I recently spent the day at WIRED Money, where the ideas
design business and technology media entity brought together the people and
businesses disrupting the world of finance. The event offered a range of
sessions covering themes and technologies changing the face of money.
With Brett King from Moven
saying that the traditional banking model involving branches, ATMs and
application forms is redundant in a digital age and when you consider that the
most powerful smartphone of 2014 has more computing power than RBS or HSBC had
in 1985 then we are very much in a new world.
Another of the speakers Matthias Kroner from Fidor, an internet community bank, challenged
the attendees by saying "to revolutionise banking in a truly global way,
financial services need to be open – to their customers, to change and to innovation". He called out a powerful learning that process won over price citing same-day
lenders with their ease and convenience as evidence.
The rise of the
digital bank
The session amplified the takeaways from a recent Mckinsey
paper. A digital transformation will
put upward of 30 percent of the revenues of a typical European bank in play. Add this to the view that banks can take out
20 to 25 percent of their cost base by leveraging this digital shift to transform
how they process and service. You then have an incredibly strong position.
Competing on Digital:
the rise of digital banking services
In engaging with start-ups and entrepreneurs one can easily
get lost in the analysis they call out as justification for change. The BBA’s
report provides an excellent state of the nation to back up most of the claims.
Finding that digital usage by the British public continues to
rise. 14.7 Billion banking apps have been downloaded so far this year and GBP
6.4 Billion is being transferred via the Internet every week (up from GBP5.8
Billion last year). 6.6 million clients
use Lloyds banking apps every week in 2014 so far. That compares to 4.7 million
for the whole of 2013. 750,000 people have signed up to the new Paym service
remitting a total transaction volume of GBP520 million.
Some serious numbers on the move to digital and with the use
of branches continuing to fall and in the case of RBS/Nat West, branch usage
has fallen from 25% of transactions in 2010 to only 10% today.
The world is changing
Digitization is changing the traditional financial services business
model, in some cases radically. The good news is that there are substantial
prizes to be had to those willing to embrace it. The bad news is that change is
coming whether or not they are ready.
