Not a lot has changed in banking over the last 30 years. We send payments, pay with plastic and withdraw from ATMs. Payments have got faster, but as for step change there is not a lot. You can argue that contactless is a breakthrough but as a technology play it’s just a way of paying without a pin number (its faster).
This may sound like doom and gloom, it’s not. We can access our banks by some of the most expensive and advanced digital channels available and have apps and browsers which can integrate our payments and data into core systems…. but this again is just a faster way of making payments. Now as a banker I am not criticising banks. Banks must work within a risk framework and with governance that those of us in the fintech world have generally never had to deal with. The constraints they operate under are immense. I think they do a great job on the whole.
Customised Payments… only for the big fish?
It’s quite a controversial view, people will say but payments are streamlined, data flows into new systems and integrated. Yes, it does and yes, they do, but as a rule they are customised services only available for the biggest fish. SAP Ariba have just integrated card payments into their procurement platform. This is a big deal, however not many small businesses use SAP Ariba so its firmly aimed at Enterprise size corporations as that is where the biggest money is to be made.
We have had transformation but generally this has been for the biggest customers. Xero have made great steps to offering advances to a smaller customer base via their app marketplace and by integrating solutions to an accountancy platform. That’s great, but any information in an accountancy platform is at least a day old, so it is working with the past not the future. This is a gap (and one which The Slide App fills!). Some accountancy players are being left behind by Xero, Freeagent and QuickBooks . Having a greenfield site has allowed them change that has not been possible by the legacy players. This also applies to banks. The new challenger banks have none of the legacy challenges that the big boys have. They can build tech that doesn’t have a current customer base and it can be adopted by a mass base. This is crucial.
PSD2 – the Biggest Change in Banking
Now couple this with the biggest change since I have been in banking (that’s a long time): PSD2 (the new EU Payments Services Directive). Service your bank account without screen scrape by a third-party application. Make a payment without using card rails. Pay for your shopping direct from the bank account without a card. This is the time when The Bank of 2029 will emerge. The tech that is developed now utilising PSD2 will change the way we bank. Don’t believe me? Fine. Here are just three ways the Bank of 2029 will change how you can bank:
1. Direct access to a bank platform – Not bank browser or app driven, an ecosystem of APIs that allow you to access your bank seamlessly from any service you choose.
2. Payments – Card, Faster Payment, CHAPS, SEPA, all committed from the solution you choose. This could be the purchase ledger, app, or from a payments diary that is running your cashflow. More importantly you will be able to choose the payment type that matches your supplier relationship or cash position.
3. Event driven funding – Cash shortage for VAT? Access a range of funding options from your third-party service to resolve the problem. Aggregation will give you the options to pay in the most economical and easy method. Banks can offer funding from pre approved lines to clients as they can see their financial behaviours. This is driving behavioural lending and not scored.
This is the time when The Bank of 2029 will emerge. The tech that is developed now utilising PSD2 will change the way we bank.
It’s not all bad news for the big banks. Underutilised credit lines can be accessed by third-party services as the banks can make you aware that you are pre-approved for funding. Your bank account can tell you that you have a £20,000 overdraft when you want it. I personally believe that the banks are the biggest winners when they mature their relationships with Fintechs and embrace some of the new tech out there.
Aggregation: One place; multiple offerings
Get ready, when you apply for funding because you can aggregate multiple offerings in one place, meaning you can choose the correct funding or banking service for you. The collation of data from many sources gives you the business the option to access banking services without a human and allowing you to choose the right solution. This in turn creates competition. Lenders and banks will compete for your business as they know that customer loyalty is key. This is only available because of the change in our banking offerings.
Banking in 2029 is a service
To summarise, what does bank of 2029 look like?It looks like whatever service you choose to service your banking needs. You may not even know that you are doing it as the bank of 2029 will be integrated into your business and personal life. No longer will the barriers of entry be in existence. In 2029 Banking will be a service.
What does bank of 2029 look like?It looks like whatever service you choose to service your banking needs.