The banks of the future will face customers with digital capacity: Expert Blog

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In the last 10 years, mobile phones have introduced the Internet in all our economic and social interactions. Already, in places like China, we're seeing mobile apps like WeChat and Alipay dominating more than 90 percent of the payments market. They are not competing for profits, but to learn the likes and dislikes of their users, and to understand their habits and financial situation. This knowledge is used to create a user profile that is then sold to advertisers or translated into loan.

China becomes a cashless society, using mobile applications that reduce financial institutions to mere payment providers. Banks are becoming more and more distant from their customers, without any knowledge of the needs of these clients or their ability to engage with them. It is easy to extrapolate that payments will be integrated into any digital social interaction in which we will engage in the future.

Thus, our future banking providers will have to hitchhike on social networks, portfolios, messaging applications and mobiles. operating systems. These will become distribution networks for their services. Banks will compete to offer the best digital banking experience to a generation that will not understand the concept of physical banks.

One of the major impacts of using Internet distribution networks to access your consumer base is to reduce the number of intermediaries who must participate in a transaction. This does not mean that middlemen will disappear completely, but in a world where two entities can communicate P2P on public Internet rails, the concept of correspondent banking will be transformed.

We already see the power of such networks in countries like Kenya, where it took only three years to set up an agencyless banking service called M-Pesa to become the most mobile banking service. performing in the developing world. They did it simply by connecting millions of consumers with their bank via SMS.

Another impact will be a reduction in the friction inherent in the change of bank. Think about how easy it is for a taxi driver to spend every day his personal activity from Uber to Lyft. This opportunity for an individual to "leave" the network puts a strong strain on traditional business models. It gives the advantage to intermediaries who are able to connect with consumers on a personal level, to give them a voice and create a loyalty that reduces 'going out'.

Implementation of Distributed Systems

networks evolve, they become more efficient. We can see an example of this in Blockchain-based networks like Bitcoin and Ethereum, which provide P2P transactions that are done without any network operator taking a charge. These networks evolve slowly due to their governance structure, but display a significant capacity to coordinate a large number of people and organizations using economic incentives. This aligns the interests of all parties in maintaining the network and improving it. Imagining new types of banks that operate over a decentralized registry could lead to real competition in the banking sector and introduce opportunities for financial innovation.

In a world where payments are inexpensive, instant and 24/7 Banks will be trusted intermediaries who accept customer deposits and manage the capital of these customers. But unlike traditional banks, they do not lock users into a closed financial services garden. The value they offer their customers will be measured by their ability to integrate solutions into digital products. They will form a banking services market, ranging from loan and wealth management to insurance.

The provision of a banking product on a public distribution network also changes the flow of information. Today, when consumers provide their credit card number and receive a consumer credit in return, they are stuck with a single credit provider. But when clients provide proof of their identity, these clients share a certification of their financial behavior. They also give their location to reduce fraud, and inform the retailer of the best way to contact them for customer service issues and digital receipts.

Digital identity standards will create new models for risk assessment. This will make it possible to connect credit donors to credit takers and to dispense with centralized credit rating providers. Already, social and mobile apps offer better data privacy controls for sharing information with third parties in response to public demand. Better encryption-based privacy controls can allow users to choose their credit providers by sharing more information and recording the complete context of each transaction securely.

The company becomes less dependent on cash transactions the rails, capital management and banking compliance will be very different, putting more emphasis on decentralized cryptographic systems. The cost of banking computing will be reduced by using free software and improving its resiliency by taking advantage of its distributed nature. The first technology-based regulators will create Internet standards for regulation and pave the way for everything else. This will provide cryptographic evidence of credit worthiness or proof of your identity. Businesses will be able to operate with greater transparency and consumers will consume with more privacy.

Finally, fintech companies and banks will look more and more alike. As user acquisition costs begin to rise for banks, they will begin to think more about maximizing each customer's lifetime value and becoming more efficient. Fintech companies will become, well … just "banks", and we will soon realize that there is no way to escape this word, no matter how much technology companies will try.