The future of banking: it’s banks, Jim, but not as we know it
Banking is moving into a new high-tech universe. Like many other aspects of our lives, the digital revolution is about changing the way we bank. In the future, we might even use Snapchat, Facebook, Instagram or other social media platforms for our banking with the traditional bank relegated to providing wholesale services.
Here’s what I think:
Right now, banks have the power
Whichever way we turn there are fees, fees, and more fees. Most banks keep their shareholders very happy with all the profit they earn from us. Sometimes it even feels like they have an intravenous line hooked up to our wallets. When it comes to travelling overseas, Choice said Aussies faced the “slippery world of foreign exchange” – we often get hit when we go overseas with fees at both ends to withdraw our money. What’s more, with most credit and debit cards there are international transaction fees charged when we buy in a foreign currency.
What does the bank of the future look like?
There are banks in the US and the UK that are offering services that are ahead of what we have available here in Australia. For example, instead of having a traditional bank account as your home screen, these banks enable you to view your money through your budget as a landing page and can see how you’re tracking for the month. They show you at a glance what’s safe to spend and send notifications when you’re spending too quickly. Imagine that? Bring it on.
Yeah. Let’s get going!
Hold on there. These US and UK banks can’t just set up shop in Australia. They need to become an Authorised Deposit-taking Institution (ADI). In other words, they need to get a banking licence. That involves jumping through more than a few hoops. But never say never. It’s highly likely we’ll get this type of service eventually from our existing banks or quite likely from an innovative start-up. Banking is improving; some of our banks in Australia are at least sending customers alerts if they’re about to go overdrawn or incur a fee, or to set a savings goal, which is a great start. And some personal finance apps allow you to connect with your bank automatically so that you can see your “safe to spend” total at a glance.
Do I even need a bank?
Quite right. In the future we could do our banking on our social media account. Why can’t our PayPal account or Apple Pay, Android Pay, Samsung Pay, or even Alipay from Chinese giant Alibaba, become our banks? We can already, for example, send money to others via PayPal if we have their email address. With their reach, social media platforms such as Facebook, Snapchat and Instagram can run banking-type features. In the US, you can already send money to a friend via Facebook Messenger; all you do is open a message, tap the $ icon and add your debit card to send the money. There are other peer-to-peer payments systems. In China, WeChat offers financial services and some say there’s a battle raging to become the WeChat of the West.
What about Bitcoin and other cryptocurrencies?
Cryptocurrencies have the potential to change the way you travel. For example, a person can go on holiday, to say, Brazil, walk into a local change house and swap the equivalent of $100 or $500 in cryptocurrency for local currency for a few cents charge. This is already happening on a small scale. An example I’ve come across is Filipino workers in the United States who send Bitcoin back to their families, who then cash it in locally. We already have a handful of Bitcoin ATMs in Australia, which allow you to withdraw your Bitcoin in Aussie dollars. Bitcoin doesn’t need a bank and can be managed on your smartphone.
But what about now?
You’ll have to hope that someone has the balls to open up a bank in Australia that’s similar to the modern US and UK banks. We do have some innovative banks that could do it. With a service like this you can use your account abroad with no nasty charges, which is amazing for regular travellers or those who want to transfer money to friends, relatives and others overseas, or buy products online.
It won’t be long before banking gets a whole lot more efficient in terms of time and cost.
Banks could be the next industry to get the digital goodbye kiss. We may not even need banks in the future. They act as middlemen and that’s something that digital technology can do. Right?
