Afterbanking: the era of renewed trust

Paul de Leusse, Chief Executive Officer of Orange Bank

Ten years ago, who could have predicted the shockwaves that are now shaking up the banking industry? Banking is an age-old institution. First appearing in the 12th century, banks now form the cornerstone of economic and social development in our societies. But now, all that is changing fast: traditional banks are facing threats across every link in their value chain – from checking accounts to payments, and from loans to savings. Each of us has experienced this new relationship to money. We see it every day with the emergence of new ways to manage our money and new practices, all driven by one imperative: restoring the customer’s control over their money, though this then leaves them in the uncomfortable situation of true “banking schizophrenia”.

Today, though we all need our banker, we can no longer place our full trust in their role. Is this the end of an era? I see it more as the start of a new one: the Afterbanking era, in which the pact of trust between the customer and their bank is undergoing a fundamental overhaul.

It all starts with trust

Trust is indeed the original pillar of banking. Very few human activities rely so heavily upon trust. An absolute condition for any economic exchange, trust plays a pivotal role in securing transactions, protecting money, advising and customer relations. Originally symbolized by a simple handshake, trust has grown in scale as banking has expanded and its services have become more sophisticated and complex. By its nature, this relationship implies a sense of reciprocity and a dual commitment: I trust my bank with my money; while the bank in turn trusts me to honor the repayment terms of the loan it granted to me. Intrinsically linked to the notion of risk, which is inseparable from the banking industry, this trust is complex: it is built, maintained, nourished and developed over time. Instilling trust takes years, but destroying it takes only an instant.

Trust under fire

In recent years – one cannot help but notice – this trust has deteriorated significantly: following the 2008 financial crisis, toxic products, massive hikes in banking fees, limited access to bank advisors for less affluent customers, capital guaranteed investments, mortgages in foreign currencies, etc. Although some actions can be explained at least in part as a response to unfavorable economic conditions, the image of banks has deteriorated as a result. All the more so since they appeared, at the same time, to become increasingly opaque in their operation, and therefore less and less trustworthy. Moreover, a fundamental shift in the management of the concept of risk has taken place: no longer assuming this risk themselves, even though this had hitherto been their role, banks began to pass this risk on to their customers. The very concept of “customer risk” did not previously exist in finance - the customer’s interest always had to come first. At the same time, banking players have become increasingly global and globalized, leading to the offshoring of many of their services and the fragmentation of their value chain.

What’s next? The story doesn’t end there. As this climate of distrust continued to take hold, new trends began to emerge. And with them, the foundations were laid for a reinvented and redefined banking model, that of Afterbanking.

Afterbanking, the era of renewed trust?

I am referring first of all to the shift in customer expectations. Not only are customers better informed, they are also more demanding. Because they are not only customers of a bank, but also consumers of Amazon, Airbnb and all these digital services that offer a more responsive, straightforward and transparent relationship. The new generations, for their part, are more concerned with the challenges facing the planet and are seeking more humane and egalitarian relationships. These new standards in customer relations are powerful drivers for proposing new services and consumption methods: more eco-responsible, easier to use, priced right, combining digital and human contact...

At the forefront of this movement, new technologies are facilitating the emergence of greater transparency and renewed trust, with the added benefit of instantaneous service. In this way, the web simplifies access to information and enables customers to play a more active role in their relationship to money, thereby desacralizing the role of the banker. We should also mention blockchain, which allows for forgery-proof and traceable systems capable of strengthening trust. Another example is crowdfunding, which has reinvented the practice of risk pooling. These innovations, together with many others, continue to go further in meeting customer needs and thereby helping to demystify banks.

No wonder, then, that a new form of competition has emerged and new entrants have joined the market. Spurred on by the potential of new technologies and capitalizing on customer frustration, “neobanks” and fintech start-ups now promise to usher in a new form of consumer banking.

Afterbanking thus marks the end of the era of classical banking. In any case, it points toward a more open and hybrid future for banking. A new world where money becomes a consumer product like any other, where physical and digital will merge and where traditional players will coexist with new entrants.

Afterbanking must be the era of renewed trust. It will create new kinds of handshakes, designed in a more digital and immediate way, based on a mature, even-handed relationship, thanks to a more personable, less hierarchical, more knowledgeable and independent form of communication. It will also bring about a new culture of responsibility - especially in data security. But I will speak to you about this in greater detail in the near future. Because the promises and challenges of Afterbanking are still far from exhausted...