According to Greenwich Associates’s report ’The Future of Banking: 2025’* by 2025 leading banks will be operating as digital financial superstores that blur the line between technology companies and banks.

Greenwich believe that banks today, in many ways, feel like analog players in an increasingly digital world. Yet change is coming fast: within the next decade, they will feel and operate more like tech companies with banking licenses.

Current progress and new expectations

Over the last year, buyers of wholesale banking services have started bringing their personal experiences as

online consumers to their expectations for commercial banking services, viz:

• one-click ordering from Amazon, tracking fulfilment requests from Uber, auto-populating information from Google Chrome
• other innovations have changed perceptions about what is possible and what is expected in electronic commerce
• customers increasingly expect interactions with their banks to be easy, fast, transparent, and done on their own terms. Expectations have changed dramatically in the last six to 12 months, with frustration evident when desired digital simplicity is not found.

Source & Copyright©2016 - Greenwich Associates

Banks in a tough spot & need to develop new model

Greenwich believe that hese demands and other competitive factors are pushing banks inexorably toward a new model: by 2025, leading banks will be operating as digital financial superstores that blur the line between technology companies and banks.

Getting to that point will not be a smooth ride. Even in the best scenario, banks as currently constructed will struggle to keep pace with retail and tech providers when it comes to innovations in online functionality and service. New regulations and compliance demands have made onboarding, loan applications and other standard bank functions more difficult, time-consuming and frustrating for customers.

Although banks are trying to use technology to overcome these new challenges and deliver a more seamless customer experience, their efforts to date have largely failed to alleviate the problems and keep up with rapidly rising expectations.

These developments have left banks in a tough spot. At exactly the time when their customers are learning how fast, easy and transparent online service can be, banks are struggling simply to maintain the quality of service, as much of their technology spend is dedicated to addressing risk, security and compliance needs and keeping disparate legacy systems running.

Non-banks to the rescue

Banks’ troubles in this area have created an opening for nonbank lenders and fintech providers that leverage cutting-edge technology and their largely unregulated status to deliver the type of service and experience consumers have come to expect from the best Internet and mobile sites.

For the next five years, the industry will continue to experience this “digital divide,” in which technology fueled disruptors drive rapid and dramatic change in the financial landscape. 

Digital banking superstores

Greenwich conclude that this fierce competition will set the stage for a new era. To overcome their regulatory disadvantages and keep pace with high-tech rivals, traditional providers will be forced to make sizable investments and implement sweeping alterations to their culture. Some providers will make it, many will be left behind.

These changes will transform many of these traditional providers into “digital financial superstores” that represent the future of banking where:

• electronic banking will be ubiquitous and one-stop banking will be available from banks
• banks will providereal advisory insights through the use of latest technologies
• major fintech and nonbank providers will be acquired by banks
• regional banks will struggle to keep up with mounting costs of IT investments for client benefit instead of regulatory/risk mitigation, while small and community banks attempt to leverage white-labeled technology from third-party providers to maintain their own value propositions.

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* Data noted in this report is collected from the Greenwich Associates Commercial Banking Program and Greenwich Market Pulse studies, which is ongoing research that addresses the most important and timely issues facing small ($1mm–$10mm) and mid-sized ($10mm–$500mm) company executive decision-makers about their banking relationships. To view full report see.

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CTMfile take: The large banks are not going to give up their central role in the financial transaction business and will change. Some will fail to manage and survive this turmoil over the next decade, nevertheless corporates need to prepare for buying their banking services from the “digital financial superstores” that banks will become. Will your internal systems cope?