viernes, 25 de enero de 2013

Banks are dead. Long live the banks?

by Hans Peter Mohl - Associate Partner at ConVista Consulting Spain


Is the classic development of the banks at a dead end? Has the traditional bank had its day? Is the web taking over parts or entire areas of the value chain of banks? Will Apple, Facebook or Google act as banks in the near future?

In the last weeks I have read some articles regarding trends and the future of banking:

1) Retail banks and their branches:
The number of branches is going down constantly for 20 years ( In the transformation of their delivery channels (Branch vs. ATM vs mobile) the banks have to decide if they will have branches in the future and what will be their role and form (e.g. outlet, cafe, virtual branches, etc). But that is just one additional building block for the industrialization of banking. As the number of banks is also going down, the banks had and have to be ready for M&A or make their testament (as it will be legally required for systemic banks).

2) Retail banking products:
Current accounts, brokerage, credit cards, deposits and loans are the standard products of most banks.  The innovation in retail banking products over the last 20 years was close to 0 (and maybe that was good and should be like this). Literally, the only changes were made in conditions and standardization of products (with or due to IT). But products like crowed sourced loans or funding, reverse mortgage or “Like-Zins” ( are possibilities to innovate or at least differentiate. Moreover, customers like mobile nomads or population that have barely seen a bank need product innovations (e.g. mobile banking in Africa or micro financing in India).

3) The competitors:
It is not clear if the lack of competition among banks, herd instinct or just greed have been the trigger for the financial crisis. But what is surprising, is that in a free market economy a small- or medium-sized company would file for bankruptcy, whereas systemic banks receive subsidies in two-digit billions. Besides other banks (locally and globally) that act globally, the number of new market entrants and non-bank competition increases. I assume that niche player like Bitcoin, Paypal, QRpay, Simple or Square stimulate the market and maybe in a near future will lead to “bankless banking” or be absorbed by traditional banks or new banks ( Especially concepts of Apple, Google or even Facebook or (mobile) phone companies provide the possibility to survive without a bank account and use your Apple-ID, Gmail-address, Facebook-Account or your phone-number as account-number for transactions. But unlike the banks that survived more than 2000 years, these players have to be successful over the long term or they will end up like AOL, MySpace or Yahoo.

4) The customers and the society:
Our society has always been changing. So it is not a surprise that the new Generation Y has a different understanding of technology and is using it constantly. The text based information from most banking-websites has to compete with the picture and video consumptions nowadays. Customer centricity, Social Media Banking and sustainability are more than buzz words. Additionally to the changing customers and the development of the age structures ( the environmental, social and governance challenges are still not taken seriously and therefore will be regulated in the future.

5) The state:
Regulation has a long history to control market failures due to inefficiency, errors and human weaknesses. However, the continued focus and the managing of risk, compliance and security should not liberate us from human logic and do not end in bureaucracy. For sure, we need control over the market and the participants, but not for its own sake and with the consequence that even worst-case scenarios are possible (bankrupt of states or banks). As an example, on one hand the requirements set by the European Banking Authority (EBA) aim  at obtaining higher transparency via a harmonization for one single rulebook in EU, as well as guaranteeing a higher level of protection for the customers on the other hand. This results in a change from a two dimensional report approach to a multidimensional framework. But this seems to be only the first step into a global model (

6) Technology:
As IT (and mobile) should and will end in a service or commodity that should lead us in 3 clicks to our objective, I expect this phase of transition to end soon. Ending the stationary area and shifting to mobile devices, the capability of calling, listening, reading, texting, watching, whatsapping, etc is changing the use of our devices and our behaviors ( Our (big) data will be in the cloud (>2,x billion Internet-User /, our payments (contactless, NFC, QRCode, in-app purchases, etc), transactions and banking have to be where we are (mobile). Locations based services combined with sensor-driven enrichment of our data ( will be just a feature in our hassle free environment, that allow us to focus on our curiosity.

Who could be blamed if banks live or die (if there is someone at all)?
A) Them: Classic Banking is not a business model anymore. A new type of bank is bringing back order - and profit - to the digital world.
B) Us: Our behavior using banks has changed considerably. We will use other services as the generations before. A new type of user is bringing back order - and profit - to the classic world.

a) Why Apple, Facebook, Google or others still do not act more like banks?
b) Why banks do not take this need for change seriously?
c) Business + Technology + User = swarm intelligence?