Banks Must Enter Businesses (Seemingly) Unrelated to Banking

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The startup scene offers a glimpse into what the future of banking services will look like (or at least a good chunk of it).

The bank of the future will be more personal and tailor-made. Banks today find themselves stuck with legacy technology systems for the simple reason that it's so cumbersome to switch from one provider to another. But banks cannot assume their customers will always suffer from such inertia.

New technology will make it so easy to change banks that I expect to see behavioral-based pricing of banking services, based on big data crunching and statistics. Customers whose behavior makes them more profitable and/or reliable will receive preferential pricing to keep them happy so they're less likely to defect. Personal financial management platforms like Fintonic, which competed in this year's Innotribe startup competition, would provide the perfect data set to put this new service model in place.

The bank of the future will be a hub for identity and security. If there is one service that a customer would be willing to pay for (and it does not really exist today) it is using your bank as a data locker of all your digital assets. MiiCard, another contestant in the startup competition, is a good example of an innovator in this field, but I could also name the most ambitious of the Innotribe projects, the Digital Asset Grid.

Aside from the question of which new banking services customers will be willing to pay for, we can make educated guesses about which services customers will not be willing to pay (or, at least, not as much as they pay today). Take foreign exchange for example. I can name two startups that participated in the Innotribe challenge dealing with cheap, secure, fast, reliable peer-to-peer forex trading: Kantox and Transferwise. They sign up customers at the speed of light. And these customers are not coming back to the banks.

To make the same statement for the lending side would be even easier. Apart from the Zopas of this world, there are startups innovating in the areas of crowd funding, P2P lending and – not so surprisingly – credit compensation. In this model, if Company A is a creditor of Company B and in debt to Company C, and B owes C or vice versa, each player only pays the net invoice, moving less money around and saving in transaction fees. Licuos,  the recent winner of the Innotribe Startup Disrupt contest in Madrid, specializes in such netting arrangements, and with a couple of large providers following, guess whose business could suffer if this idea scales.

Bank services in the future will adapt to the more entrepreneur-friendly world we are entering. Why more "entrepreneur-friendly"? Because the market is easily global, access to customers is not an issue, computing power is available on demand, and some non-traditional players have reached a scale (think Square) to disrupt fundamentally the models we are used to seeing.

To stay in the game, banks will therefore have to adapt not only their (traditional) offering, but get into markets that today are totally unrelated to them.

The "experts" laughed at CIC when the French bank began selling mobile phones and related plans a few years ago. It now has a significant portion of the market, and guess what? It also has one of the French market's highest ratios of customers who use mobile banking services.

Imagine an entrepreneur with an idea, and a bank delivering everything from the incorporation of the company to the bank account to credit and payment facilities. I would pay for it.

"Understand your potential customers before they become real ones" is the simplest, most innovative and rewarding thing a bank can do today.

Matteo Rizzi is a co-founder of Innotribe, a team that promotes innovation at the Society of Worldwide Interbank Financial Telecommunication. He previously cofounded, the largest portal for Italian expatriates. You can read his blog on and follow him on @matteorizzi.

Correction: An earlier version of this post identified The Currency Cloud as a peer-to-peer forex platform. It is actually an international payments platform.  

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