Former General Manager at N26, Fintech Advisor, Board Member, and Investor Georg Hauer opened Forbes Cyprus the Future of Fintech Summit 2023 with his trailblazing keynote “How Will Banking Look in 2035?” Georg explored the evolving landscape of banking, envisioning the future in 2035 and the transformative forces driving change.
The following text version of the speech has been edited for clarity.
I would like to glance into the future to get it with you. But before we do that, let’s briefly remember where we started. The world’s first mobile-only Bank M-Pesa, was not founded in the United States or Europe. But it was founded in Kenya in 2007.
And I remember traveling just a few years later to Kenya and Uganda. I could see people in very remote Villages where people didn’t even have electric outlets to transfer money via SMS from their Nokia phones to their family members in other Villages or cities.
And I asked myself. How come that people in these remote Villages can do that? And we in Germany and Europe cannot. A few years later. I joined the leadership team of a beginner tiny fintech called n26, which later became one of Europe’s most successful digital banks. The real inspiration to disrupt banking in Europe started in East Africa.
Looking beyond borders opens a window to tomorrow’s possibilities.
Today, about 2.2 billion online banking users worldwide — however, 40% live in China, Korea, or Japan. The rest of the world comprises most of Asia and Africa. It is the second-largest online banking region. Online banking
looks very different across different markets.
Suppose you look at it and look beyond borders. It opens a window into tomorrow’s possibilities. When considering how banking will look in the future, it is worth looking at how it looks today in different markets because it seems very different across countries.
In Asia, especially in Korea and Japan, financial services and peer-to-peer money transfer are heavily dominated by super apps like Cacao Pay on the left and WeChat Pay on the right. Essentially, it is one app to do everything in your financial life.
However, that doesn’t necessarily mean the super app is precisely how the future of banking will look in Europe.
Banking today already looks quite different across markets. Like this photo, I took both of these photos, one in Korea and one in Senegal, both just a few weeks ago, and I’m in a fortunate position that I’m able to travel to a lot of different markets and work or test other fintech products and Mobile Banking products.
And what’s fascinating about the right picture taking Senegal in a very, very remote Village in Senegal where there was no banking. No Bank. No Brand Banking Branch. Not even an ATM. I was able to withdraw money from a shoe shop. You can see the shoes in the background of this image. The iris robe cost about 40 euros, and it cost nothing. And this is what the shop looked like from the outside.
So, when you look at the future of banking, I want to talk about something other than banking in Europe. But how can excess banking, in general, genuinely change people’s lives? Access to banking in Western Africa is an entirely different story than access to new banking types in Europe.
Even in Europe, we are now increasingly getting access to completely new banking services directly on our phones or wherever we are.
Managing your money and investments directly from your phone was impossible a few years ago. Nowadays, it has become a complete standard. In the future, you can get the best mortgage deal now from your phone.
Now, you’re still walking into a bank branch not very often, and banking access to banking can truly be life-changing. And there’s no market that better represents that than Brazil. The new bank is probably one of the world’s largest and most successful digital banks within nine years. They managed to acquire 90 million customers, most of them living in Brazil, and they almost single-handedly changed the fate of their country because, in 2011, nearly half of all Brazilians did not have a bank account.
This number is now down to less than 10%, and no Bank makes eight billion dollars in Revenue with that, so providing access to the unbanked is a compelling business.
Ten predictions for the banking future
First, more than six billion online banking users will likely be worldwide. That will give power to the unbanked; however, That will also open entirely new markets for technology providers and digital banks worldwide.
1. 6+ billion online banking users—giving more power to unbanked consumers.
Currently, or for a very long time, banks have focused on specific target audiences because they’re more profitable.
Imagine a world where every human can access financial services directly from their phone. Imagine. What kind of market does this open up for your own company?
2. Seamless banking. Non-banking players will take over many banking roles, which will trigger new regulations.
Banking will be completely seamless and will be embedded everywhere. It will be usual to apply for a loan not at your bank but directly at a shop or any other trading platform or potentially get your mortgage through a third-party provider. And that will open the gateways to non-banking players dominating the banking world.
