The keys to fighting fraud?

September 8, 2016
/   Insights

We're constantly being warned that fraud is one of the biggest threats facing the banking industry, but the true scale of this was revealed by a recent survey that suggests it could make up...

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Making Banking Fun: Gamification in Financial Services

August 5, 2013
/   Insights

Recently, the team sat in on American Banker’s webinar, “Gamification in Financial Services: Five Proven Ways to Get an Edge,” which shared how leading brands in financial services have applied gamification to reach...

Technology M&As: The Beats Go On

May 29, 2014
/   Insights

The ongoing fascination with Apple’s $3 billion purchase of Beats Electronics is entirely understandable, because it’s a cool story. However, it also says a lot about what’s going on between finance and tech.

What We’re Reading

May 5, 2011
/   Spotlight

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below. Virtual Banking Worlds Provide Tangible Lessons American...

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

What We’re Reading: Thanksgiving Edition

November 22, 2012
/   Spotlight

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom. Mobile Thursday? Plans for Thanksgiving...

“What does the bank of the future really look like when it is sitting on a legacy system?”

That question made perfect sense back in the mid-’90s, when the Internet was brand new. Everything seemed like legacy back then. But now? Yet the question is still being asked, in a perfectly valid context, in a recent article in American Banker that evaluates just how much disruption there really has been in the industry.

There’s no question that this is a vital issue. Technologies are now adopted by consumers at rates that defy the ability of many infrastructures to keep up. Nor is the genie going back in the bottle: New platforms will continue to be replaced by newer platforms, just as the number of apps—both the Apple and Android stores have over 1.5 million already—will keep going up.

In fact, there may be even more changes in the (near) future than there have been in the (recent) past. If mobile banking came a shock, think what effect the Internet of Things might have. Sure, it’s hard to even contemplate what purpose additional entry points will have—don’t we already have all the devices and software we could possibly need to manage our finances? But that’s exactly what was said about every previous wave of change, and see how those turned out.

But as we’ve examined on this blog numerous times before, ‘change’ in the abstract comes a little easier than it does in real life, particularly in our line of work. Financial services institutions build their reputation by offering stability, and disruption—however appealing that might seem to technology startups—flies in the face of that age-old philosophy. Indeed, research indicates that customers are more sensitive when it comes to money matters. A glitch that would be shrugged off in other tech-enabled fields might undermine trust and comfort with the bank.

Which brings us back to the original question: How do you balance the need to create a futuristic institution while maintaining the legacy, and all that it entails?

Banks of all sizes have been long sought ways to move forward without upsetting the norm—they want to derive the benefits of, say, emerging API capabilities or multi-channel marketing and transaction. But as the pace of change outside the institution continues to accelerate, the pressure on the infrastructure keeps increasing, and the status quo is simply not sustainable.

One obvious consequence is that whatever banks of the future look like, there will be fewer of them. The financial crisis of 2008 put the brakes on mergers and acquisitions for a while, but there are signs that change is in the air. We might see a domino effect: Smaller competitors get gobbled up by those in the mid-size market, which in turn then have the capacity to take on their larger rivals, unless they in turn get acquired themselves.

But there’s another option that the American Banker article and other sources consider: ‘parallel’ banks.

Not to be confused with shadow banking, in this scenario banks create an alternate facility that enables them to move customers over gradually. The newer variety would presumably have the newest infrastructure from the ground up, and do business primarily with the generation of consumers that never steps foot in a branch. It could be completely free of the legacy and absorb every kind of emerging technology.

It’s an interesting concept that’s likely a long way from reality. Most institutions simply don’t have the resources to create an entirely new entity—even the most profitable keep their focus on existing operations. Besides, in this environment, how long will it be before the new version reaches legacy status? Five years? Three? One?

Justifiable skepticism aside, it’s reasonable to believe that the bank of the future will be as different from the bank of today as the car of today is from the gas-guzzlers of the ’70s. But what will it look like? Will it be mostly virtual, with tellers connected via video pods or holograms? Will all currency be digital? Will financial advice be based entirely on algorithms?

Speculation welcome.


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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Brad Strothkamp