“Within the next five years we will see new disruptive businesses come in who will use social media and eat the lunch of the big boy banks. How exactly that will happen I don’t know, but it will happen and you’ll have read it here first. (That’s what disruptive is, it’s unpredictable)”
Yesterday the BBC published an article titled “Start-ups challenge big banks' technology”
Doesn’t take much to work out that basically said article (in more technical detail than my own) agrees with me.
Private banks particularly are in deep, deep trouble. Management knows that they need to change their business model, but they are simply unable. If your whole career has been in the secret confines of a private bank, it simply isn’t in your DNA to come out and embrace the new.
There’s something you need to understand about traditional private banking, it is status quo above all else (no not that "Whatever you want" Status Quo).
Status quo is brilliant when things are… well… status quo. But look back at the past 10 years. We’ve gone from bubble boom to mega bust. With this turmoil we’ve seen a revolution in both how we communicate with each other (social media) and a legislative tsunami.
It’s not status quo my lovelies, it is utter fog of war stuff right now. So what has the traditional private banking sector decided to do? It’s decided on WW I style trench warfare when the opposition, the “fintech” industry is flying remote controlled drones up above. It can only end in one way: The defeat of the traditional private bank.
The only way to survive is to fight back, but how do you fight back when you were trained to use muskets and to the enemy you’re nothing but a target on a computer screen?
This means that risks must be taken, which also means that there’ll be winners and there’ll be losers, but at least there will still be an industry.
What needs to be done is :
- Legacy systems must be gotten rid of
- New technology needs to be put in place
- Employees need to be educated (ask your private banker how much education he received last year)
- New ways of communicating with clients must be adopted (Social Media)
Without a complete rehaul of the business model, the only competitive thing going for traditional private banks is the "cachet" and "reputation" of being a private banking client.
Tell me, how's the reputation of private banks and bankers doing at the moment?