About the Future of Retail Banking

I read an article on CNBC written by Eric Rosenbaum about what Peter Diamandis, executive chairman and co-founder of Singularity University recently said (and much more).

“Finance will be the most disrupted industry in the next 10 years,”

Well if we think about the changes technology has brought to this normally conservative industry during the last years – paired with the financial earthquake which started in 2008 and still is producing aftershocks – then we can easily imagine some major disruption to it in the next five to ten years.

Following the article, Diamandis stated that “Bank branches will most be gone” he added that in his opinion this process will happen during the next ten years.

You might want to read the linked article to get some more interesting facts about the number of smartphone banking users etc.

I just want to express my personal view to the possible future of retail banking.

There will be companies like Apple and Google to name the most famous ones which will control a big part of the transaction cake. Thanks to blockchain technology this (money transfer) will be done instantly and the bank customers will be happy with that. Maybe they will buy a bank to get a banking license and offer the rest of the retail banking business too.

Branches will be transformed into no-teller mini-branches using Video Teller Machines to keep the customer contact personal and with the necessary human touch. Those machines can handle nearly everything what you would expect from a normal retail bank branch as we know them today.

Instant issuing of bank cards, printing, scanning and signing of documents, paper or digital. Cross selling of other products like insurances, loans, consumer credits, mortgages and so on.

After that phase there might even be no more need to carry a bank card in the wallet. The smartphone will replace the credit and/or debit card. The personal interaction with the customer will be via the customers device. Biometrics (voice recognition, iris scan, fingerprint / vein scan and face recognition) will confirm the identity of the smartphone user quasi instantly so there will be no more need to enter any account and password when contacting your bank via the remote teller.

Same for cash. The transaction will be switched from classical core banking processing and infrastructure to mobile. ATMs as we know them today (and more less the same design since they have been invented) will change their look and feel. No more upper part with screen, pin-pad, card-reader, just the safe and an internet connection. If you need cash then you handle the request by the use of your smartphone and just walk up to the next ATM of the Future which will distribute it after a tap with your phone. This will eliminate the big loss of money stolen from accounts by the use of cloned cards after skimming attacks.

And no, I don’t think that EMV is the holy grail against skimming. Technology changes and the bad guys adopt. They are really smart in this. But the new ATM’s won’t give them any possibility to compromise them because there simply will not be any hard disk or operating system inside any more. This will help banks to save enormous amounts of money on their spendings on security and licenses. The single ATM can’t be attacked by a hacker any more and skimming will be impossible because there is no more card which could be skimmed.

So to sum it up:

  • Retail banking will be taken over by tech companies like Apple, Google and start-ups
  • Retail bank branches as we know them will disappear
  • Video Teller Machines will replace human tellers in mini-branches
  • Bank cards will disappear, smartphones do their job backed by solid biometrics to ensure the KYC¹
  • Mobile devices will be used for live video customer – teller communication
  • ATMs will be transformed into smart safes
  • Cash will not disappear (at least that fast)

¹KYC = Know Your Customer

First published on finextra.