Business Models

“Understanding the Decline and Demise of the Banking Industry”

This term paper is written by Tessa Johnson, dated July 20th, 2027.  [Ed note:  2027 is now the official date for the future]

GonzoBanker – Article

This term paper outlines a historical review of the banking industry and examines the underlying causes behind the turbulent past 20 years that led up to the Financial and Wealth Services Industry Act of 2024. This act has essentially eliminated “banking” as a distinct industry in the United States.

Looking back at banking 20 years ago, it is clear that this industry became entrapped in “legacy” issues that resulted in slow action, poor risk decisions and ultimately massive consolation during a time of innovation and change in the our economy.

There were apparently three key root cause elements that got us here over the last 20 years since 2007  ….

  1. Root Cause #1: A difficult quarterly profit focus
  2. Root Cause #2: Widespread commoditization without strategic adjustments
  3. Root Cause #3: An inability to invest and innovate 
  4. Root Cause #4: A “hollowing out” of skills and knowledge

Relevance to Bankwatch:
The classic quote from this somewhat tongue in cheek piece (only slightly somewhat though) is the following, and if this makes you squirm, then go back and reread the Gonzo post veeeerrrry carefully.

Quotes from this period in business are somewhat comical as bankers
write that they aspire to be “best in class,” “high performance” and
“customer driven,” but none of the historical strategic plans seem to
include what any of these terms actually meant.

Finally, this statement sums up the future for me  [think dis-aggregated financial services; debit card provider separate from bank account, separate from mortgage balance, separate from mortgage rate risk, separate from P2P payments, separate from P2P loans, etc etc]  …

……….  highly collaborative FINANCIAL MATRIX that drives most financial services activity across the network of specialists. To think that one company attempted to control the entire financial supply chain is hard to grasp in our time.

Nice one Gonzo!

3 thoughts on ““Understanding the Decline and Demise of the Banking Industry””

  1. Thanks Colin, I hadn’t seen that.

    I love that so many FIs want to be customer-centric but only so far as the FIs benefit. If we truly wanted to be customer-centric, we’d widen our scope to include all the variety of options customers have in financial services and make sure we’re meeting customers’ needs.

    One theme that kept cropping up again and again at BarCampBank, and it fits perfectly here, “And that’s why Wesabe is so brilliant.”

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