Banking 2025 - Digital or Red Telephone Box?

Time to read: 5 minutes for a different prespective

It is 2025, the mainstream proliferation of Artificial Intelligence (‘AI’), Internet of Things (‘IoT’), Robotics and Virtual Reality (‘VR’) is complete. High street bank branches have been confined to history, and have been replaced by hairdressers, nail bars and pet stores. Bizarrely, whilst we have fully embraced technology into every aspect of our lives, we are increasingly finding solace through basic forms of human contact and non-digital interaction.

The traditional Retail and Commercial high street banks have all but disappeared - their demise coming at the hands of online retailers and technology providers entering and monopolizing the sector through digitized service oriented banking. The traditional banking product based models of the past are now deemed irrelevant by consumers. Consumers have lost confidence and trust with Banks following the mis-selling scandals of Payment Protection Insurance, Interest Rate Hedging, and Current Account charges; coupled with significant General Data Protection Regulation (‘GDPR’) breaches and fines - balance sheets have been eroded and customers have simply walked away.

Cash is a novelty, ATMs now shares the same fate as red telephone boxes. Transactions and payments are completely serviced through aggregators (e.g. Payment Services Directive 2) and mobile devices. Digital currency account for the vast majority of financial transactions. 

The full embrace of digital has left some members of our society behind, such as the elderly and the vulnerable. In response, National Governments and Regulators have created specialised community banks providing tailored banking services to the most vulnerable within our Society. Consumer debt has risen to a record high, academics have attributed this to a loss of perspective with respect to the value of money and a lack of basic financial acumen.

Now back to the present…

How close to reality is my imagined scenario?

In reality, the we are not that far away…

• Amazon currently provides financial products through its lending business and is successfully building a book of business. Amazon Web Services (‘AWS’) is becoming the cloud platform of choice for Banks. There is also a body of opinion that Amazon is possibly a strategic purchase away from occupying a prominent position as a Bank within the UK.
• Continued market disruption will produce clear winners and losers. Over time, the battle lines will be drawn – these lines being Banks + FinTechs Vs Online Retailers. Those institutions that remain relevant, invest, demonstrate agility, and are focused upon segment specific services will survive.
• Regulation and market reforms will continue and the respective strategies adopted by Banks (i.e. complete or comply) will determine the winners and losers.
• The Bank of England recently raised concerns regarding raising consumer debt in particular with respect to credit cards and vehicle financing.

Banking in particular is entering a period of renewed change – a digitally driven industrial revolution, as such. The question is:

• How prepared are traditional Banks, and recent new entrants to the challenges ahead?
• How worried should they be with agile, highly capitalized players possibly entering into the market?
• How concerned should we be as consumers, and citizens?
• How prepared is the Regulator for the actual impact of introduced market reforms, and the pace of Technological change?

I would welcome your views and comments.

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About Ambrish: Ambrish is an accomplished, well-rounded financial services director with a 20-year career spent shaping and delivering business outcomes. He is an executive-board-level advisor at the intersection of business, technology, digital transformation and FinTech (https://www.linkedin.com/in/fsdirector/).

Associated Banking Strategy Posts

• Banking Strategy and Fintech
• Machine learning—Ethics, rights and conduct
• Keeping Up vs. Keeping Ahead: Banking Strategy
• How prepared are you for the 4th Industrial Revolution?—Banking
• Banking 2025—Digital or Red Telephone Box

All views expressed are my own.

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