The days of traditional banking are numbered. Banking operations can now be done in real time on a mobile app. Simpler, more intuitive and less costly, these new solutions will affect established institutions.
Smartphone : the new pocket money
In the race to banking innovations, mobile payment actors such as WeChat Pay, a subsidiary of Tencent, and AliPay, another branch of Alibaba, are leading the way. The former allows the user to pay for everyday expenses (taxi, equipped shops…) with his or her phone, linked to a card. The latter, now leader on the Chinese market, generates a QR code used during the payment process in all shops partnered with Alibaba. In Asia these new practices are everywhere. In Shanghai, some places already refuse cash. Similarly in the U.S. tools like Google Wallet or Apple Pay are developing, favoring real time transaction with little to no cost.
Banking establishments: to a generalised hold-up?
By 2020, over 5 000 agencies should be closing in France. The cause: traditional banks that have put off positioning themselves in the digital world, relying on their monopoly, and constrained by restrictive laws and security risks. En January 2018 in Davos, Robert Kapito, CEO of BlackRock, said he was shocked by the last valorization of Ant Financial, subsidiary of Alibaba, at 150 billion dollars. “Western financial institutions should start worrying” he declared. With young and innovative companies on one side, advancing at the double, and banks stuck in their old ways on the other, the results are decisive. BNP Paribas, “The bank for a changing world”, took three years to build its digital strategy. As a result, that strategy was obsolete before even seeing daylight. Yet, it is essential to facilitate processes and reconnect with clients, who have long been forgotten about in the banking system. However, start-ups seem to be the only ones changing their offer today. With their massive strike force, Chinese and South-East Asian giants, as well as those from the U.S. will be quick to step into the breach.
Profession : banker without a bank
Amongst the new financial operators, we are assisting at the emerging of telecom giants who, just like Orange, rely on their network to develop their banking offer. Launched in November 2017, Orange Bank has already converted 200 000 users, and expects 2 million accounts in 10 years. A first tremor in the sector.
Other actors that need close watch: the web giants BATX and GAFA. Though they do not have alternative solutions for the European market for now, they all have what it takes and are already offering associated banking services, via Luxembourg or Ireland.
As for Fintechs, we can first fin classic start-ups that operate on a circumscribed activity. Example: the British start-up TransferWise that has put into place a system allowing to reduce delays and and exchange costs for international transfers. In parallel, new global and disruptive offers are being developed, offering true alternatives to banks. The London fintech Revolut now offers a physical or virtual bank card system that gathers a multitude of services, including the possibility to make payments around the world at current rate, without any bank commission. Similarly, the Berlin mobile neobank N26 has made a major breakthrough on the market with over one million active users.
Tomorrow’s banks: a composite picture
Long gone are the interactions with an agency. Technologies linked to the smartphone and its securing are bound to multiply. N26 and Revolut are showing their hand: the banker is becoming a partner that proposes a large panel of services and simplifies the user journey. Phones and connected watches are becoming substitutes for credit and debit cards. In the back office, the bank organism assures security challenges and financial stability are being dealt with. In this rebooted model, the profitability relies on data. And this, in all transparency of course.
This evolution is no longer an option. If the unfurling tech wave crashes on Europe, massive lay-offs would follow, provoking an upheaval none would get out of unscathed.