The future shape of banking

A new report from PwC suggests that, as early as 2025 – 2030, a market economy could readily exist without banks of the traditional kind. The report, The Future Shape of Banking, says that as barriers to entry for non-banks to provide formerly ‘core’ banking services continues to decline, the business models of today’s banks will be challenged.However, banks retain some substantial advantages to help them prevent this from happening: although tarnished by the financial crisis, banks’ brands and reputations remain powerful, shored up by familiarity, experience and regulation. Trust and brand matter in financial transactions and some of the resistance to alternative banking providers results from a lack of trust in their security.

Other key points from the report:

  • Banking services will move away from physical, tangible distribution into technology-enabled channels.
  • As technology advances, it will become easier for customers to move between banks and other service providers.
  • Brands could become central to banks’ value – those which build a brand which represents trust, integrity, security and quality to customers will be more likely to solve the ‘transaction cost’ of choosing how and with whom to bank.
  • Banks could become utilities focused on the management of deposits below insured limits and providing a narrow range of domestic credit products.
  • Regulators and regulation also need to adapt their mindset and approach in order to deal with the changing banking landscape.