Is there a future for traditional banking?

If new applied sciences and the disaster made banks broaden their enterprise to the web and to using ATMs, with the pandemic this course of has accelerated,

Speaking in regards to the future is at all times unsure, however it’s attention-grabbing to consider the doable situations that await such an outdated and conservative service as banking.

The banks were created with a view to contact cash bidders and demanders and reply – as much as a restrict – because the final guarantors if any of the events didn’t comply.

With the web there was a fantastic transformation of banking, funds and, primarily, monetary markets. Operations have now been carried out in thousandths of a second, the quantity of operations elevated and gave strategy to monetary engineering and hypothesis. As well as, the Web has meant a discount in structural prices for banks, primarily for workplaces.

Challenges throughout the conventional enterprise

The disaster of 2008 made banks rethink their face-to-face service and in addition their internationalization technique. In truth, many of the foreign banks that had opened a market in Spain ended up leaving.

The nice recession additionally misplaced a fantastic worth carefully associated to banking: belief. Many voters, on account of detrimental experiences with their investments and appreciable losses of their financial savings, they stopped trusting their banks.

New applied sciences and the disaster have led banks to guess on increasing their on-line enterprise and using ATMs for a lot of of their operations. With the COVID-19 pandemic, this course of has accelerated and expanded much more. Examples of this are the closing of branches and the variety of EREs which are being carried out on this sector. And together with this, a course of already recognized within the sector in Spain has additionally been resumed: that of the bank mergers.

Spanish banking is the second most digitized on this planet after the Turkish

Fewer banks implies a smaller offer and one can converse of an oligopoly (a market with few suppliers), since about 70% of the Spanish market belongs to 4 banks.

The primary banking enterprise was to lend cash, nonetheless, we have now been with detrimental rates of interest for a few years (and there are nonetheless just a few extra). And though commissions are one other line of enterprise, banking laws and European laws don’t depart absolute freedom to set any value on them.

This example ends, ultimately, billing the earnings statements of the entities; An instance of this are the historical losses that Banco Santander not too long ago communicated. Thus, the enterprise is questioned and smaller banks find yourself merging. However the story doesn’t finish right here.

The challenges of the brand new century

The fintech they current themselves as a fantastic risk to conventional banking. The neo banks and the _challenger banks they unfold an increasing number of and their providers are extra aggressive than conventional banking, providing a contemporary product catalog and following a charge coverage low price, so wanted in occasions of disaster.

The challenger banks, Not like the neo banks, have a banking license and, as such, are coated by the deposit assure funds (FGD) of their respective international locations and are topic to the identical regulation as a standard financial institution.

Nonetheless, a few of the neo banks They function as digital cash entities (EDEs) and are duly approved, which permits them to supply digital technique of cost (playing cards), and to challenge digital cash to hold out cost operations with third events.

And as know-how at all times transforms all the pieces, the utmost transformation anticipated within the sector is given by a brand new know-how: that of blockchain. If the web introduced the primary technological revolution to banking, the blockchain It appears to be will deliver the second. Just like the web, this know-how is not going to solely have an effect on the monetary system, but in addition all financial and monetary transactions, in addition to the best way it capabilities and operates at totally different ranges.

The primary function of blockchain will likely be to ensure that bidders and candidates adjust to their preliminary settlement. If the primary position of the financial institution has been to ensure compliance with a monetary contract, what is going to its new position be whether it is displaced by the know-how of the financial institution? blockchain, at a a lot decrease price and with out the chance of chapter?

Is one other future doable?

The way forward for standard banking is very threatened by a enterprise mannequin that has been too targeted on monetary merchandise and never on the wants of its clients.

Added to this can be a key issue: safety. Cyber ​​assaults are the order of the day and buyer belief has been extremely compromised.

Lastly, there may be know-how, which assaults on two sides: the fintech and the blockchain. The combination of those variables can lead to a mannequin of economic entities removed from what we all know now. The pandemic has solely accelerated modifications that have been already coming in a world the place progress inevitably passes by way of profound change and transformation of all the pieces.The Conversation

Elisabet Ruiz Dotras, Professor in finance, UOC – Open University of Catalonia

This text was initially printed on The Conversation. learn the original.