For almost the entirety of human civilization, we didn’t have banks — then along came the Italian Renaissance, and modern banking as we know it sprung into being. The future of this storied institution certainly has some benefits for the consumer as banks evolve and bring on new forms of technology, but it also has some significant drawbacks.
The Internet and the rise of the Digital Age has brought enormous benefit to our society, but just as new and amazing technologies have improved our lives, there have been many silent victims — those old technologies that got shuttled out the door in favor of the faster and more efficient. Banking isn’t going the way of the typewriter just yet, but it’s starting to look a lot like the fossil fuel industry — changes are coming, and while some will benefit the consumer, others will spell trouble for your future…
#1 Checks Are Out
Now this might come as a surprise to some of you…No, not the idea that paper checks are going to go the way of the dodo, but rather that anyone is even still using checks in the first place. In many parts of the world, paper checks have been declared all-but-dead for a long time (thanks to technologies like M-Pesa). In the U.S., they’ve mostly stuck around as an anachronism — something Grandma sends you on your birthday that sits in your desk until your next birthday — but there are still plenty of employers large and small who continue to rely on paper checks for payroll. Still, the times they are a-changin.’ Even though the decline of the check slowed a bit last year, the rise of technologies like Venmo and Google Wallet ensure that the lights are soon going out on the paper check.
One of the traditional roles of a bank was to provide a checking account — savings accounts are all but useless these days — but for most banks, the switch to debit cards will preserve that role… for now. As a consumer, you’ll notice a change as banks slowly stop offering paper check services and this foundational function of banking begins to fade into history.
#2 Smaller Banks and Credit Unions Are Out
Losing access to checks is a big “meh” for anyone under 50; the slow-but-sure disappearance of small banks and credit unions, however, is likely to have a huge impact on the average consumer. Here’s the problem — technology is disrupting banking for the worst. Only those who have access to and control over some of the innovations coming down the pipeline will be able to survive. That is to say, only the big players in the banking world. While some of that new tech benefits consumers (blockchain is a perfect example of this), much of it will simply serve to cut out the little guys and leave the banking industry a true industry of giants. Why is that bad for the consumer? Because banks aren’t just there to siphon fees from your money in exchange for some stupid paper checks and a debit card — they’re often where folks turn when it’s time to get a car or home loan (or any other type of loan for that matter).
Using a small lender has a lot of major advantages for the average consumer, and in some smaller and/or rural communities, the ties between these small institutions and the rest of the community mean more than you might think. Big banks have a bad history of leaving these communities to fail when smaller institutions would have been willing to invest in the community, if only they’d been around. This is one of those cases where more technology is not making things better for everyone.
#3 Everything Goes Digital
This is one of those changes that I just love — the biggest way that you’re going to see banks change in the coming years is the switch to digital. What does that mean? It means that banks big and small are going to make it much, much easier for you to move money around, both from a desktop computer and on mobile. Though many banks have mobile banking apps, many still lack major functionality — all that is poised to change, giving you more options, fewer fees, less hassle, and more convenience.
Going digital also means that mobile payment options are set to explode in a big way. Already par for the course in many parts of Africa, more and more countries are jumping on the mobile-pay bandwagon, and the sluggard U.S. is doing the same as well. Finally, you’re going to see the proliferation of digital-only banking institutions like Ally bank. With more and more people seeing less and less need to actually enter a physical branch to do their banking, the incredible investment necessary to purchase and maintain brick-and-mortar locations won’t make as much sense to banking institutions worldwide.
Change Is Coming, and It’s Not All to Your Benefit
The bottom line is this — banking today is surviving mostly on fees, and people like you and I are increasingly unwilling to put up with those fees. Now that technology is disrupting the traditional role of banks as money-holding and loan institutions and are removing the need for the traditional bank, banks are going to have to pursue change to reduce or eliminate fees. Much of the change is going to come in the form of consolidation. After all, those fees are often the only thing standing between the life of an institution and its complete dissolution.
Still, you may see community banking holding on for dear life in smaller communities, but even this is unlikely to last — there will come a day in the not-too-distant future where banking as a whole will be unrecognizable, where fees become a thing of the past, but so too will the ease and comfort of knowing your banker and feeling assured that they’ll be there to help you get a loan and move from one stage of life to the next. They might give you increasingly convenient options for managing your finances digitally, but that will come at a cost. Often, one of those costs will be customer service — fortunately, there are some intriguing CX trends coming down the pipeline in 2018.