On March 19th Paolo Spadafora, CEO of Epiphany, joined the BIAN Open Table on the future of Banks “The Bank is Dead, long live Banking”. The Banking Industry Architecture Network (BIAN) is an organization created to establish, promote and provide a common framework for banking interoperability issues.
One of the questions he was asked was “What do you think about the future of banks?”
Here is the vision he shared on the future of banking at the BIAN Open Table.
“I have a radical vision of how banks will become in 2025. At any rate, before sharing my vision on the future of banks, let me introduce some concepts to better understand the current state of play.
We have seen a few successful examples of what they call today the sharing economy. Technology is an enabler for the sharing economy, that is characterized by an unprecedented plethora of experiences for the end users. Embedded transactions let us have an easier access to all these experiences. The sharing economy has driven a shift from possess to access, making it easier to have as many experiences as users want without buying any goods. And this of course means more transactions. And by transactions, I mean not only payments but also lending, loans, money transfer, investments and so on. Think of Amazon Go: you just walk out from the stores without lining up for the payment. What an experience!!! And with 5G and the rise of IoT any device will be able to make transactions.
As speed and availability of real-time transactions make life easier for the end users, on the flip side complexity will grow because of regulations needed to make sure all these transactions will happen safely. And while traditional banks may be slowed down in managing such complex processes because of existing and forthcoming regulations, third party providers (TPPs) and fintechs are responsive, agile and fast. They will manage the last mile, the end user interaction, and we can already see today a disruption in the banking sector, we see new “digital only” banks keep growing, new mobile payments apps become popular at the speed of light.
How do I see the future of banking? Simple! By 2025 banks must change their business model and act like wholesalers, they need to become “financial service providers”. Fintechs and TPPs are the new players which will manage the last mile, the interaction with end users in both digital and traditional channels. TPPs and Fintechs are specialized in managing what at Epiphany we call the Human Experience. New type of branches shall be created, acting like those agencies of the insurance sector. Agencies will be specialized by verticals and they will act like industry-specific financial consultants, with experts who will run their due diligence to understand their clients’ potential and help businesses – and people – access the product or service they need. In the digital channel this vertical specialization is already happening. And it is working! Some banks may have concerns about disintermediation or loss of branding but I don’t envision any of this. As an example, let’s think about Microsoft: they provide products and services, but those are delivered by partners. Still, everyone knows Microsoft.
To support the constant growing number of real-time transactions and to be prepared to embrace new business models, banks must modernize their infrastructures and adopt forward-looking modern platforms. This is the reason why Epiphany is a member of BIAN and why we use BIAN standards as building blocks for our digital banking platform: to achieve the goal of modernizing existing platforms.
Last but not least, there is something else we need to consider: end users’ engagement. And this is another thing fintechs and TPPs are good at, because they build products and services around customers. We need banks to improve customer engagement and trust.
At Epiphany we are working on an innovative project that leverages AI and puts humans at the center to improve existing processes and meet customers expectation.”
Good times are coming and we all need to collaborate and participate in the creation of this new ecosystem, user friendly, secure, responsive.