{"id":32158,"date":"2016-11-14T16:45:06","date_gmt":"2016-11-14T21:45:06","guid":{"rendered":"https:\/\/globalriskinstitute.org\/?post_type=publication&#038;p=32158"},"modified":"2022-11-09T16:51:46","modified_gmt":"2022-11-09T21:51:46","slug":"digital-banking-manifesto-the-end-of-banks","status":"publish","type":"publication","link":"https:\/\/globalriskinstitute.org\/publication\/digital-banking-manifesto-the-end-of-banks\/","title":{"rendered":"Digital Banking Manifesto: The End of Banks?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"32158\" class=\"elementor elementor-32158\" data-elementor-post-type=\"publication\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-3f3f803c elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"3f3f803c\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-731266b0\" data-id=\"731266b0\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-d87e059 elementor-widget elementor-widget-heading\" data-id=\"d87e059\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.21.0 - 25-04-2024 *\/\n.elementor-heading-title{padding:0;margin:0;line-height:1}.elementor-widget-heading .elementor-heading-title[class*=elementor-size-]>a{color:inherit;font-size:inherit;line-height:inherit}.elementor-widget-heading .elementor-heading-title.elementor-size-small{font-size:15px}.elementor-widget-heading .elementor-heading-title.elementor-size-medium{font-size:19px}.elementor-widget-heading .elementor-heading-title.elementor-size-large{font-size:29px}.elementor-widget-heading .elementor-heading-title.elementor-size-xl{font-size:39px}.elementor-widget-heading .elementor-heading-title.elementor-size-xxl{font-size:59px}<\/style><h2 class=\"elementor-heading-title elementor-size-default\">Introduction<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-23ef60c6 elementor-widget elementor-widget-text-editor\" data-id=\"23ef60c6\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.21.0 - 25-04-2024 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<blockquote><p>We are entering a new era of innovation that will reshape consumers\u2019 relationships with their banks. In order to understand how banking will evolve in the digital age, it is important to understand its basic premise. While reasonable people can disagree about nuances, at heart, the art of banking is one of skillful record keeping in the double-entry general ledger. At micro level, banks can be thought of as dividend producing machines seeking deposits and issuing loans. At macro level, they are creators of credit money. \u00a0The main determinants of their quality and reliability are the amount of capital and the level of liquidity (essentially central bank money) they keep. In general, a bank would like to maintain the right levels of both \u2013 if it has too little, it becomes fragile, if it has too much, it becomes unprofitable and hence unable to fulfill its purpose of paying dividends. Some of the loans issued by the bank will be repaid as expected, and some will default. In general, when loans are repaid, the bank\u2019s capital grows and when they default, the capital diminishes. If the bank\u2019s capital falls below a certain fraction of its risk-weighted assets, the bank defaults. Good bankers differ from bad ones by their ability to attract a large pool of reliable borrowers, so that default levels stay close to their expected values. (Some defaults are inevitable and are accounted for by charging interest.) At the same time, good bankers need to attract long-term depositors and serve them well, so that depositors do not suddenly withdraw their deposits. If the latter were to happen, the bank can exhaust its liquid reserves and default through a different route. In principle, if its less liquid assets are sound, the central bank, which is called the lender of last resort for a reason, can come to the rescue and provide additional liquidity.<\/p><p>It is clear from the above description that banking activity is mostly technological and mathematical in nature. Hence, it is well suited to be digitized, yet the prevalence of legacy systems and legacy culture inhibits banks from embracing innovation as much as they should in order to survive and thrive in the digital economy of the 21 century. The root causes of banking malaise should be obvious \u2013 old-fashioned banks are far behind the latest technological breakthroughs; they also have a poor handle of the risks on their books. While major industries, including retail, travel, communications, and mass media have undergone revolutionary changes in their business models in the last thirty years or so, banking remained static at its core, living on its past glories and ignoring the winds of changes. Existing banks suffer from numerous drawbacks, because competition among them is relatively weak. Moreover, their customers are generally not happy with the level of customer service they receive, besides, they are exposed to the risk of losing their deposits (above and beyond the regulatory guaranteed minimum) in the case of their bank\u2019s default. Zero or negative deposit rates, which became prevalent in most developed countries in recent years, make keeping money in the bank both risky and unprofitable. Yet, at present, customers do not have viable alternatives.<\/p><p>In addition, there are whole strata of people and SME, especially in developing countries, who are either underbanked or unbanked, due to the fact that traditional banking methods are not flexible enough either to solve the know your customer (KYC) problem for them or to assess their credit worthiness.<\/p><p>Thanks to new developments in data technology and in mobile telecommunications adoption, we see the potential rise of a third wave of innovation in banking. We will outline in this paper the key features, benefits, and strategic imperative of the\u00a0<strong>Digital Bank of the Future<\/strong>\u00a0(DBF).<\/p><\/blockquote>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Introduction We are entering a new era of innovation that will reshape consumers\u2019 relationships with their banks. In order to understand how banking will evolve in the digital age, it [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":32159,"menu_order":0,"template":"","meta":{"_acf_changed":false,"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"footnotes":""},"categories":[65,55,73],"tags":[244],"content_type":[21],"access_rule":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Digital Banking Manifesto: The End of Banks? - Global Risk Institute<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/globalriskinstitute.org\/publication\/digital-banking-manifesto-the-end-of-banks\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Digital Banking Manifesto: The End of Banks? - Global Risk Institute\" \/>\n<meta property=\"og:description\" content=\"Introduction We are entering a new era of innovation that will reshape consumers\u2019 relationships with their banks. 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