No Friction….
If you are still thinking like a bank, operating like a bank and pushing product like a bank in 2025, then you probably I’d hazard a guess wont make it to be whatever “a bank” ends up looking like in 2030. Its now universally accepted that as the intersection between financial services and technology increasingly blurs, the scale of innovation and pace of change accelerates, and tectonic demographic shifts change the way we consume, transact and interact, then the bank of 2030 will look very different to the bank of 2021. Being slightly bolder there’s the question of will a bank even exist anymore?
To get an idea as to what banking might look like in 2030 then, a place to start would be with what the consumers and businesses of today are already saying they wont tolerate:
(1) Friction
(2) An experience that isn’t personalised
(3) Lack of transparency
Friction-”It burnnnns”
The most successful technology companies are those that are continuously innovating to solve problems, changing the way we think and behave, but also those that are hell bent on removing friction from user journeys and experiences. Amazon obsesses over removing every pain point from a customer journey- Two clicks is one too many, putting in your card details each purchase- ouch, and even an order arriving the next day is seen as coming too late. No friction….
With door delivery DVD’s Blockbuster had nailed, (or so they at least thought) the removal of friction from the experience of renting a movie. No longer would people have to get in their car and drive to a store to rent a movie for £3.99, then being charged late return fee’s when inevitably said DVD got lost in the sofa or under the rug…. No, now they could order a DVD of their choosing and three days later it would arrive in its perfect little envelope ready for viewing pleasure before the trip to the post office to mail it back… Joy of Joy’s…. Then along came Netflix who weren’t interested in how to improve the physical delivery of DVD’s (Although DVD-A-Roo would have been genius.) but rather reinvented the entire entertainment industry by providing subscribers instant access to thousands of titles they could stream on any device, anywhere and at anytime.. No friction…
Whilst the industry has had no choice but to embrace digitisation and the advent of Open Banking has enabled Fintech’s to do things better, faster and cheaper than many incumbent institutions can, banking still remains marred with friction. Whether account opening, making payments, saving money, getting a mortgage or accessing credit the consumer is often faced with shoe boxes of paperwork or forms to fill in, and more often or not finds themselves inserted into the banks process and a prisoner to their procedures, policies and legacy technology capability. Products are offered in silo’s and through fixed distribution channels each governed by their own process and internal rules…Friction…
But by 2030 as more applications and opportunities to solve problems become apparent from the closer alignment of Open Banking initiatives, artificial intelligence, digital currencies and blockchain technologies, and the more consumers get used to and expect frictionless experiences then the more banking will become invisible and offered away from banks themselves.
Friction will be removed as finance becomes ubiquitous, invisible and embedded in experiences. Whether its shopping e-commerce, travel, entertainment or healthcare, more and more companies will offer their customers financial solutions. They are unlikely to be labelled as loans, overdrafts or credit cards, but rather will be contextualized and experience driven. Shopify as an example are already literally operating as the one stop shop for merchants. You market and sell on the platform, process and receive payments through it and can even borrow money for working capital to grow your business without ever having to touch a bank. Because Shopify have access to millions of data points they are able to make decisions faster, with greater confidence and much more tailored to the risk profile of the borrower. Fast forward a few years and a “loan” for a new car wont come from your bank or perhaps even the leasing company as the finance contract will be embedded into the purchase of the car. Heck you might not even be buying the car, but instead simply paying a subscription fee, and through a smart contract that knows how much to charge you based on your usage of the vehicle.
With seven times as many connected devices than humans on the planet it doesn’t take Elon Musk to know the direction of travel for the Internet Of Things, and as machine learning capabilities advance and AI is adopted in more and more industries, the way in which we experience financial services is going to drastically change over the next decade. Conventional bank products as we know them today will disappear to be replaced by embedded “at time of need” experiences, the bank account will be replaced by digital wallets, money will be programmable and smart contracts executed on blockchains will open up global trade to greater transparency, reducing costs and time. Best of all…. No friction.
Customisation- “I’m not a number I’m a free man”
If you don’t know your customers, how can you give them what they want? Banks have long held in addition to millions of people’s and businesses cash deposits, millions of people’s and businesses data deposits. That data much like deposits is arguably secure, safe and protected through regulation… But it is dumb data, and certainly not being used to drive hyper personalised experiences. Now monolithic, industrial “every car is a Model T” products and manufactured processes have no doubt enabled banks to offer their customers solutions at scale, cheaply and as efficiently as possible, but for the consumer of 2030 if the experience is not personalised and interwoven into their lifestyle then they simply won’t accept it.
If Starbucks can provide a bespoke offer to every client with a loyalty card then it would be safe to assume those millions of coffee drinkers would expect a personalised service from their financial services provider. I can build my own coffee (love a double blended skinny cappuccino with two shots of vanilla) but I can’t build my own loan.
If harnessed properly and the data doesn’t disappear to the Sarlacc pit then Open Banking has the huge potential to enable banks to offer their customers that truly personalised experience, but they will need to recognise that they won’t be able to do it all on their own. Only through partnerships and perhaps acting as the gateway to access value from the ecosystem will they keep customers attention. Sure this might mean the bank won’t have the opportunity to sell them a credit card or a car loan but at least they keep them on their platform and the data flowing through. The consumer of 2030 will demand choice as well as personalisation and so they won’t be wedded to a brand just because its been around a long time.
Transparency- Where my money at?
If a business in the UK were to today send money to a supplier in India, then said payment would be subjected to the joys of the correspondent banking system. The business would not get a notification to say the payment had been sent, nor one to say it had arrived, or even one to say how long it was going to take. To compound all that they would not know how much it was going to cost until the fees had already been debited. Ouch. Forgot 2030 the consumers and businesses of today already expect making a payment to be as simple and instant as sending a text or an email.
With it already looking the case that the thousands of crypto currencies out there not becoming the answer to a new global payment system, Central Bank digital currencies have stepped in. Effectively digital cash issued by Central Banks, CBCD’s whilst still being thought through by national governments have the potential to make payments quicker, easier and more transparent. The scope also exists for these to help Central Banks automate monetary policy, detect and prevent criminal activity, and tax evasion, as well as enabling the millions of unbanked to potentially enter the financial system. There are of course more questions than answers, not least the potential destabilising impact they could have on commercial banks and therefore credit creation, but no doubt by 2030 many of these issues will have been solved for and the global payments system will look very very different to the one we have today.
With the pace of change, acceleration in innovation, and new market entrants joining the ecosystem almost every day, financial services in 2030 will no doubt look very different to the financial services of 2021. The organisations then that haven’t embraced friction free experiences and integrated the technology to enable hyper personalised experiences just won’t make it….
