New regulation and technology begs the question what will the bank of the future be? Banking has changed radically over the last decade, and will surely change significantly over the next. A big change was the abolition of Glass-Steagall. But Dodd-Frank, for all its pages, leaves the industry largely intact - re-engineering rather than reformation.
This leaves it to technology to create significant change if any in the next ten years. Will tomorrow's banks be today's social networks?
We have a new economy - a virtual one growing at a rapid rate while the old one struggles to recover. New, multi-faceted business models define the new economy, powered by consumers in love with technology. Banks are responding by upgrading physical storefronts with virtual ones. ESignage, eSignature, eEverything is making a comeback.
Technology will continue to achieve more with less. Cloud computing will become pervasive and user interfaces intimate, interactive and inciting. All touch will be high touch. We will live in a world of continuous and connected services.
What will the implications be?
Banking will be a 24x7 business, redefined by mobility. Smartphones will be the branch of the future. Bank branches will be showcases for new technology, centers for innovation, advice and financial education. Banking will become more personalized.
Ever lower latency is pushing public capital markets towards higher standards of trading efficiency, but not necessarily of capital formation. Private equity will play a greater role in bringing new businesses to market and redesigning industry landscapes.
In the old economy, scale was vital to command markets and huge data centers. Change was incremental rather than disruptive. As markets shift more rapidly and data centers drift to the cloud, innovation will become business as usual. Products will ebb and flow faster, start-ups will become easier and competition will increase exponentially. Power is shifting from institutions to consumers thanks to regulation and technology.
Today banks think about risk in the traditional sense of counterparties, instruments, markets and operations, but in the future will be more concerned about the business risks embedded in their constantly shifting franchises.