The Future of High Street Banks:

Most of us will be familiar with the ‘big four’ when it comes to banks. Their presence is marked on every high street: Barclays, Lloyds, Natwest and HSBC (the former Midland Bank). If in need of a loan, the manager of one of these four would probably be your first port of call. But, in recent times, the image of the ‘big four’ has been slipping. 

Beset by scandals, most prominently the PPI (Payment Protection Insurance) mis-selling affair, reputations have struggled to ever fully recover. And, when you consider that scandal alone is rumoured to have cost an eye-watering £50bn, it’s little wonder. Lloyds was reputed to be the biggest culprit at the time and ended up paying some £20bn in compensation. To put that into context, the market capitalisation of Manchester United football club, is approximately $2.5 (£1.77bn). So, the PPI compensation bill soared a staggering 28 times Man U’s value!!!

Yes, it’s fair to say that public faith in the banks has been teetering for some time now. But what has dramatically threatened the ‘old’ banks more recently is the continued rise in financial technology (aka ‘fintech’).

The Rise of the Challenger Banks

You may or may not have heard of the so-called ‘challenger banks.’ These include the likes of Monzo, Revolut, Starling and Metro, and are more commonly favoured by Millennials and Gen Z’s. Naturally enough, the younger generations represented by these terms have quickly adopted fintech. Undoubtedly, the use of apps for banking appeals to the ‘click of the button’ immediacy indigenous to their world. So, if this is the first you’ve heard of any of these new banks, you can expect to see them going mainstream shortly. Starling Bank has already started advertising its business accounts on TV. Surely it won’t be too long before the others follow suit.

Perhaps though the most compelling evidence is anecdotal. For example, how many people you talk to remember when they last went into a bank branch. And what does that mean for the future of banks in the not too distant future?

The Future of Banking

As banking moves ever increasingly online, there will be an inevitable decrease in physical branches. While that is not necessarily good news for town centres already struggling with store closures, there doesn’t seem to be an alternative. Physical buildings are costly to maintain – and their running even more so. 

Will this cause problems? To start with, inevitably, yes! While fintech may be the order of today, there are many generations who still rely heavily on cash. But, with Sweden paving the way for a cashless society by 2023, it seems inevitable that we will be moving further towards online banking in the future.

Fintech will almost continue its inevitable rise. We can fully expect more and more challenger banks to pop up. They will also, more than likely, increasingly define their target markets and specialise in them. 

And as for bank staff? Sadly, those in the physical stores are going to be needed less and less. Looking ahead, it seems inevitable that ‘bank managers’ of the future are more likely to zoom meet you online, on your phone or on your wrist, and making lending decisions based on artificial intelligence and machine learning. 

It’s amazing what fintech will mean for the future of banking. But, the good news is that it can only be rolled out at a pace comfortable to the needs of the populace. Extenuating circumstances will need factoring in, unique situations will need to be understood, and workarounds formulated. Only then will we all be in a position to welcome it. 

How Can We Help?

Did you know that a big part of the financial adviser role is coaching clients? If you would like to know more about online banking and what we offer to help keep track of your entire financial life in one secure place, do let us know! After all, we do have our own Lewis Brownlee app. It has even been designed specifically to give you more control and visibility of your finances in an easy-to-use and understand format. We would be delighted to give you a demo and to get you started in the world of online finance at a pace that is comfortable for you! 

Written by Ian Barnett

Ian is an experienced Chartered Financial Planner as well as being a Fellow of the Personal Finance Society, with over 25 years’ experience in the financial services industry.  With a broad range of client experience and expertise, Ian specialises in financial matters from Pre-Retirement Planning to Inheritance Tax Planning and all points in between.

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