Headlines today!
What are some of things that Bank’s do now?
• Accept Deposits (and facilitating withdrawal of
these deposits)
• Issuing Loans (and ensuring that the loans are
collected with interest)
• Issuing and clearing Checks, Demand Drafts
• Facilitating Direct Debit/ ECS
• Issuing/ Discounting of Overdraft, Bill of
Exchange, Letter of Credit
• Invest in Bonds, Securities, etcetera
• Safe deposit lockers/ safe custody
• Merchant Banking and Underwriting
• Bancassurance
• Cards - Debit, Credit, FX, Gift, Special Purpose
Things: They are a changing…
• The way people bank is changing
• Retail sector has adopted digital channels at
the bleeding edge of technology
• Corporate sector has traditionally been a
laggard in adoption
• Legislation and rising costs of traditional
banking are forcing a rethink
• Very few banks have identified how to use the
huge data they are sitting on and how to leverage more
What/ who is changing the status quo?
• Fintech startups
• Legislative push towards digital channels
• AI – Machine Learning, Expert Systems, Natural
Language Processing
• Mobile devices, Internet-of-Things
So what is changing?
• Banking from/ to anywhere, anytime, anyhow
• Bank will increasingly move from stores-of-money
to stores-of-data
• Money is increasingly an digital/ virtual
• Countries (and surprise-surprise even Banks) do
not want to be handling paper or paper currencies due to the increased risk and
costs involved
• Decentralized data stores of digital accounts
controlled by a statutory authority will kick-in sooner than later with
transactions happening point-to-point eliminating middlemen
Many
banks are spending a lot of thought and implementing common platform for all
their offerings. They are embracing innovative digital channels. However, with extremely
quick innovation (read disruption) cycles will they be able to keep pace, be
nimble?
In 2017, we saw many countries and central banks mark crypto
currencies as non-legal tender. It is important to note that hardly anybody has
marked it as an illegal tender. The BIS and central banks worldwide are working
round-the-clock to identify how to get a proper framework to control crypto
currencies. Into the future, something like an XDR (Special Drawing Rights) currency,
will not be linked to a currency basket as, is being done today but to a common
world currency. The “problem” with this is will remove a lot of complexity in
the world market. Many intermediaries, many brokers, too many high-paying jobs are
at stake. Officially, it will not be easy to push this out through the World
Bank in turn through all then countries. However, with a parallel economy
cropping up and growing, by the 2040s’ at the latest, this is bound to come
into fruition.
- How will banks cope?
- Will banks be relevant and how?
- Will the behemoths of today remain?
Do wait for the next part in a couple of weeks.
Please leave your comments and let me know your thoughts.
