Do banks have a future in the digital age

McKinsey recently published a report about the impact of the digital revolution on the financial services industry (http://www.ft.com/cms/s/0/a5cafe92-66bf-11e5-97d0-1456a776a4f5.html#axzz3o7uTWUbJ ). Some of the sectors that will see a decline in revenues and profits include payments processing, SME lending, wealth management and mortgages. At the same time it’s mentioned that “most attackers do not want to become a bank but want to squeeze themselves between the customer and the bank and skim the cream off”. Basically meaning they will reap the profits without running risks or be subject to regulation.

In the same week I attended a presentation by Steve Tunstall talking about the impact of the digital developments on regulation (http://parima.org/steve-tunstall/ ). One example he used was Uber, which basically drives out the taxi industry in many countries – including the heavy regulation in that sector. Regulation is basically replaced by openness and transparency. It’s no longer a regulatory body that safeguards fair pricing, adequate customer service levels and safety, direct feedback from customers shared via the cloud to everyone interested keeps the company in check. An interesting thought: regulators have been in put in place by government and societies to protect individuals from wrongdoing by institutions like banks. If customers get direct influence over the behavior and service of institutions likely less regulation might be needed.

What’s your view? We welcome your thoughts.