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Industry predicts the future of banking

Theo Osborn | 17:00 Wednesday 15th August 2018

Banking is forever evolving, with new entrants to the market and modern technology being introduced on a regular basis.

The rise of digital and specialist banks in recent years has provided much-needed competition for the incumbents, while initiatives such as Open Banking have opened the door for further advancement in the industry.

But what are the biggest changes the industry expects to see in the future?

And what innovative technology will disrupt the ecosystem?

Specialist Banking spoke to industry experts to find out their predictions for the future of banking.

Future of Banking

What will the future of banking look like?

Jon Hall, managing director at Masthaven, said that Open Banking, data, collaboration and differentiation would be the main changes.

“The banking sector is already undergoing radical change – the most significant being the emergence of specialist and challenger banks [which] have questioned the status quo, the established hegemony of the big high street banks.

“The next 10 years will be a period of rapid change for the banking sector and collaboration will be key. 

“We shouldn’t rule out specialist bank retail stores or collaboration with smaller banks to provide brokers and consumers alike with the platforms they need to meet their banking needs.”

“The next 10 years will be about the value of and exchange of data for a whole variety of purposes, from more targeted credit assessments to providing targeted added value services to single point of access management of all finances,” said Stuart Hulme, marketing and savings director at Hampshire Trust Bank.

Paul Bowen, financial services lead for Europe at Avanade, said: “It is hard to imagine many people continuing to use their default payment mechanism of a debit card in 10 years. 

“They will expect much greater benefits for using a service, they will be more comfortable using multiple payment methods for specific purposes and will struggle to imagine the concept of a credit or debit card.

The hype around blockchain  – the underlying tracing mechanism of cryptocurrencies – has perhaps been overblown to date. 

“However, one can imagine that in 10 years’ time, the blockages to implementation of a distributed ledger (notably organisational resistance) will be overcome.”

Last week, Dharmesh Mistry, chief digital officer at Temenos, claimed that AI would turn banking into a lifetime money-management service.

“Banks are already embedding AI and data analytics into almost every line of business to allow them to deliver services more effectively and efficiently,” Dharmesh claimed in his blog post. 

“Where today chat-bots are being used to answer customer queries and robo-advisers match products with a customer’s risk profile, in just a few years, AI will enable banks to offer a comprehensive and sophisticated money-management service. 

“They will use it to maximise the value you can get from both your data and your money.”

Mark Aldred, banking specialist at Auriga, thought that there were a number of big changes that banks needed to tackle over the next decade.

“Our populations are rapidly ageing, and we need to find a way to enable them to bank as easily as they do today and in our globally connected world.

“Money needs to flow more easily than ever before, no matter where it is going to or coming from.

“Indeed, this pressure may mean it’s emerging economies that are most innovative.”

Gary Singh, VP at Ondot Systems, believed that banking would become part of commerce in the next 10 or more years.

“One hundred per cent digital and integrated into commerce platforms, unlike retail, the physical footprint in banking has limited value.

“This could be digitally transformed into offering commerce services (in addition to banking) by monetising transaction data (merchant and consumers).

The future of bank branches

“Don’t expect the bank branch to disappear,” commented Mark. 

“There’ll be fewer, but bigger and offer a richer experience. 

“Re-designing the bank branch in terms of convenience and experience is key here. 

“A true omnichannel approach that makes a branch visit seamless with a customer’s other digital channels is essential. 

“This is manifested by next-generation bank branches that have digital self-service banking hubs.”

Bob Thwaites, founder and director of design consultancy Four by Two, felt that the key to create such a flagship environment was a different proposition to the traditional banking offer. 

“These spaces will reflect the online app in a physical space by being more creative and offering niche services that will be targeted at the new generation of smart banking customers. 

“These spaces will be less about the transfer of physical currency, but rather become a service point for information and one-to-one staff engagement in a space that connects more with lifestyle.

"Everything that the word ‘bank’ currently stands for will change with the digitisation of money, meaning that the physical, bricks-and-mortar ‘bank’ will soon become a meeting space; a coffee shop, a co-lab working space, a space for people to meet, engage and exchange.”

Peter Matthews, CEO at finance brand expert, Nucleus, had his doubts about whether specialist banks would open retail stores.

“Why would they?

“Incumbents are doing everything they can to streamline their organisations and reduce the cost of their branch infrastructure.

“Why do you need to go to a bank other than to pay cash or cheques in or sign a mortgage? 

“Most of these things can be done without a physical branch.”

Stuart concluded: “The banking industry will undoubtedly undergo significant change in the next decade.

“That said, it’s highly unlikely that any specialist bank will – at the time being at least – seriously be considering opening retail branches.

“Even the big banks are shrinking their high street presence as more and more consumers use online banking.”

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