Banking has seen two distinct life cycles in the last 50 years. Till the earlier part of the 20th-century bankers were staid individuals wearing pin-striped suits who rarely budged from the straight and narrow. The phrase ‘As safe as a bank’ was not just indicative of the cautious nature of bankers but also their orthodox way of thinking. It was all in a day’s work for them to turn away prospective clients if they did not fit into the narrow qualifying criteria. Then banking jumped over to the other extreme of canvassing crazily for business. It wasn’t uncommon to find senior bankers wait hours outside the office of a prospect, just to see if some new deposits could be collected. And now we are ready for the next wave of banking.
We are already starting to see a paradigm shift in how all banking solutions are being brought to the customer’s doorstep. Or to be precise, to the customer’s mobile phone. We are hurtling towards a new world of banking at breakneck speed. A world which doesn’t need bank branches, salesmen, or even call centers. The bank is with the customer 24×7, at his beck and call. The bank is not bound by any constraints of location or time. Let us examine a few examples of the disruptions that we have already begun to see in the banking and financial services industry (BFSI).
Just like one goes to Google Store to download a game to play, one can download the stock trading app Robinhood. You don’t pay any fees and you can use Robinhood to trade in stocks or funds or options. The days of applying for trading accounts is well and truly over.
Loans are the most popular ones out of all banking solutions. But banks have been known to sit on applications for ages and reject applications arbitrarily. Lending Club is a peer to peer loan marketplace that does away with the need for a bank. It matches the needs of borrowers who need money and investors who wish to make profits from interest earned on loans.
The Unified Payments Interface is a real-time payment system that does not rely on clearinghouses, cheques, and banks for transferring of payments. It uses a mobile platform to help transfer funds from one bank to the other. It was launched by NPCI (National Payments Corporation of India) and it facilitates digital payments in this digital world. Several companies like www.finacus.co.in are partners in this initiative.
This is an automated online investment advisor which seeks to replace the services of human investment managers by the use of algorithms and analytics. As long as the client can keep his account funded, Betterment would continue to fine tune the portfolio to meet the stated investment goals.
These were just four randomly chosen examples from around the world. But there are thousands of disruptive ideas just beginning to take shape out there, which promise to change the banking industry beyond recognition.