FinTech changes the rules of the game: What is the future of banks?

Technology has managed to change most human fields, and today the old banking system is beginning to erode. Dinosaur banks resisted for many years and adapted only out of necessity. Today, we have a number of signals that we are at the end of a time when even the banks themselves have run out of time.

Internet banking is a weak consolation for technological progress. The potential of fintech (technology applied in the financial world) is much greater. The banks have not used this opportunity yet, but what’s more, it opens up space for other players who change the rules of the current game.

The Internet causes sales!

A short example for all. Elon Musk sold more cars in 24 hours than Volkswagen in half a year. Some build their business models on this, others are aware of it and others still ignore it.

Technology allows you to change the rules. This is really happening!

And in this article, I want to present in some passages perhaps even the visionary ideas that I drew and connected after watching the great seminar New Abnormal: Shine and Misery of Financial Dinosaurs: Banks, Blockchain and We .

How did banks react to the Internet?

From the very beginning, the banks worked in a branch structure. The bank’s branch serves de facto as an extended arm. He’s a bank trader .

With the advent of the Internet , banks decided after several years (decades) to create  Internet banking . We can now send and receive payments directly from the Internet. We don’t have to go to branches. But the banks created only another type of branch – a branch on the Internet.

But who among us likes to go into internet banking? Who likes to sign up there?

We only log in to internet banking if we want to send a payment or see that we have received a payment. There are still relatively negative emotions associated with it. It’s not like social networks, where we want to connect, so that, for example, we stay in touch with friends, do not miss an important event that we care about, etc.

The modern branch must be much more closely connected with the place we normally visit

The modern branch must be a tool of real life. Today, the smartphone and its various applications play a role in this way  today . Today, Fintech is replacing the bank’s branches. After all, 38% of Americans who have a bank account have never been to a bank branch.

But it will go even further. We may not see branches and banks at all…

What is the vision of the future?

At one point, the bank’s branches will cease to exist. Payments will become part of our other activities.

The goal is to make payments where we normally move. We do not want to log in to internet banking.

A payment intermediary (which often works today, such as GoPay) is a non-business solution in the future. Such a solution is likely to die. At least he’s ready for it. As such, the bank has money, and this gives it a relatively strong position in the near future, where mainly alternative currencies (cryptocurrencies, such as bitcoin). Here is the unanswered question of how quickly cryptocurrencies can replace or subsidize today’s money . It is estimated that in 10 years there will be states in which cash will not be used.

Companies like Facebook, Apple, Android or AliExpress (AliPay) come up with a solution where we pay for them. Because they have occupied a large part of the market and, above all, the trust of their own customers, they have a unique position in the coming revolution. These companies are beginning to play a relatively important role in the financial world.

The bank’s huge competitive advantage

If we consider that the banking system will undergo a real revolution, whether due to the collapse of the current (long-term unsustainable) model of the financial world or another, banks currently have one incredible competitive advantage.

Banks know much more about us than any other company, society or organization.

On the one hand, the bank has a number of data that we pass on to it when opening a bank account, when applying for a mortgage, etc. Paradoxically, this was caused by the strict regulation of banks, which have to keep this data for several years, even if we have terminated the contract with them.

In addition, the bank sees all our financial flows – what we pay for, when we pay, where we pay and also how much money we receive, what cash flow we have, what financial security cushion we maintain, etc. The bank knows our financial behavior perfectly.

This is a huge competitive advantage, which is really only dormant inside the banks so far.

Synergies and mergers

The future is in favor of mergers . Giant companies may become mammoths, and mammoths may become even more gigantic. This will be mainly due to the cooperation of several entities. In other words, it is quite possible that there will be a synergy between the activities of two different entities. Just as lawyers and accountants, webmasters and graphic designers work together today, banks are offered cooperation with energy companies, for example.

Today, it looks public that Facebook, Google, and other large companies are literally buying up small businesses.

In the future, much smaller players can (and will) compete with banks thanks to technology . Just like on Google or Facebook. Banks will start buying smaller companies that will spew technology products and services. The second option is that the banks will create small tech startups themselves , which will aim to produce technological gadgets, which the bank will then take over.

Cyber ​​security

With the development of technology, the issue of cyber security is increasingly being asked. The security of financial flows that flow over the Internet is very important. Thanks to this, PayPal was still so successful under the leadership of Elon Musek.

This risk is literally borne by banks and giant companies, as cyber security investments are high. Because banks and other quasi-banks have a lot of money, they will be able to provide any platform for financial flows that people can trust (from a security perspective).

In addition, I bet cards that there will be even more regulation from the European Union on transaction security and related security policy.

The European Union has recently agreed (effective probably not until 2018) that entities that will provide anything related to financial flows (eg mobile pay applications) will need to have their own interfaces. The regulation therefore forces entrepreneurs to offer the client a user-friendly environment where they can see where the money is flowing from. How noble 🙂 This regulation will only support the emergence of a better interface in which we will find ourselves easier to navigate. But maybe it will also support the following trend…

The bank will only be a producer, someone else will sell

Imagine a bank as a manufacturer of personal accounts, mortgages, loans, etc. It still sells those products through branches and other retailers. However, these vendors change over time. We are now entering the moment of discussing whether the bank will continue to sell its products. Rather, it looks like the bank will go “visually” into the background and its vendors will be all sorts of technology services, applications, etc.

It’s time for Smart Bank to come

Today, many of us watch smart TV, but before that it was just television. We had phones, but today we only use smartphones. Evolution and quite possibly a revolution await the banks. Just as there is talk of taxi services, which are going through rough days thanks to Uber, banks are probably facing a similar situation.

The bank’s future is quite possibly just a bank that is not visible.

The goal of today’s old bank is to equip its branch so that its employees are able to help the client as much as possible. In other words, the employee must have everything (maximum amount of information, documents,…) to help the client.

However, the future signals a different approach , namely: The client must have everything (the maximum amount of information, documents,…) in order to make the best decision.