This is what the Bank of the Future looks like in 10 years time
On 22nd of May, the Activeledger team attended “The Bank of the Future” event held by HubHub (@hubhubcowork) in Bratislava. Activeledger CEO Martyn Walker (@walkermartyn) as the “disruptor” on the panel, faced Pamela Babuscakova (@pampoohsik) , Head of R&D of Tatra Bank (@tatrabanka) and experienced venture capitalist Michael Schuster from SpeedInvest (@speedinvest). The session was hosted by Barbora Ruscin.
Chairs of incumbent players are shaking
The conversation opened with Tatra Bank sharing how it is struggling to catch up with trends in retail banking. “We are trying to be a client-centred bank. In a short period of time, you can open a bank account completely on your mobile,” began Pamela Babuscakova. “A few years ago we also brought up peer to peer payment, so a client can send money by only knowing the phone number and not the bank account [of the recipient].” These things may already sound very familiar in the U.K., home to 5 of the top 6 challenger banks in Europe (or even the world). As you read this article, Revolut has already joined the unicorn club and is now marching towards 2 million users.
“The key is connecting to the customer and providing transparency. Let me ask you a question — How would you position your bank against the challenger banks?” Martyn Walkers’ puzzler hinted at the fact that all challenger banks have these functions and have cherry-picked the features they want to offer, really placing the customers at the centre of their business.
Michael Schuster, as a sophisticated market observer and investor, joined in the debate with strong and blunt statements: “Where do the most innovative people want to work in the future? The answer is clearly not a bank!”
Well, let’s not be so assertive. Big banks are also adopting new technologies. A friend of mine in a very senior position at Nomura told me two years ago that they have long planned to get rid of their research department and replace it with artificial intelligence. (See: Nomura Testing AI to Improve Investment Decision-Making) In Goldman Sach’s New York office, 598 traders were replaced by machines and some 200 computer engineers. Innovative computer engineers will probably find banks a new tech central to work in.
So are the banks shaking in their boots? The answer is obvious when people start using Revolut and Monzo and put away their Lloyds or Barclays cards.
The biggest obstacle is people, and the bank of the future is an oxymoron
When asked by moderator Barbora Ruscin: “How long does it take to introduce an innovative idea in a bank?”, Pamela answered, “…months…in an optimistic scenario.” This reality is not hard to imagine, especially when legacy bank mobile apps like that of Natwest only display your transaction details 6~12 hours after the occurrence.
Intuitively, isn’t this also related to security? What if my card was accidentally charged an extra zero by a vendor on the street on a weekend? Oh I guess I can only find out 6 hours later, and will have to call the bank on their 24 hour hotline (if that exists), go through tons of security questions (including trying to remember a few transactions before this one), and finally get them to hold or cancel this payment for me. All of this, instead of going to a Help Section on a challenger bank’s app with instant customer service. (To make matters even worse, the value of the time spent is probably greater than the wrong amount charged!)
“The bank of the future is not going to exist.” Martyn challenged. “In the blockchain world, our entire goal is to debank the banked rather than to bank the unbanked. There might be a time when I will only choose a challenger bank because it does tick all the boxes. We’re not there at the moment but this is a problem for the high street banks — They need to do more and be more transparent.” Indeed, what the high street banks provide us with now is trust because they’ve been around for decades. But the challenger banks are chipping away at them as each day passes. Blockchain technology is even further down the line already — transactions are occurring every day on the network without any intermediary and without a bank lurking in the shadows.
Blockchain is evading the financial sector
So when blockchain and cryptocurrencies take over, should I cancel my accounts with high street banks?
No. Don’t do that. First of all, cryptocurrency is a whole other topic. Second of all, think of Blockchain as a tool; a tool that banks should start to use more. Nonetheless, it is down to the banks to choose to use it (in the back office, by adopting smart contract) in reducing human errors or eliminating administrative processes. And this is not something that will immediately benefit the public.
“It’s fair to say that one of the problems that large businesses including high street banks have with Blockchain is that, they’ve just spent the last 20 to 50 years investing in systems that are working at the moment, and this represents a huge cost to them,” pointed out Martyn. Michael also agreed that the cost of changing and the benefits that the technology could bring were far too big for the banks to understand and make decisions accordingly.
How should the banks then face the hit? “Look at the new business opportunities that are coming along that can take benefits of Blockchain solution and therefore not replace all of the legacy systems and software,” Martyn replied. Lacking interoperability is a common misconception over Blockchain. More and more private chains nowadays offer the ability to interconnect with legacy systems — Activeledger is one that integrates very well with ERP, CRM, and other ordinary Blockchains. (See: Shipping Giant Deploys Blockchain to Combat Industry Cyberattacks)
The future is everything digitised on a decentralised system
“Most of the banks today are sales and marketing organisations and not tech or innovation. If you look at Facebook, what it does is actually distributing trust.” Michael commented. Indeed, you believe in the virtual environment that you are in, built with information and conversations from your friends and families.
So what does the future look like? Does it have anything to do with trust, and what does a future bank look like — if it exists at all — in 10 years time? The panellists were asked by Barbora to sum up and provide a vision. Here are the answers:
For Pamela the bank of the future was personalised, seamless, and more based on advisory services. Meanwhile, Michael thought that the bank of the future would be more like Spotify — you’re only really nervous when the song stops: “The thing to look at is solutions that can scramble data and protect your privacy while allowing data analytics on top of it. So to actually give banks the tools to create cool products again,” he explained.
Well, the good stuff always takes longer.
Martyn’s vision of the bank of the future was my favourite — “All my real and virtual assets are digitised,” he summarised, “An overview is available at any given moment in time on my mobile screen. So I will have a picture of my worth and requirements to maintain the assets that I have. In other words, it will be a centralised solution but on a decentralised platform.”