The bank of the future

Thought Leadership 5 minutes to read
Kim Fournais

Founder and CEO

Summary:  To be truly competitive in this fast-moving world, banks need to put their customers first and re-think their IT strategies in order to address new competitive pressures from tech giants. This is why white-label technology partnerships make such sense.


The downfall of banks has been predicted several times throughout history. In the 1990s it was said that “banking is necessary, banks are not” and for banks these gloomy forecasts have gained renewed traction in recent years. Fintechs delivering a relevant and razor-sharp digital customer experience make banks look dusty and foot-dragging. At the same time, tech giants such as Apple, Tencent and Alibaba are moving rapidly into areas usually associated with more traditional financial institutions. 

Most banks are late to the digital party. That is obvious to everyone. Yet, despite the evident challenges, the rumours of the bank’s demise are greatly exaggerated. If banks have the courage to make the right decisions, they have a bright future ahead of them.

In our opinion, to be successful the bank of the future builds on a foundation of long-term win-win and putting clients at the very core of its operations. The future belongs to banks who acknowledge that the rising digital demand from clients is not met by simply expanding an ever-growing IT department. lncreased expectations for digital experiences from clients and the many opportunities that new technology provides call for an open business model with a sharp focus on the bank’s core strength – servicing clients.

Most banks have been accustomed to building their own systems to cover large parts of the value chain to meet the opportunities and challenges faced by digitalisation. That is why most banks today develop in essence the same technology and digital solutions. It is highly inefficient for everyone to do the same and a foolish race to participate in. Only one can be the best, so why not leverage the services offered from the best providers instead of developing them in-house?

This old model is clearly not sustainable long-term as studies have shown that roughly 80% of annual IT budgets at European banks are used solely to run and maintain legacy IT systems. This leaves few resources for real innovation and meeting the fierce competition from fintechs and the tech giants. 

From our point of view, the bank of the future does not develop much technology itself. The bank of the future helps its clients navigate through the increasingly complex world of apps and smart fintech solutions by handpicking the best solutions and packaging them effectively. By adhering to this platform or marketplace model, banks can build a low cost, flexible and state-of-the art client experience. The flexibility of having an open model makes it easy to add new services, without adding high costs and complexity.

For banks, their core competency is to service clients. However, the client focus is all too often shifted by an outdated IT infrastructure. In a time dominated by flexible technology and cloud solutions, it does not make sense that many banks still rely on old mainframes. 

When a bank switches to a more open model, it not only gets the benefit of more flexibility but also lower costs. The bank also creates a much stronger foundation for building long-term win-win. Operating as an open platform removes any incentives in promoting one’s own products and services, which many banks do today, and lays the foundation for truly putting the clients’ interests first which, in our view, is the clear precondition for long-term success. 

Those banks who dare to take the leap from developing technology in-house, to become truly open banks operating as marketplaces or platforms, have a bright future. Indeed, with the advent of cloud-based solutions, that future is not that far away.

In 2001, Saxo Bank signed our white-label partnership for a bank to use our technology to better service their customers, and we have argued for a long time that partnerships are the future of the financial sector. The development has not moved as quickly as I expected, but it is certainly accelerating. More banks are starting to understand that outdated IT infrastructure is the biggest obstacle and that they no longer have to develop their own technology. It is simply too expensive, especially with increasing regulatory requirements, and the world is moving too fast.

Banks have a strong opportunity to compete against fintechs and the big tech companies as they have the resources and large, loyal customer bases, but theses strong foundation can easily crack if they insist on building their own systems, products and solutions.

The winners will be those who focus on delivering an experience tailored to the needs of the individual client. This can only be achieved by collaborating with specialist partners, each of which can supply the sub-elements that together form a razor-sharp and unique client experience at the lowest possible cost, putting the clients’ interests first.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992