The year is 2029 and central banks around the world are beginning to issue digital money direct to the public. Rather than creating physical money that is distributed via retail banks, central banks are now letting the general public get their money directly from them. Retail banks have had their wings clipped and their business model forcibly changed in just a few years, with their main raison d’etre stolen from them.
Thankfully though, your bank isn’t feeling the pinch because you’ve prepared using our five steps below:
1) You’ve become better at dealing with tricky customers
While central banks are well-versed in issuing currency, they are less so in with dealing with the public. If every person in the country holds an account with them, central banks will need to quickly build the processes and systems to look after them. Commercial banks have a great advantage here. Despite not being famous for brilliant customer service, banks have at least got the structure to perform it in place. Thirty-six per cent of Europeans trust their banks, 34% of Europeans trust national governments, down by 2% from the previous year. The former number has far more potential to increase.
2) You’ve added extra services
While central banks take over customer accounts and issuing money, it is unlikely they will offer loans, mortgages and insurance. Even if society is happy for banking and Government to come together, having central Government dictate your insurance policies is likely to be a step too far. If retail banks can win trust here, customers may stay with them to open an account, too, particularly if they receive perks to do so.
3) You’ve gotten there first
Bitcoin may have kicked off the cryptocurrency space race in 2009, but just because central banks are getting in on the action, it doesn’t mean commercial banks can’t. JP Morgan has already introduced its own digital currency called JPM Coin. Currently its only open to institutional clients, but it’s not a stretch to imagine the currency could be seen as a worthwhile investment for the general public.
4) You’ve adapted to younger generations
App-only banks, such as Monzo, have seen great success by tapping into the mindset of young, aspirational and internationally-minded generations. Zero international transaction fees, small business loans and competitive student loans have made banking relevant to a generation that has, on the whole, felt disillusioned by savings and money in general. Like it or not, if you’re going to survive, you need to appeal to the generation that grew up against the backdrop of the biggest global recession since the Great Depression. It’ll take a lot more than positive PR but get this right and you’ll blow all other competition apart.
5) Central Bank Digital Currency (CBDC) is failing and you’re best placed to take over
There’s a high chance that CBDC will fail. Even if it is possible, the collusion of Government and banking may prove unsavoury for too many people. Perhaps certain lobbies get favoured rates, maybe some unfavourable companies whose CEOs revoke their party funding are left to fail, perhaps the membership of the opposition party are hit by a “banking hack”. CBDC feels like a Government scandal waiting to happen, but either way, digital currencies and wallets still present a massive opportunity for banks to bridge the customer service gap. Customers expect it, but they don’t currently expect who will offer it.
The way money is created and distributed is going through radical change, but retail banks still have time to show how relevant they can be. In general, banks have put customer service on a backburner. But if they can prioritise this more and be seen as relevant and more tech-savvy than the rising app-only competition, retail banks can still lead the market in this new world.