Banking is a blend of analog and digital, courtesy of the level playing field

“We need banking. We do not need banks anymore.“ Bill Gates‘ statement in 1997 was prophetic. Whereas in 2000 financial institutions were the only ones to offer banking and insurance products, and they limited themselves to that, the situation in 2030 is completely different. The seeds for this were planted mainly in the early 2020s. This is when other players, such as those in fintech, entered the market; while at the same time, banks and insurance companies started to diversify their product and service offerings.

CEO, KBC

What is very important here is the level playing field that the government has provided to players in fintech, big tech, even the baker around the corner. At a certain point, anyone could offer financial services, without having to comply with the applicable regulations. Those regulatory gaps have since been closed, with the focus on consumer protection, particularly notable.

Today, the financial sector is primarily a blend of the analog and digital worlds. On the one hand you still have physical banks, the central bank and the euro, but on the other hand there is also an ecosystem that is digital and where the digital euro is central. The fact that the central bank released its own digital currency brought structure to the digital landscape.

Many have tried before; just think of Meta. But because the fully virtual and non-tangible world did not have that structure, these initiatives failed to take off or crashed.

Now, the CBDC, or digital currency of the European Central Bank, does represent a significant change in the global ecosystem of finance. After all, it allows central banks to address consumers directly for the first time. Banks used to be the obligatory middleman; that is not necessarily the case anymore.

However, this does not mean that financial institutions have been sidelined. Part of the traffic of the digital euro goes through the central bank, another part through the banks. And it is the financial institutions that still have the lead when it comes to loans and the like. More than that, they have the opportunity to issue their own blockchain-based currency, tied to the digital euro.

On that front, the launch of the Kate Coin by KBC, in the summer of 2022, was a nice taster. It was the KBC’s own digital currency, which, however, could only be used in a so-called “closed loop environment.” 

The digital euro has ensured that this type of currency could be widely used.

This does not mean that the advantage of a closed loop environment has disappeared in all cases. It still proves its usefulness with regard to subsidies, for example. We can hardly imagine that there was a time when companies received subsidies relating to, for example, social economy, but where there was no limit to what these subsidies could be used for.

Financial institutions that do not offer these kinds of applications have not necessarily disappeared, but they are invisible to the consumer. Your services are offered as a kind of white label by other partners in the financial chain. If you want to avoid that, you have to offer extra things. A multi business model is a conditio sine qua non for those who still want to be in direct contact with end customers.

It is useful to start from the focus of the customer, who wants to manage his financial processes as frictionless as possible. Whereas in 1980 a financial institution was very reactive, in the early 2020s it became important to use data to find out when someone was about to buy a house in order to offer the right products in advance. Today, that‘s not enough. Now you sell a product with the financing included.

Fortunately, in order to give financial institutions the opportunity to expand in this area, a level playing field has also been established in the area of data. This is where the successors to PSD2 played a major role. These directives gave big tech access to financial institutions’ data, but the opposite situation (i.e. financial institutions’ access to big tech data) was not the case. Fortunately, the successors to PSD2 have put a stop to that. 

However, this does not mean that we should not be careful with data. Consumers assume that you won’t damage their trust in that respect. So ensuring that no traces of data transactions remain is a minimum minimorum. Only if we can guarantee this do we remain a trusted partner and advisor.

This role as advisor has become increasingly important in recent years. Customers are no longer in contact with us via their cell phone, tablet or PC, but via our assistant. This assistant helps, based on trust and geared to the lifestyle of our customers.

In 2022, KBC assistant Kate sent a message to some 120,000 customers asking whether they had suffered any damage during a storm. They could report the damage via Kate in one to two minutes. After a month, just about all claims had been settled. Back then that was a feat, now it is the standard. And only for those who can offer this standard is there still room.