Paving the way for the bank of the future

Fintech (pronounced as feen-tek) is the financial technology buzzword that is slowly becoming reality. Jack Ma, the founder of Alibaba, once said that while fintech aims to replace the financial systems all together, tech-fin is integrating components to the existing ecosystem.
However, the tech-fin definition never became mainstream, and fintech is still used as the only way to define a technology startup that has designed a solution to simplify banking or access to credit.
Banks and financial institutions fear cyber crime like never before. By 2021 it is predicted that the global industry of cybersecurity in finance will hit $6 trillion. Similarly, all the activities of KYC (Know Your Customer) and AML (Anti-Money Laundering), collectively labelled as Compliance, will eat up most of the profits of banks and financial institutions.
Recorded banking started approximately 4 thousand years ago, when the Assyrians and Babylonians recorded the first lending transactions towards farmers. Italy added structure to banking by introducing modern concepts of documented transactions in the 14th century Florence. Initially such organisations we operated as “mount of piety”, similarly to a pawnbroker charity.
Subsequently, Banca Monte dei Paschi di Siena was founded in its present form in 1624.
In 1891 American Express invented a concept that persisted until my teenage days, over a century later: the Traveler’s Cheque, a paper note that was accepted internationally and saved the hassle of currency exchange. It was in 1940 that the first form of credit cards appeared as “merchant cards”.
Cards begun becoming mainstream when Bank of New York introduced the first automated teller machine (ATM) in 1961. Soon after Barclays introduced their ATMs in 1967. In Singapore ATM appeared the ‘80s.
In the ‘90s there was the introduction of point of sale devices (POS) able to accept retail payments in stores, making the digital transactions become routine.
Banks began introducing additional services for customers, such as telephone banking. But one of the most interesting innovations of that time was the concept of debit card, a card that can spend only the amount that has been pre-loaded with.
In my opinion, debit cards spearheaded the concept that money could be stored elsewhere than a normal bank account. In fact, most of the modern mobile wallets are doing exactly what debit cards did nearly 30 years ago. Storing value in a portable way.
Internet banking started in the late ‘90s in those countries that were able to bring a stable Internet connection to all users. Other countries had to delay their Internet banking penetration by a decade or more. In some emerging countries it is still a struggle to provide a smooth and reliable service.
In 2001, there were 3 million Internet banking users in the USA, a country with about 280 million citizens back then. Most of them were “wired” through Bank of America. Just 5 years later, in 2006, 80 per cent of all the American banks had a digital service for their customers.
In 2010 a paradox happened: the Internet banking was growing at a faster pace than the Internet itself. The Internet, having boomed in the previous decade, was then catching breath and waiting for emerging markets to onboard. Whereas Internet banking did not mature quickly enough, hence rushing to catch up with numbers. At that point in time there were more users starting with Internet banking than people who were discovering the Internet for the first time.
Banks are now battling with the new challenge called API: application programming interfaces. APIs are sets of functions and procedures that allow the creation of software and applications aimed to access the features or data of an operating system, an application, or any other service. Banks have tonnes of data and through APIs they are able to give secured access to such data to any developer.
However, conservative approach to data management as well as scepticism towards fintech, held back many banks from embarking on this journey.
For instance, when I want to access my bank account balance in bank A, I need to use the website or mobile app of Bank A. When I want to access my bank account balance in bank B, I need to use the website or mobile app of Bank B. And so on. But meta wallets have already started appearing, where both balances are available for reading in a unified app which collects the relevant data from the APIs of both bank A and bank B.
While in the past, shopping and banking were 2 separate entities with a hard wall in between that we could only overcome by physically bridging through moving money from one place to another, the banks of the future will be part of the shopping experience.
Right through our favourite shopping portal we will be able to check our bank balance to see if we can afford the next purchase. The bank of the future will be with us everywhere we spend.