A banking forecast revisited

By Brian Clegg

REVISIT SERIESAn updated post from July 2016

When I look back at old blog posts, it’s particularly interesting when the post in question happens to be about a prediction on what would have happened by 2026. (TL;DR – it hasn’t.)

As Bohr almost said, forecasting is difficult, especially about the future – in fact it’s pretty well always wrong. And never more so when we try to predict cataclysmic change. As I discussed in Dice World, the problem is that the systems we are usually trying to predict are so large and complex (and often mathematically chaotic) that we are almost always blindsided by major changes. So I raised an eyebrow when I saw an article claiming that within a decade, retail banks will be dead.

It’s certainly true, as the writer suggests, that bank branches are closing because we are doing more online banking, but I think there is far too much conservatism about retail banking to see such a massive change as the reaching the end of the familiar bank brands in ten years. Look how long after Europe was paying its bills with direct debits the USA was still tediously printing off cheques to pay bills. Not to mention the time it took for chip and pin to be available over there.

The author of the post envisages that ‘thе biggеѕt bаnkѕ in thе world in 2025 will bе technology companies’. It’s certainly true that they are edging into financial services through things like ApplePay – but they certainly haven’t become the main banks in their own right. And even if it comes true at a later date, it doesn’t mean that ‘retail banks will be dead’. Nor does it mean that ‘the biggest banks in your country will be technology companies’, as we still have huge country-to-country variation in retail banks. You don’t see many Lloyds and NatWest branches outside the UK, for instance.

Although bankers aren’t trusted, we still invest significant trust in familiar high street banking brands, plus brands like Virgin and the supermarkets which have a similar feeling of national acceptance. We are far less likely to trust Google or Apple directly with our money. Handling payment transactions is one thing. Handling our bank accounts, particularly current accounts and mortgages, is another.

I am not saying we won’t see a gradual shift away from today’s retail banks to a wider range of options. But I think the reports of retail banking’s (future) death were and still are greatly exaggerated.

Image from Unsplash by Chuck Eugene – I couldn’t find a Lloyds or Barclays, but HSBC will do

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Now Appearing is the blog of science writer Brian Clegg (www.brianclegg.net), author of Inflight Science, Before the Big Bang and The God Effect.