A dark and disturbing fairy tale

Of course, banks are operational in 2030. Are these the same players as in 2022? Not at all, those who missed the digital train are long gone and forgotten. Some existing banks have made that revolution themselves; others have adopted the „buy and build“ strategy, while others have joined forces with competitors from completely different worlds, such as telecom companies or energy suppliers. At the same time, of course, there has been an influx from the technology sector, and we have gone through a wave of consolidations, resulting in fewer large banks. So yes, the banking landscape looks very different than it did ten years ago.

CEO SFPI-FPIM

This disruption has also ensured that banks are offering a much more combined product proposal. In their apps, you don‘t just do your banking, you also pay your cell phone and electricity bill to name just a few. Who plays first fiddle in this respect (the bank or the telecom operator?) is by no means a foregone conclusion. That battle is still raging. 

Because banks are entering into partnerships with completely different players, the value chain is also expanding. Whereas traditional banks saw the bulk of their income depend on interest rates, in the new world there is much more opportunity for cross-selling. Banking and insurance are a given, but now we also have banking, insurance and telecom, as well as banking, insurance and energy.

For the end user, there is good news: banking apps are much more fun to use than ever before. The user experience has improved by leaps and bounds. In your bank app, you are part of a community, you link your identity to your account, you use avatars and you chat with like-minded people; you would almost start using it for fun. These kinds of apps also reach a much larger audience than just young people and tech-savvy users. Older people use them too, if only to keep in touch with their children.

At the same time, the business model of banks is still very much based on classic banking services (although divisions like payments, investment banking and trading are being divested as much as possible or left to niche players). That is a requirement of the governments and the regulators, since compliance rules and capital requirements have also become increasingly stringent. Neobanks are being pushed to offer classic banking services, which they see as a hindrance much more than an advantage. 

As far as corporate finance is concerned, we see more and more sectors being excluded by banks, due to stricter ESG rules and increased KYC requirements. Fossil fuels, the diamond industry and even soccer, banks no longer want to (or can) deal with these industries, so they have moved to other parts of the world, where the rules are less strict. ESG also played a role in making some cryptocurrencies acceptable. There are digital currencies that are used as a regulated form of financing by all banks, but only because they are much less energy intensive than, say, Bitcoin.

But 2030 also has its dark sides. Belgium and Western Europe are going through many changes that are causing serious social tension: the digital divide, the gap between the haves and have-nots, the switch to a green society that will cost a lot of money, the affordability of pensions, just to name a few. 

One of the consequences is that there is still a state bank operating in our country in order to give access to basic banking services to every class of people. That bank will also receive an endowment from the government for that purpose. At the same time, by 2030 we also have had a new financial crisis on our hands (making that of 2008 pale in comparison) and there will be strong tensions within the Eurozone. At least one, and probably more, countries have followed the example of the British and gone their separate ways. Deglobalization is a reality, and we are moving towards a world that consists of smaller, geographical blocks that evolve at different speeds. For a small, open economy like Belgium, this is bad news. 

What doesn‘t help is the climate change we are going through. It is leaving heavy marks on the insurance market, for example. Insurance for farmers is becoming extremely expensive. Insurance for houses that could flood or are in areas with many forest fires: idem. These phenomena cause social disruption and make the “E “ in ESG increasingly difficult to reconcile with the “S”. In addition, bailouts (as in 2008) are almost impossible for governments. With the first financial crisis, the COVID-19 pandemic and the Ukraine war, the states have already made huge financial efforts; from which they still must recover.