Many people are too busy to make the most of their finances. Traditional banking doesn’t solve that problem and so we need a better model of banking for the twenty-first century.
Almost everyone faces the problem of working out how best to finance their life. Like funding a wedding, getting a car, buying a house, preparing for retirement. Goals may differ but the job of deciding which are important and how to progress them is common to us all. At the same time, most people don't really want to spend time thinking about their finances. Either because they are too busy or too uncertain about what to do. Traditional banks exploit that inertia and offer poor value and impersonal service.
The reason banks behave this way is structural. Most banks today have business models that are legacies of industrial revolution: nineteenth century joint-stock banks built large branch networks; twentieth century computerisation meant banks had to invest in big technology platforms. The result was costly infrastructure, highly centralised production and decentralised distribution, which makes it very difficult to offer customers good value or personalisation.
What has changed is that neither of these expensive assets are required to build a bank in the twenty-first century. Gone is the need for both physical branches and computer centres. Digital channels have made branches unnecessary with ever fewer customers using them to access their bank. The availability of cloud computing and software-as-a service has removed the need for banks to be constrained by their own infrastructure. What remains is a bank balance-sheet now largely free of physical assets and devoted to its specialist role of enabling saving and borrowing through risk and maturity transformation. A tech-enabled balance-sheet, able to directly connect with each customer.
It should be possible now to build a bank that solves for the customer inertia problem. Unfortunately, the first wave of neo-banks tried to break the inertia by focusing on current accounts, which most people don’t want to switch. Instead we need a model that enables the customer to focus on the things they are actually interested in doing, whilst their bank does the financial heavy lifting. Like a digital bank-manager in your pocket, that takes the effort out of managing your finances. With rewarding savings and borrowing options that are personalised to your needs. We need a bank designed for human behaviour, not trying to change or exploit it. A bank for busy people.
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