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“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.

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

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.