For all the threats that new entrants to banking services may pose, there are equally huge opportunities for banks to take a significant share of the many millions of people joining the banked community every year
There is a widely used and often misunderstood phrase which says, “May you live in interesting times." I say misunderstood, because whilst purporting to be a blessing, it is in fact a curse. It is believed to originate from ancient China and was allegedly heaped on the enemy with the clear implication that ‘uninteresting times’ of peace and tranquillity are more life-enhancing than ‘interesting’ ones. But in today’s world, and in a literal business sense, these are truly interesting times—especially within the banking industry.
The quantum leaps in technology that have fuelled an explosion of innovation and disruption have also increasingly led to the disintermediation of the role of traditional banks and banking services. But for all the threats that new entrants to banking services may pose— be they fintech’s, telco’s, e-commerce giants or whoever, there are equally huge opportunities for banks to take a significant share of the many millions of people joining the banked community every year in emerging markets around the world.
Last year, insights from the World Bank’s Global Findex Database stated that 515 million people gained access to an account with a financial institution or mobile money provider between 2014 and 2017, and although 1.7 billion people remain unbanked globally, around two thirds have a mobile phone and 70 per cent plus are under the age of 30, so the opportunity could not be clearer.
The majority of these people may be at the very lowest point in the banking pyramid; simply storing and transferring a few dollars via mobile phones, but they represent a huge base of the youngest populations in the world, and it is this first stage of financial inclusion that will be the basis of growing and prosperous economies in these countries and regions for decades to come. The danger for banks is that other agile competitors are already making large gains in attracting new customers.
Back in the 90’s Bill Gates stated, “We need banking, but we do not need banks anymore.” That may have been a rather premature obituary for the banking industry, but the message was clear. Thankfully, trust is a fundamental part of every relationship and thanks to the new digital ecosystems, brands have greater global reach than ever, and brand reputations are being spread at an ever-increasing pace through communities by social media and word of mouth.
Fortunately, people still trust established brands all around the world—even in the remotest, poorest countries—and nowhere are people more concerned about trust than when it comes to their money. Banks have a considerable advantage in this regard over many newer companies, as their brands are well established and trusted in most instances, and those who are swift to understand the needs of this new generation of customers and provide affordable and effective solutions will surely fare well and prosper in the vast open spaces that these new opportunities represent.
Never has ‘carpe diem’ been more appropriate than in the context of the challenges and opportunities facing the global banking industry today. Seizing these opportunities is no easy task, but with visionary leadership, the willingness to change and adapt, and the means to invest in the future, there is no doubt that these opportunities are the banking industry’s to lose. It is very much all to play for.