Why banking needs a financial time machine

Many people wish they had a better sense of their financial future. Worried they'll find out too late they're less financially comfortable than they had hoped.

What if, instead, they had access to a time machine? A technology that could help them see into their future and, if needed, go back and make changes in the present. This is our vision for the future of banking.

Almost everyone faces the same problem of working out how best to manage their money to live their best lives. Whether they can afford the lifestyle or retirement they'd dreamt of.

In a survey of aspiring affluent consumers in the UK, we found that 90% worried they were not getting the most out of their finances, and 72% needed clarification about what changes to make.

Traditional banking doesn't solve this. Only the very wealthiest people are offered financial planning. Everybody else gets low savings rates and high borrowing costs. The result is a significant financial value and advice gap.

TECHNOLOGICAL EVOLUTION IN BANKING

The reason banks behave this way is structural. Most banks today have business models that are legacies of the industrial revolution: nineteenth-century joint-stock banks built large branch networks; twentieth-century computerisation meant banks had to invest in big technology platforms.

The result is costly infrastructure and one-size-fits-all services, which make it very difficult to offer customers good value or personalisation.

Neither of these expensive assets is required to build a bank in the twenty-first century. Digital channels have made branches less necessary, and cloud computing has removed the need for banks to own computer centres.

What remains is a bank balance sheet now largely free of physical assets. And the opportunity to apply new technology to solve the real-world problems of managing your finances.

A GUARDIAN OF FINANCIAL WELLBEING

What banking needs now is a different business. Not just a better or cheaper version of the old banking model. In the twenty-first century, new technologies allow us to imagine a new enlightened role for banks. As more than just a balance sheet, but a guardian of customers' financial wellbeing that takes the effort out of managing finances.

It needs banking that can predict customers' futures and provide them with the levers necessary to change it.

Yesterday's banks showed customers their current financial statement, so they could see what they could afford right now. Tomorrow's bank will predict their financial position 10, 20 or even 30 years into the future, showing what life they can afford then and help them get there.

The ability to combine new capabilities, such as open finance, AI and goals-driven planning to help customers reach a better financial future. These three capabilities, which have seen only limited use in financial services to date, are crucial to unlocking a new model of ongoing holistic financial management. We see this as a remaking of what it means to be a bank.