‘Manufacturing’ vs distribution: where is digital banking going?

The role that banks will play in the future remains uncertain. The core activities of creating, moving, and transforming money are critical to the modern economy, and make up the “manufacturing” side of the banking business. The separate competitive demands of manufacturing and distribution will drive a separation of these activities within individual banks. Duncan Knowles writes that the future of banks will lie primarily in manufacturing, while the distribution side will be overtaken by smaller, nimbler competitors.

 
Bank customers have grown accustomed to being able to access services on demand, through their mobile phones, with largely frictionless experiences. These expectations translate across industries, with frustrations mounting whenever a legacy process requires a form to be filled, a signature to be provided, a conversation to take place, or a physical meeting to happen.

New entrants have identified pain points in customer experiences, such as account opening and transaction authorisation, and have developed simpler, more intuitive approaches to ease these. In response, incumbent banks have invested heavily in improved mobile banking apps, both for individual customers, and for the employees of corporate customers.

However, digital disruption in commercial banking is still at the stage of digitising traditional products, services and experiences. Just as early digitisation of music saw digital stores on which albums or single tracks could be purchased, digital banking now offers digitised versions of current accounts, credit cards, payments and personal loans. However, truly digital banking has yet to evolve; the analogy of the streaming services that have largely taken over music distribution.

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Πηγή: blogs.lse.ac.uk