It will be widespread that non-banks. Non-banks enter financial service providers that do not have a full banking license that they will offer more and more.
Nowadays, banking services are run by banks. Interestingly, this means this will also trigger new types of Regulation.
New types of Regulation are required because, of course, if banking moves to nonbanking players, authorities are also interested in regulating those players. You can see that now with payment providers getting stricter and strictly regulated. It will likely trigger new types of licenses as well. You can call them bank licenses, which may be some Fintech licenses. And Brazil is here. A great example is Brazil, which has a so-called fintech license that enables many different banking services but is a partial banking license. It may become the standard in the future.
3. Bank branches will disappear entirely, except for a few specialised flagship stores.
Bank branches will completely disappear. When I asked how many of you have been to a bank branch in the past 12 or 6 months. I still see many of the hands. Because of your business, corporate banking is still heavily focused on units nowadays.
In the future, bank branches will likely disappear so that only very few banks will remain. Units will remain in every city and look more like Flagship stores. Rather than having typical bank branches, instead of having 30, a bank might have only one, which might look like that.
4. AI will disrupt compliance and customer service—most bank back office processes will function autonomously.
AI will entirely disrupt compliance and customer service. Most of bank’s back-office processes will be automated. They will simply run without any human interaction. Today, money laundering is so sophisticated that compliance teams are overwhelmed to handle any of it. They need to shift more and more to technology, and nowadays, technology enables teams to improve. It’s very likely that at some point.
The criminals are becoming so sophisticated that you must fight them purely with technology and customer service. AI is expected to drive the first and second lines of customer service.
5. Your online presence will co-determine your credit score.
It might sound scary for a few of you, but online presence might call it for your credit score. And the internet remembers. It might sound like a dystopian future, but the truth is, as a bank, you have every interest in knowing your customers as well as possible. And it’s completely normal to use any information available.
6. Hyper personalization. Everyone has a digital bank advisor. With big gaps in quality
Banking will be hyper-personalized. And any bank will likely follow. Personalization would be so modular that even the most Regional and traditional banks can offer personalized banking. However, the quality will differ massively.
7. All stocks and bonds will be tokenized. Your ID card as well.
Stocks and bonds will likely be fully tokenized. That means you can quickly transfer stocks or bonds to another platform. You can keep it in a cold wallet. And in fact, the same might happen with your ID. That will completely disrupt how KYC is being done in banking because your KYC information is suddenly portable. You can open a new bank account with one click rather than a lengthy process that might take a day.
8. Cryptocurrencies will be mainstream—but are strictly regulated by central banks.
Cryptocurrencies will become completely mainstream. Your parents and grandparents might Inspire them. However, they will be strictly regulated by central banks. The idea of a completely decentralized cryptocurrency trading system is unlikely to materialize. Why, well, the cryptocurrencies itself? It can’t be controlled completely. The exchanges through which most people buy, sell, and hold their coins can, and they will because central banks have zero interest in cryptocurrencies becoming completely mainstream without controlling them. And it will be exciting for certain Emerging Markets. We’re the use case, which is a massive one.
9. Bank cards will first be replaced by mobile wallets—then by biometrics.
Bank cards will disappear. Mobile banks’ mobile wallets will first substitute them. But in fact, I expect that only to be an interim step.
I expect Biometrics will be the actual gateway to your account at the end of the day. Which one? It is to be seen, but the plastic card likely has an expiration date.
10. One tech company will be among the top 10 retail banks. and even enter the mortgage business
And last but not least. One of the top 10 retail banks will be the giant tech company we know today. This one again is to be seen, but I expect not only will the end of retail banking, but I believe that even this one of the most core businesses of retail Banks nowadays will be influenced by big tech companies, and that’s the mortgage business.
To summarize, the technological change in banking will likely accelerate even further but faster and faster.
And it will influence all our lives. The impact on people will be massive, and much of it will be very positive. And many people here in the room will play an enormous role in influencing and shaping the future of banking. And that’s why I’m very excited for the next decade.
