What is the future of banking?

The recent changes in banking are most obvious when we contrast the way the young tend to do their banking compared with the traditional method of banking. Mobile banking and online banking allow for a more flexible, simple service that saves time. Investing has also become extremely easy through online platforms: this is especially true after J. P. Morgan's announcement that they will offer 100 free stock or ETF trades to their 47 million customers. Contrast this with waiting in line at the bank.

This, however, doesn't mean that face-to-face service is dead. Many older people, who cannot use modern technology or do not trust their banking to mobile platforms, will remain a key segment for banks. This is something that is often forgotten in the face of the spectacular developments in fintech. Banks are at a dilemma. They can focus exclusively on client service, leaving fintech to the many ambitious young start-ups. Or they can implement both. But there is no option for banks to abandon client service for technological development.

By 2050 the number of people over 65 will exceed those under 5 for the first time in human history. These demographic changes give banks an opportunity to profit from better client service. The aging are not isolated from the economy: BofAML estimates that they account for 60% of consumer spending in the U.S. and 50% in the UK.

UniCredit, one of the largest European banks, has a special committee focusing on solutions for aging customers. As part of this strategy, the bank is training 2000 specialists for at-home visits to clients who have a trouble getting to the bank.

Goldman Sachs, Deutsche Bank and Morgan Stanley aim to attract wealthier retirees to their asset management business. Asset management will likely be one of the fastest growing sectors of the economy. In a research by HSBC, one out of eight resondents said that they do not believe they will have enough savings to retire. This is also likely to unlock the largest pool of savings in the economy: real estate. According to L&G, a British insurer, Britons have 1,3 trillion pounds of wealth locked in their homes. Through mortgages and lease-backs, pensioners can unlock these savings for their retirement.

Of course, in the sphere of financial technology small, flexible companies, who are not accountable to millions of clients and partners have an advantage. This does not mean, however, that banking is dying. An aging population gives banks the opportunity to dominate in the niche of better service for the client.

Sources: The Financial Times Limited, CNBC

Original post: CNBC

Image: pixabay.com

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