The innovation of online banking truly changed the way we handle money, but did the banks ever think this invention could fall out of their own hands? Everyday, I can check my bank account from the tips of my fingers, but things were not always like this. Fifty years ago, you would have to walk into a bank to do what you can now do simply on your phone. And this applies to a variety of services: you can deposit checks, make appointments, and even handle disputes over the phone.
Without a doubt, this technology has made the world much more efficient, but it has led to a few unintended consequences. The increase of banking technologies meant there was less need for in-person banking, and as result this hurt that aspect of their business. There is almost no communication between the depositor and the bank anymore since everything is done over the phone or at an ATM. For the average person, there is no need for a bank, just a lot of ATM’s and internet connection. Minus a regular checking account, the other services of a bank are becoming accessible elsewhere too. Not only do banks provide loans and compile information for companies, but Amazon is starting to do these things too. Who’s to say the frightful 5 cannot do what the banks are already doing now?
The key difference between banks and a company like Amazon is customer satisfaction. They have both evolved to offer similar interactive experiences on the web (lots of AI), but companies like Amazon, Google, and Facebook interact with their users much more, and offer a more pleasurable experience. As shown below, the disruptive improvements made by technology companies heavily influence the bank’s return on investments.
(Note: If digital disruption stays on pace, it is likely we could experience another depression by 2025 because the banks would perform so poorly it would affect many other businesses and their finances ran through the bank).
This screams nightmare for the banks. The bank is becoming small competition to these technology companies, and already they offer many of the same services in their bank-like accounts. Even I am considering an Amazon Prime Visa Card, prime benefits could be more applicable to me than the typical benefits of a credit card.
Going into the future, banks need to develop better relationships with their customers in order to compete. Likewise, many other companies must adapt and form databases of their customers in order to develop long-lasting relationships. The more digitally ahead a company is, the more likely they are to survive in the future. Now is the time to transform with the customers awaiting change.