Picture this scene: I'm in a meeting where we're trying to work out the future of banking. Not just next year, or the year after, but in 20 years from now. This is an exercise, by the way, which is valuable for everyone to undertake. No-one expects to get their predictions right, but it crystallises thinking about some of the issues right now.
Anyway, so I'm in this meeting, and I present, as a working hypothesis, the idea that banks may no longer have a significant economic role in 2029.
Surprisingly, it was a junior consultant working in the bank, a gen-Y-er, who said to me "Huh?. Banks have been around for hundreds of years. What's going to happen in the next 20 to kill them off?".
Notice that the immediate misinterpretation of my remarks was that banking would end. But what I actually said was "significant economic role". There is a difference, and I think it an important one.
The real question is whether banks will remain at the centre of the financial services value chain, or be forced to the periphery. In the latter case, they still exist, but have a less significant economic role. They become providers of niche and specialised services, services which are important, but don't have economically earth-shaking consequences.
It follows that something else would flow into the void left by the banks.
Now, as with all these exercises, you never know for sure what might happen in the future. But you can extrapolate from trends you see today.
For example, the increasing pace of change.
The rise of non-bank competitors.
The democratisation of the tools of banking production.
Generation-Create, and their penchant for turning the stuff we do into something we don't expect.
Consumer mistrust of banks.
Increasing banking system complexity and rising regulatory costs.
And many, many more.
If you think about these trends a bit, you can come up with some interesting scenarios. I like to typify them as a binary pair: the worst possible thing that can happen to banks, compared to the best. For example, the increasing pace of change might make it impossible for monolithic banks to keep up, so they persevere with products and services that no one wants until they wither and die. On the other hand, the increasing pace of change could be something banks take active steps to address, and they mobilise their huge resource advantages and leave their competitors in the dust.
You can do the same for all of these trends. Generation-create, for example, might mash-up its own bank using commonly available internet services on the one hand rendering banks obsolete. Or a bank might provide an API for its services on the other, and therefore become part of a mash-up itself. In the latter case, this would be a shift towards the periphery, rather than the centre of the financial services value chain.
When you do this kind of analysis systematically, you quickly get to some interesting clarity around the issues of today. And of the kinds of strategic decisions banks would need to make right now to position themselves where they want to be in 20 years. That's the point of the innovation process I describe in Futureproofing, by the way.
As far as I am concerned, I don't see the end of banking as we know it happening in the next 20 years, no matter how provocative I am with new consultants coming into the bank. But I do think the moves we all make now will determine whether banks are able to – or even want to – retain their economically central role in the future. My own view is that a move to the periphery is inevitable.
And as to what will fill the void that's left?