Date Archives → January 2010

Why Banks Are Becoming An Endangered Species

You may not know it’s happening, but we are witnessing the slow disappearance of the High Street bank, and with it the sound of rattling coins and rustling notes. In their place, in the evolution of financial processing, will be licensed Software Houses and the efficient, secure and invisible hum of electronic currency.

It is the most significant event since the Phoenicians switched from barter to gold a millennium ago, or the Italian money merchants of Lombardy opened the first bank (banco) in London’s Lombard Street in the seventeenth century. The transitions from barter to gold, and gold to bank notes, are equivalent to what we are now about to witness in the transition from notes to electronic currency. It surpasses the existing technologies of CHIPS, CHAPS and RTGS systems, themselves harbingers of today’s Internet savvy environment. It involves the total replacement of physical or hard currency with a new, virtual unit of exchange. The closest we will get to touching it is when it’s loaded onto our SmartCards, and the closest banks will get to processing it will be through newly formed alliances with technology partners.
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The Global Decline of Banks

Up until now customers have been enslaved to a traditional banking system that has changed little over time. Improvements made have done little more than automate clerical functions. In a regulated market, with a captive customer base, banks have maintained a conservative approach to change. Branch Clearing, and Inter Bank Settlement for example, have functionally remained the same. That is all about to change at a time when customers are beginning to complain over rising fees and charges, declining levels of service, inefficiency, and often an almost Luddite attitude by banks to threshold technology. For the customer it’s been a question of grin and bear it – there has been no escape – until now. The marketplace is now changing so rapidly that banks world wide have been unable to respond. In a deregulated environment they are being challenged by a plethora of new products and services, that offer more efficient, cheaper solutions to their customers financial needs. The need for legacy Clearing & Settlement systems is the latest service to be challenged. This new dawning of opportunity for customers, this Internet driven revolution, has started to challenge the domination of banks and will result in fundamental changes to the structure of the banking system.
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