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Insights / Blog / Business

Dear Banks, it’s so over

February 09, 2016
Alain VeuveAlain VeuveManaging Director, AOE Switzerland

The discussions whether or not banks have a future are not letting up. For a long time I hesitated and didn’t want to commit to a position. But, the longer I observe developments in the financial technology (FinTech) industry, the more I reach the conclusion that the situation will become exceedingly difficult for the large, traditional banks.

Why should large banks have no future?

I see three reasons that finally convinced me:

1. The banks blew it

The problems that the financial sector has brought both the economy and society during the past few years are numerous. Scandals, declining service orientation and countless cases of mismanagement have left their mark on society. Banks, and with them (unfortunately and unjustifiably) their upright employees, have massively lost reputation. Credibility of banks has reached rock-bottom. The following tweet, for instance, gets to the heart of the matter:

2. The significance of money has fundamentally changed

I maintain that we will never again reach the interest rates of the 1970s. In my opinion the reason is that capital is available to a much greater extent. Today, whoever needs a loan will get one – and this literally regardless of purpose. Through the credit industry (aka the financial industry) property and possessions have been decoupled from one another; nearly everyone has access to and benefits from everything. Today’s debt-financed ownership structure would not be financially viable with the credit terms in place 40 years ago. Consequently, interest rates must go down. And money must be printed. Thus, the basic business model of traditional banks is slowly losing its foundation.

3. FinTech: Decoupling the Bank into banking services

The third argument, however, weighs the most – and it is this one that ultimately decided the issue for me: The introduction of more and more technology in the banking industry has led to a dissection of the typical banking business model. Was we can observe in the FinTech sector is that the various bank services are now being provided from companies that are independent of one another.

On occasion this must frustrate executives of large banks. Separate services are being formed left and right, and these are solving issues of sub-areas better than one’s own core business. What created synergies in the pass, namely the bundling of capital and administration is now being substituted through technology almost entirely. Today, no one would build a full-service retail bank to provide financial services.

This is a positive development for both society and, correspondingly, the economy. Just think back to the financial crisis, in which “system relevance” of banks was a big topic. A large bank is literally an economic risk for a society. Dividing the business departments into different independent players is therefore a step in the right direction.

Incipient stages of decoupling: FinTech startups

Need examples? You already know them: The following services are more cost efficient, quicker and easier to use than anything large banks have to offer.


With TransferWise foreign currency transactions can be handled, quickly, cheaply and easily. The concept is straightforward: TransferWise simply matches different inquiries and carries out the note payable. For instance, if one would like to convert 1,000 Euros into US-Dollars, TransferWise looks for someone else among its users who wants to carry out the reverse transaction. And executes the exchange (put extremely simplified).


LendingClub ist the market leader in the area of crowd lending. Quite a few similar services are available in Europe. The concept is simple: As a borrower you can enter the desired amount, investors (creditors) can sign for shares. This is easy and efficient and creates relatively high returns with relatively low interest rates for the borrowers.


Number26 is another well-known entity: Europe’s online transactional account. Opening an account is super easy, the support is good, there are no charges and a few weeks ago an overdraft features was also added. From a consumer’s perspective this is how transactional accounts need to be in 2016.


Robinhood enables trading of securities via app. Transactions are free-of-charge and the app is really well done. Unfortunately, right now Robinhood can only be used in the US; however, international distribution is currently being moved forward and we will be able to use Robinhood in Europe in the foreseeable future. And this is how they make money.


Swanest is an online broker that offers a portfolio evaluation for private persons. The tool is extremely easy to use and provides information about the compilation of the portfolio depending on risk aversion.

The list of FinTech startups is literally endless. Of course not all of them will make and of course a lot of this is still in its infancy. And yes, banks won’t be dead tomorrow. And there is still the issue of regulation. And, and, and.

But make no mistake about it – whatever benefits the customer in the long run and finds his favor will prevail. Banking will need this – banks the way we know them today will not. Sorry.