The future of banking: Digital super stores

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By 2025 leading banks will be operating as digital financial superstores that blur the line between technology companies and banks, according to a new report from Greenwich Associates.

The Future of Banking: 2025 traces the changes in the banking industry since the global finance crisis and projects the course of its evolution in the years to come.

It documents the rapid change in customer expectations – One-click ordering from Amazon, tracking fulfilment requests from Uber, auto-populating repetitive information from Google Chrome, and other innovations.  The influence of the digital consumer experience is quickly and dramatically reshaping expectations across all banking interactions.  With tech and retail sites setting new standards, customers increasingly expect interactions with their banks to be easy, fast, transparent, and done on their own terms.

Enter the NonBanks 
Banks’ troubles have created an opening for nonbank lenders and fintech providers that leverage cutting-edge technology and their largely unregulated status to deliver the type of service and experience consumers have come to expect from the best Internet and mobile sites.

“These pressures are pushing banks inexorably toward a new model,” says Don Raftery Greenwich Associates Managing Director and author of the report. “Today banks feel analog in an increasingly digital world.  Within the next decade, the leading banks will feel and operate more like tech companies with banking licenses.”

Digital Banking Superstores 
That new model will take shape by, if not before, 2025, when the industry arrives in what Greenwich Associates dubs “The Age of the Digital Banking Superstore.” In this phase, electronic banking will be ubiquitous. Stripped of their technology advantage (and their regulatory advantage as well, assuming regulators act appropriately):

  • Nonbanks will cede clients and share of wallet to the banks, and clients will rediscover the benefits of one-stop shopping with large banks.
  • These benefits will not be just marketing hyperbole, but real advisory driven insights to help clients by better leveraging technology and data.
  • Many major fintech and nonbank providers will be acquired by banks in the coming years, further enhancing and accelerating banks’ technology prowess.
  • Regional banks will struggle to keep up with mounting costs of IT investments for client benefit instead of regulatory/risk mitigation, while small and community banks attempt to leverage white-labeled technology from third-party providers to maintain their own value propositions.

Even as large banks reassert themselves, they will face competition from new market entrants eager to apply far-flung communications networks, artificial intelligence, cloud-computing platforms, machine learning, and other technology advantages to the world of banking.

“The rapid development of retail ‘mobile money’ and bank-by-phone networks over the past decade demonstrates how technology can disrupt traditional notions of banking,” says Don Raftery. “Even in more developed and heavily regulated markets like the U.S. and Europe, virtually the only thing standing between banks and giants like Google and the telecom providers will be a banking license.”