Friday, 8 July 2016

Banking baloney

Branches like this may be doomed
(image from Wikipedia)
As Bohr almost said, forecasting is difficult, especially about the future - in fact it's pretty well always wrong. And never more so when we try to predict cataclysmic change. As I discussed in Dice World, the problem is that the systems we are usually trying to predict are so large and complex (and often mathematically chaotic) that we are almost always blindsided by major changes. So I raised an eyebrow when I saw an article claiming that within a decade, retail banks will be dead.

It's certainly true, as the writer suggests, that bank branches are closing because we are doing more online banking, but I think there is far too much conservatism about retail banking to see such a massive change as the end of the familiar banks in ten years. Look how long after Europe was paying its bills with direct debits the USA was still tediously printing off cheques to pay bills. Not to mention the time it took for chip and pin to be available over there.

The author of the post envisages that 'thе biggеѕt bаnkѕ in thе world in 2025 will bе technology companies'. This may be true, in the sense that they are edging into financial services through things like ApplePay - but it's extremely unlikely. And even if it is true, it doesn't mean that 'retail banks will be dead'. Nor does it mean that 'the biggest banks in your country will be technology companies', as we still have huge country-to-country variation in retail banks. You don't see many Lloyds and NatWest branches outside the UK, for instance.

Although bankers aren't trusted, we still invest significant trust in familiar high street banking brands, plus brands like Virgin and the supermarkets which have a similar feeling of national acceptance. We are far less likely to trust Google or Apple with our money. Handling payment transactions is one thing. Handling our bank accounts, particularly current accounts and mortgages, is another.

I am not saying we won't see a gradual shift away from today's retail banks to a wider range of options. But I think the reports of retail banking's (future) death are greatly exaggerated.

No comments:

Post a Comment