How will the bank account change by 2030? In some ways, not very much. The customer’s basic needs around their money are likely to remain the same. But it is the way those needs are met that will undergo a radical transformation.
People want to do six things with a bank account: to make or receive payments (send money or deposit a salary); to borrow money, through a credit card or mortgage; to “lend” – as in savings or a pension; they want risk protection, which means some kind of insurance; and they want pertinent information on all their financial dealings.
Today, those needs are serviced by a set of disconnected products and services, provided by multiple financial institutions. My hypothesis is that we will see the emergence of a service that streamlines and integrates all the data around those six activities in a way that make the customer feel in control of their finances.
This data expert will build an app to centralise all this information. It will sit on your phone and look a lot like your Outlook or Gmail app, but instead of pulling in email from multiple accounts, calendars and more, the app will be a single point of entry for your financial life.
The way you visualise financial data on your phone or connected device will also be very different in 2030. There will be more interactivity, gamification of features, and possibly even some augmented or virtual reality. Sitting down at a desktop computer to check your balance will seem very old-fashioned by that time.
At 10x, the transformation business I founded in 2016, we are building a platform that can handle vast amounts of customer data and will allow banks to build and launch new products quickly and easily. Ours is a b2b offering, and we’re brand-agnostic – we’ll work with big incumbents and neobanks alike. So when I talk about the data expert who will help you take charge of your financial life, I envision an organisation building that little robot using our platform. Could we do it? Probably, but building a consumer-focused company isn’t in the plan right now.
I do believe that the fundamental way that banks make money may also change over time – although perhaps 2030 is a little soon. Today, financial services are provided by banks that use their balance sheet to hold customers’ money or lend to others. There is a process of intermediation with that process, which banks make money out of.
In future, the banking industry will move towards more of a peer-to-peer model for lending. This will be unlike the “peer-to-peer” we know of today, which is still very early stage, but will use a distributed ledger – blockchain – to manage the process of saving and lending money.
We won’t need the bank there in the middle holding the money anymore, because transactions can be easily logged and tracked on the blockchain. The impact of this could be profound, and result in a lower cost to the customer.
The early use cases of this system are the cryptocurrencies like bitcoin. I suspect that many of these new currencies will not exist in their current formats in future, but it is not inconceivable to me that we will see a V2 or V3 of crypto having significant impact on the world, especially in international payments, and through the internet of things, which may require machines to pay each other for services without human interference.
As for which banks will survive the coming changes, it’s likely that a number of the large players in the space today will still be around. Their business models will need to evolve in order to adapt to the new trading conditions. We’ll see the emergence of some new players and we’re likely to witness the scaling of the some of today’s neobanks - but not all.
Right now, we’re in the foothills of these changes. If you look back at the internet in 2000, there were all sorts of search engines and social media sites vying for prominence. Google and Facebook weren’t the leaders. But then people play around, work out what they like, and you see victors emerging.
"We are also going to face a set of profound decisions around identity, privacy, data ownership and security, which will require significant change to existing legal and regulatory frameworks."
The banking industry is already changing. Look at all the announcements in the press regarding branch closures. Four years ago, I predicted that 50pc of branches would close, and that was seen as a punchy forecast. People were quick to doubt that it would happen. Now I predict that 80pc of branches will close. Why do we need them? They only exist because of the political pressure on banks to provide them. Don’t forget, 10 years ago there was a Blockbuster on every street corner and there are almost no video stores now.
The big challenge today’s banks face isn’t actually a technological one – although artificial intelligence and blockchain do have the potential to disrupt the status quo. No, the big problem banks have is cultural resistance – people within these organisations don’t want to change, and don’t understand why they should change.
We are also going to face a set of profound decisions around identity, privacy, data ownership and security, which will require significant change to existing legal and regulatory frameworks.
It’s in everybody’s interest that we get all this right over the coming years, because we all want a fairer, more cost-effective and more inclusive financial system that is better at helping people achieve their goals. Technology is the enabler, but it will ultimately be agile, innovative organisations that help make this future a reality.