Banks in search of the right scope and (perhaps) more lucid regulation

More than 20 years after the 2008 financial crisis, the banking sector is still in the midst of a transformation. More than ever, the players who can anticipate customer needs are winning, but those needs are increasingly evolving. Each new technology, each societal evolution and each fashion effect reshuffles the cards. In this changing environment, agility is the key.

For the large universal banks, the question of the scope of their activities and their offer to customers is more important than ever. The dilemma of maintaining universality in order to offer a complete service to customers and getting rid of activities that are not very or not at all profitable seems insoluble.

Ombudsman Ombudsfin

Especially because the old solutions, such as raising basic management fees or offsetting losses in one activity with profits in another, have reached their limits. Smaller, flexible and often fintech players are competing with them in the most lucrative niches. By the beginning of the decade, new operators had already entered the international payments segment.

One of the advantages of these small competitors is that they are not subject to some of the regulations imposed on universal banks due to their size and the multiplicity of their activities.

This regulatory competition has been causing the large banks to outsource more tasks for many years, while staying in control, which is sometimes quite tricky. Today, the question of maintaining the full scope of banking activities is bothering Belgium, and the regulators are worried that it will be impossible to control such a wide range of activities.

Therefore, now, more than ever, is the time to rationalize the different levels of power involved (ECB, Europe, countries, regions) and to rethink regulation by abandoning the procedural side and returning to the essence of the regulatory wave, which was to protect savers after the 2008 crisis and to put the spirit of the regulation above the letter.

Regulators must ensure that they provide a fair environment for all players and as uniform as possible at the European level. Cooperation must be encouraged to rationalize costs without unraveling the market structure.

In this respect, a recent step forward in Belgium is the creation of a national KYC (know your customer) data centre, copying (at last) what has been done in the Netherlands for a decade.

Furthermore, I am pleased to see that reason has prevailed in the area of ESG labeling/regulation. Faced with the threat of vast relocation (of activities and pollution) and the impossibility for industries to make a 180° turn, at the snap of their fingers, everyone, regulators included, has taken their responsibilities to accelerate and finance the transition while respecting companies and investors. 

In a world of perpetual technological revolution, proactivity is also more important than ever. For too long, the industry and the authorities have lagged behind in the face of the development of phishing, smishing, vishing, president‘s fraud, invoice fraud, etc. The loopholes, which the fraudsters exploited are known, but too little has been done to protect customers, especially putting more efficient fraud detection mechanisms in place.

Fortunately, now in 2030, that is history. The small step in the right direction in 2023 with the namecheck was followed by many others.

Banks have also become aware of the importance of the relationship with their customers. New technologies make life easier for everyone, but they do not entirely replace human contact, especially for more complicated situations. Call centers have been upgraded to offer real solutions and face-to-face discussions with specialists are still offered to cope with complex issues.

Moreover, it is no longer a question of getting rid of a customer with the bad habit of preferring cash, for example, without warning him and explaining “the new normal” to him. 

Between concrete vision and candor, this panorama of the banking sector in 2030 reflects, above all, my desire as an ombudsman of the financial sector to reposition the customer and pragmatism at the center of the issues.