CFTE looks back at Ronit Ghose’s (Global Head of Banks Research – Citi) recent presentation titled Bank X: The New New Banks, where he answered questions from the audience about a wide range of topics. Click here to view the full presentation on BrightTalk.
Question: For a long time, we’ve had low interest rates, so banks aren’t making the money they’d like to. Is this holding them back from changing their technology platform and so they are just tinkering on the side?
Answer: That’s a very good question. We had a checklist in the report where we tried to identify what allowed banks in different countries or system to embrace digital or technological change. One of the key factors was budget. For the banks in regions like Australia, Singapore and the US, the tech budget has been going up with the typical number being about 15-25% of total costs.
From 2010, that number has been growing steadily. In Europe, that ratio has been going down. There’s a very short-term firefighting focus among many European banks currently. The tech can be bought if needed, but it’s prioritisation and incentive that’s the biggest challenge.
Q: Digital banks are innovating with technology, but their fundamental philosophy is the same. Do you see cryptocurrency and direct ownership of money disrupting banking before digital banks?
A: The challenge that banks have is trying to work out what the use case is right now for blockchain and cryptocurrency. Obviously, there are a lot of problems that could be solved. But for me, perhaps 99% of the population care that a bank is like an institution – if anything goes wrong, I will go to the regulator and complain. So, the crypto critique of the role of institutions in banking is a relatively marginal one in my humble opinion.
However, there are lots of parts of banking are very slow and archaic and there could be solutions. I’ve just not seen one that’s industrialised at scale. My favourite non-answer is that it’s like the Internet, but in 1992! I think the problem is that there was so much hype two to three years ago, and it’s almost created this sort of bubble that blockchain is great, but we haven’t gotten the proof and that scale of applications yet.
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