When Cosimo Medici founded the Medici Bank in 1397, little did he know that it would change the way commerce was conducted globally for centuries to come. For the next 550 years banking hardly changed at all. But when the Stanford Research Institute, under contract from Bank of America, built the first mainframe computer designed for bank bookkeeping and check processing, it was the start of a decade’s long transformation of banking and financial services around both core technology and customer practices.
In my recent book Bank 4.0, I showed how these changes are accelerating and how both digitization of industries at large, along with technology-first providers continuously attacking friction are leading to a transformation of the entire banking sector globally. Starting with the introduction of self-service and Internet Banking capabilities in the 1980s and 90s, through to the use of AI, Augmented Reality and voice technologies that we’re seeing the early stages of today. Figure 1 – Bank 1.0 to Bank 4.0 Transformation Drivers In 2014 I predicted that by 2025 branches in western economies would be around 70% of their pre-digital peak. That estimate seemed aggressive back in 2014, but today with the impact of the CoVID-19 virus, it looks increasingly likely. More important than that, by 2025 most people with a basic value store of digital money (like a mobile wallet or super app), will have never seen the inside of a bank branch. That’s because the next 2 billion people we bank won’t ever have visited one.
In 2005 if you lived in Kenya there was a 70 percent chance you didn’t have a bank account, nor could you store money safely and likely your savings were non-existent. Today, if you’re an adult living in Kenya there’s a 98 percent likelihood that you have used a mobile money account (stored in your phone SIM), and that you can transfer money instantly to any other adult in Kenya. Today, data shows that Kenyans trust their phone more than they trust cash in terms of safety and utility, with people sewing sim cards into their clothes or hiding them in their shoes so they can more safely carry their money with them. This is all possible because of a mobile money service called M-Pesa, created by the telecommunications operator Safaricom. Today at least 40 percent of Kenya’s GDP runs across the rails of their mobile money service called M-Pesa […]
