, the institutions able to capitalise on the progress made by fintechs will be the winners. GTNews says that although the younger generation is eager to engage with digital banks, older customers have yet to be convinced. There’s little denying, though, that dynamic digital providers are growing in popularity.
If the older generations find it uncomfortable to use digital banking, the next phase of technology may prove to be an even bigger challenge. The internet of things is moving forward at such a rate that the next growth sector is likely to be the “internet of payments”, driven by so-called “machine to machine” connections.
It’s a world in which your computer printer will automatically order ink when it runs low, or your refrigerator purchases milk when stocks diminish. Apply that to financial management and utilities, and we really will be living in a hyper-connected world. PaymentsSource says that banks who can ride the crest of hyper-connectivity and combine it with technology operability will reap the rewards of the massive growth in transactions this will bring.
There’s little time to catch your breath in an environment that is advancing at lightning speed!