New Banking For A New World


The way we look at banking needs to change dramatically, writes futurist Nils Elmark, who will be speaking at Salt’s Disrupting Finance event in September.

We need to see the fintech revolution – not as an innovation of the established banking industry – but as a completely new approach free of banking traditions to solve the global challenges of the 21st century. To do so we need to change the way we all talk about banking.

The financial industry is shrinking.

More than a million jobs have been lost since 2008 and the downsizing isn’t slowing down: HSBC just reported they are going to cut 50,000 jobs over the next two years and Barclays too are planning to automate a further 30,000 jobs away. At the same time, more and more people and businesses are being excluded from traditional banking services; in particular, small and micro-small businesses find it hard to get loans and funding.

All the established banks are digitising, cost-cutting and consolidating to keep their share of profit in the existing market. They are still making money for themselves but I doubt they will be able to continue; traditional banking is an obsolete business construct based on 20th century technology solving 20th century problems.

Traditional banks will eventually go to where you already find typewriters, cassette recorders and Kodak films.

What we need is a flashing new banking model – I’m not even sure we can call it banking anymore – based on 21st century technology solving 21st century problems. We need redesigned banks that have time on their side.

The challenge is that we are in the middle of a global paradigm shift.

We are looking at a new world in the making. What banks have learned over past centuries isn’t of much use now; they don’t know what the future will bring and they don’t know how they must react to it. Consequently, banks cut costs to protect their $5 trillion market capitalisation – and wait.

What is holding bankers back from re-imagining their self-perception is an almost 400-year-old banking narrative. Since the Merchant of Venice bankers, customers and politicians have talked about their practice and created a mutual understanding of what banking means. This narrative creates and maintains the identity of banking; it helps us to understand what we can expect of banks and it gives bankers a direction into the future.

Bankers have brought banking as far as it is possible within the framework of the present narrative.

They have created banking as they said they would and most of us have supported the narrative. It’s a bit like the EU; we have had an ambitious European narrative for half a century and Europe – as the financial services industry – has reached the final act of the play. Everything we have talked about has been achieved.

Now we need a new narrative to guide us into the future.

For the moment, the banking discussion is about transactions. It’s about how banking operations can be done cheaper and faster in the existing marketplace. Yes, we may now use our debit cards instead of Oyster cards and soon we may even use our mobiles. But isn’t this just part of the old banking narrative? We are talking about shaving a few seconds or pennies off known transactions in known markets. The financial services industry is not doing anything fundamentally new in a world that demands radical progress.

The new narrative should be full of exciting stories about how banking can create new jobs for millions of unemployed people; how banking can support billions of people who are excluded from the modern online society, or how banking can provide investments in new technologies that address the entire scope of the challenges facing the 21st century.

How do you change the future?

By changing the agenda.

When Modi became prime minister of India a year ago he started a new banking narrative. He talked about how India should include all unbanked citizens in its banking system. Now 12 months later, more than 100 million new bank accounts have allegedly been opened.

The world moves in the direction we talk.

We have to stop preparing for the future and start creating it. Luckily, a new narrative has begun: Over the last 4-5 years, we have started to talk about new ideas such as crowdfunding, peer-to-peer lending and mobile payments, and they age gaining influence. We see new disruptive startups that put these new ideas into practice and challenge the established banks.

In other words, we have two competing banking narratives. But the sooner we create one strong compelling storyline full of ambition, excitement and new direction the sooner we will see real progress.

Businesses grow when they solve people’s needs and create new markets.

We need the established banking system and the new fintech generation to collaborate on that and bring the financial infrastructure in sync with the endless opportunities of the 21st century.

Join Salt’s expert panel for the Disrupting Finance event on 16 September. Click here for more details.

Nils Elmark is consulting futurist and founder of Incepcion, a consultancy that helps companies create better and braver dreams.