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And how about reading an article on Consumer banking?
One thing has remained constant for a century at least: the branch banking system.Now several changes are coming, driven by technology—the growth of internet usage on smartphones, the rise of “big data” computer processing and the increasing willingness of customers to do complicated things online. These developments will transform the way banks do business and organise themselves.
The revolution will be most visible on the high street. Branches will become less important and there will be far fewer of them. Those that remain will look quite different. Instead of walking into one to deposit checks or get statements, most people will do this from their mobile phones. Instead of opening wallets in shops and being confronted with a choice of whether to pay by cash or plastic card, they will wave a phone at the checkout. On it will be a virtual wallet provided by a firm such as Google, PayPal, Square or some company that hasn’t been thought of yet. If you have forgotten your phone you will type in your phone number and a secret code (or simply speak your name) and carry on shopping.
But this is not just a more convenient way of paying. It also promises to overturn your existing financial relationships. Instead of reaching for the first card that happens to be in your wallet to pay for a $2 cup of coffee (and risk being charged a $35 penalty by your bank for exceeding your overdraft limit), your phone will choose the best method of payment. Repayments will automatically be channelled to pay off the most expensive loans first. Penalty fees for inadvertent overdrafts will become things of the past.
These changes will give bank customers more clout, allowing people effortlessly to find the best deals, mainly at the expense of banks’ profits. Some of the biggest beneficiaries will be migrants, who have been failed by a banking system that charges them up to 20% of the sums they regularly send to support their families at home. People with bad credit scores will also surely no longer have to pay interest rates of 1,000% a year to payday lenders. But virtually all customers should gain.
This will undermine the old model of retail banking. Pricing will become more transparent. It will be harder to pretend that banking is free when in fact it relies on customers giving banks virtually interest-free loans in the form of deposits; harder to profit from the disorganisation of customers who slip into unauthorised overdrafts or roll over balances on high-interest credit cards while leaving cash in low-yielding savings accounts. Banks will probably have to accept lower margins on credit cards, personal loans and mortgages.
Yet there is a big opportunity for banks, too. They will cut costs by closing many of their branches. Banks will also tap into new sources of revenue by mining their enormous troves of customer data. A bank that knows what you have just bought or where you have booked a holiday will be able to offer real-time discounts on related products.
In terms of access, some worry that as banking moves further online, the old, the poor and the computer-illiterate will be excluded from the financial system. But the simple, low-cost mobile-banking systems that operate in countries such as Kenya, India or Brazil suggest otherwise.
edited from The Economist
