The future of retail banking

There was a time, not too long ago, when we used to write the amount we would like to transfer to another party on slips of paper. The other party will take the slip to their local bank branch, usually found on the corner of a street, to have it deposited and thus, complete the transfer of funds. The slips of paper were called cheques (or checks if you’re American).

While cheques are still being used, the introduction of easier ways of remitting funds such as e-transfers will eventually see them go the way of the Dodo. And as we’re in the midst of a banking transformation, what does the future hold for retail banking? How will our children and our children’s children be conducting their financial activity?

Digital-only banks are a start but not the end

Within the media, there is great hype about digital-only banks with no retail presence. In theory, it is a great idea with substantial cost savings from not having to invest in real estate and branch personnel. There is also the benefit of having a 1 to 1 connection with your client base through mobile devices. In practice, it’s not a bad idea either albeit many technical assumptions need to be made. Where digital-only banks excel is what I call “weekly wealth”. It’s the day-to-day transactional financial servicing that digital-only banks do things so much more efficiently.

Where it all falls down today for digital-only banks and where traditional banks are still trying to figure out is “wise wealth”.

Financial advice is the next battleground

We’ve seen the emergence of robo-advisors, which for all their big promise, offers safe returns. If you’re looking for a standard, well balanced asset mix, that should be fine. If you’re looking to be more in control, then you either need to learn how to build portfolios and self-serve or be wealthy to afford private banking services.

This is where fintech can fill the void. There could be 2 approaches to closing the gap between self directed investing and private banking: Technology that helps financial advisors serve more clients and thus capping management fees or AI-driven financial advisors to supplement folks who are into self-directed investments. In future posts, I’ll be exploring these 2 approaches in greater detail.