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What is the future of banking? Winners and losers in the massive banking shakeout? Greatest risk for any bank over the next 10 years will be Institutional Blindness. Banking Agility: world can change faster than a bank can hold a board meeting. Trust is main thing that any bank has to offer. Reputational risk. Futurist banking keynote speaker – Patrick Dixon – Wolters Kluwer banking trends event.
Retail Banking Speed: Google data proves that 70% of smartphone users press the back button on any page that loads in longer than 3 seconds. And a 5 second wait can lose up to 90% of all customers. 42% of Millennials would transact more payments online if the process was easier and faster. Mobile payments will boom but physical money will also grow. In most nations of the world, the amount of physical cash in circulation will continue to grow for the next decade and beyond.
In the UK, e-commerce accounts for over 12% of all retail spending, compared to Germany where it is less than 5%. Two similar European nations in size and use of smartphones. The difference is partly because people in the UK are more relaxed about online fraud, identity theft.
Banks will need to partner with Telcos. Telcos know where the customer is, and can guess what they are thinking about, but often have no insight into how they are using their money. GDPR privacy legislation in the EU will mean that much of this will require explicit formal consent by customers.
Billions are being spent on Big Data projects by banks, but most of it has been wasted, just as I predicted over 5 years ago.
Mobile payments will be driven by emerging markets. A billion adults will migrate from rural areas to towns, and from towns to cities, over the next 30 years, to earn money and find their future.
As a direct result, remittances will boom as such migrants send even more money home – cross-border remittances represent more than 10% of the entire economies of over 30 nations.
Expect 3 billion people to be banking on mobile devices by 2021, as huge numbers of people make the transition from phone remittances / payments to opening proper bank accounts.
In a single step, the Indian government banned the use of 80% of all bank notes. At the same time, the government rolled out the world’s largest biometric-based payment system, with over 850 million biometric profiles registered by early 2019.
Banks will invest heavily in One Customer initiatives. Customers want to have easy, fast, simple conversations with ONE person about their banking needs.
More bank Legacy IT systems will be abandoned. 97 out of 100 of the world’s largest banks are using Cobol systems which run on old IBM servers, technologies which are decades old.
Expect more banks to expand their presence in the Cloud – despite worries. Cloud-based banking services are now consuming 11-20% of typical bank budgets, but Cloud use will continue to be limited to less sensitive services in many large banks.
Open Banking will be required by regulators. Expect many more Robot Advisors.
More nations will tighten up laws on transparency about commissions and charges for financial products.
More bank mergers. Our world is too small to justify more than two global airline manufacturers, two mobile phone operating systems….Yet the same world has over 25,000 different banks and credit unions.
Here are several examples of the need for scale:
1. Bank Regulation and Compliance
2. Capital adequacy
4. Smart customers
Expect massive global FinTech battles for supremacy.
Rapid growth of new bank entrants
Despite all the challenges of being a full service bank, expect many new entrants into retail banking in particular.
Expect massive investment by banks in cybersecurity over the next 25 years.
Up to 43% of all US e-commerce payments are fraud in peak months. The US alone is being hit by over $20bn a year of online fraud. 8% of online merchant revenues are fraud in America according to a Vesta / Javelin report, while up to 43% of US e-commerce orders are fraud in peak months (Lexis Nexus survey).
17m people across the United States are victims each year of identity theft, with 66% growth of account takeoever in a single year. Your own identity is probably for sale.It doesn’t help that so many passwords are weak.
Bitcoin will disappoint many banking investors
Visa processes 24,000 transactions a second, but the Bitcoin system struggles at present to complete more than 7. Yet this tiny level of activity is burning up the same amount of energy as the entire nation of Austria, producing the same carbon emissions as Denmark.
Blockchain is a permanent global digital ledger used by Bitcoin and many banks have invested heavily, hoping for an ultra-secure way to exchange documents. But despite $1.7bn invested, by the end of 2019 we had yet to see a single impactful innovation in any bank.