Banks are struggling with legacy systems, regulations, and rigid hierarchical cultures while small and flexible fintechs are running off with the customers. Therefore, there is some justification in wondering whether banks still have a future. We asked four experts with completely different backgrounds about their visions of what is coming.
He doesn't have a crystal ball, of course, but the most obvious future that low-code platform vendor OutSystems co-founder Rui Pereira sees for banks is comparable to what telecom companies are today. The telcos deal with the basics: networks and calls. On top of the basics are all kinds of new services. Pereira thinks that the banks will, in the future, take care of the basic servicing of accounts.
"They have the money and the accounts, but customers don’t really have any contact with them. They click in apps such as Revolute, Apple Pay, and Robin Hood,” he says.
Trust Is in the Middle of It All
Indeed, Timo Span, a partner with Deloitte who works a lot with banks, sees that there is a fear that in the future they will only be the processors. They are worried that they will take care of the infrastructure, while others cuddle with the customers. But it won't go that far, he thinks.
"It certainly is a tumultuous time for them. And it is a realistic scenario that their market is shrinking, and margins are under pressure. But the masses are not yet moving to all kinds of challenger banks. The big banks clearly still have their trust. And on top of that, they are setting up challengers themselves to keep their place in the ecosystems that way.”
John Robinson, the founder of the British fintech Bluezest, agrees. When it comes to banks, he doesn't see anything comparable to Google coming forward. He points to trust, which he places at the center of the financial system. According to him, confidence in the banks is much greater than in some of the new challengers, to which people will not easily give their savings on a grand scale.
"After all, for the more complex, high-value products banks sell, you have to be sure that they are well provided for and serviced. Moreover, there is sufficient competition because almost every country has at least four big banks."
Of course, there are small innovative parties that make the customer much more central than the banks do, such as Bluezest, but the banks have the money to strategically buy a few of them each time. “They will pick things up as they go,” Robinson says. “And, they could always set up departments with young people who virtually do the same as fintechs.”
Banks can stay in contact with the customer and focus on the customer, points out Marco Witteveen. He is COO at the Dutch branch of Garantibank, a Spanish-Turkish merchant bank, where he initiated a customer-centric digital transformation. He believes that there is a future for banks that put the customer first. He emphasizes that his bank must reinvent itself.
"We need to change and, above all, simplify our business model here in the Netherlands. This means, in particular, that Garantibank Nederland must have a clear focus. For us, it's not about product leadership, but about operational excellence and customer centricity. To this end, it is very important that the bank have an easily maintainable system where changes can be implemented quickly. Fortunately, we were able to build that in the last year with the help of low-code."
Banks as a Platform
Finally, Timo Span sees new opportunities for banks. "I also see banks more and more as a platform between companies and individuals.” According to Span, banks have a lot of connections and knowledge, which they can use to the advantage of their customers. "If, for example, I am a gardener and I want to go into the export business, I will want to know how I am going to do that, what I should arrange. Through the banks, I can get in touch with colleagues and experts. In addition, you go there with a business plan and then they help you." The banks still have to work out and implement this platform concept properly, says Span.
Besides that, banks have to work together, adds Span. "Ecosystems will be very important in the future, but managing ecosystems is difficult. You have to try to understand each other. And more importantly, you have to trust each other." This trust has traditionally not existed between the banks, which has already led to the failure of several collaborations. "When you work together, you have to share data, customer contacts, and other information that can benefit the other. Those are the things banks would rather keep for themselves. So it comes down to courage. Anyone who dares to work together will make progress."
The Future Is Determined by Customers
The different experts agree that banks do have a future. To stay relevant, they will have to put the customer in the center, though. And to stay ahead of fintechs, they will have to work on their flexibility. So, it is essential that they gradually transform their extended legacy IT systems to new technology. If they fail to do so, they risk being marginalized while others run off with their customers.