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Money20/20: reflections on day two – banking, part one

With more than 450 speakers across around 150 sessions, delivering more than 4,000 minutes of content, Money20/20 is an outsize event for an outsize city. Day two comprised sessions focusing on payments, commerce, security, and banking.

Kicking off the banking track, host Chris Skinner issued an impassioned plea for banks to adapt or die. He explained how a third of banking jobs will disappear over the next 20 years as a result of AI-driven automation, and how a high proportion of US banks are still running core systems that are so old the programmers who know how they work are starting to die of old age. He went on to urge banks to address the lack of diversity on their boards, citing the fact that 94% of senior decision-making personnel have no knowledge of technology.

This set the scene for the next session, Blockbuster Banking: When is the Netflix Moment? Panelists from a number of new entrants tackled the question of whether banks will be rendered obsolete by fintech challengers. There seemed to be agreement that banks and fintechs need each other, with the former offering scale, trust, and security and the latter dynamism and customer-centricity.

An interesting point raised was that with consumers no longer primarily choosing their bank on the basis of branch location, brand will become a far bigger driver of choice. However, banking being one of the least differentiated industries in this respect may leave incumbents vulnerable to attack.

For any provider, old or new, to succeed in the new environment, the panelists agreed that it needs to focus on trust, prioritize customer outcomes ahead of cross-selling, and listen to customers.

In a fact-filled presentation, Jeff Yabuki of Fiserv identified the four key trends that will drive change in banking. These are:

  • Digital experience: By 2020 there will be 50 billion connected devices in existence worldwide. This makes a digital engagement strategy essential, but with 60% of consumers still using branches, an omni-channel approach is needed.
  • War for payments: Non-cash payments in the US amount to $75tn per year, creating a market worth $400bn. By 2020, P2P payments alone will be worth $300bn.
  • Reimagining lending: How will loans be decisioned and what assets will be financed? Car ownership, for example, may decline, leading to reduced demand for motor finance. $600bn in interest income in the US is driving significant interest from alternative lenders.
  • Power of analytics: Data creation is growing exponentially, with 90% of all data in human existence generated in the last two years. Combining transactional data with machine learning will enable banks to improve customer engagement.

Every speaker agreed that banking is in the midst of a technology-driven revolution. But there were different opinions about how much the incumbents would ultimately be affected. While Skinner was insistent about the risks to banks’ very existence, others were more sanguine, and felt that banks will reach an accommodation with the challengers. For now, this will remain an open question.

By Daoud Fakhri, Prinicipal Retail Banking Analyst

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