The Problem with Most Banks Today
Today we see a tectonic shift in world finance. Yet is this immense shift a recent development, or has this been a long-overdue advancement we are finally seeing unfold?
David Gerbino of DMG Consulting famously said after the financial meltdown of 2008:
“The sad truth is that traditional retail and business banking has been broken for decades.”
Carol Realini, the author of the bestseller, “BANKRUPT: Why Banking is Broken. How it can be Transformed”, notes:
“I saw first-hand the struggles within the banks to support innovation. I have been in countless meetings with bankers all over the world…it was clear there was too much emphasis being put on protecting traditional revenue streams, not enough of disruptive innovation. Even when innovation received initial support, it was frequently bogged down with business constraints and internal organizational struggles.”
Unfortunately, the problems with banks, seen so clearly over a decade ago, have not been adequately addressed overall. Instead, issues have remained, or banks have attempted to rectify these issues through misguided compensation in one direction or another.
A recent article in Fintech News shows results from a survey of how banks fell short of meeting customers’ expectations in 2021, dramatically shown below:
(The gap between customer expectations and bank priorities continues to widen, Sources: Capgemini Financial Services Analysis, 2021; World Retail Banking Report 2021 Executive and Voice of Customer surveys)
Outdated Modus Operandi
In light of our most recent financial crisis, legacy banks’ process to embrace new, progressive policies has become even more impaired and sluggish. Despite the addition of mobile interfaces for our familiar banking institutions, financial services for most customers are generally the same. Banking today may even be worse, given our current state of overdue mortgages and an increase in everyday banking fees to cover defaults.
Historically, banking worldwide has been slow to embrace innovation. Outdated services built on solutions from the 1970s when banks had no real competition are still somehow with us.
Lack of Trust
Centralized institutions have had a monopoly on wealth, causing every financial crisis in history. Dramatic failures and scandals at Wells Fargo, RBS, and Deutsche Bank have served as canaries in the coal mine, once sending a warning that low-interest rates and regulatory pressures may have opened the door to misconduct in the industry. This, in turn, decreased trust in banking and sent interest rates higher in response.
It’s hard to believe trust in banking institutions had been on the rise, but that has taken a stark turn for the worse lately. According to the Booth/Kellogg Financial Trust score, trust in the financial system has dropped 33% since peaking in 2019. Trust is the second most important factor consumers consider when buying financial products — second only to “ease and convenience” (47%), by a tiny margin (45%). Trust even outranks price (43%).
A Fragmented System
The fundamental flaw of traditional banking today is the way banking services are handled within the organization. Most use a fragmented system with parties focused on their interests and no common information shared. For instance, a customer may want a retail bank account, a credit card, and a mortgage from one bank, expecting a seamless process since it looks like one entity. Yet from the bank’s perspective, these are functionally three different businesses entirely. So a customer is forced to submit identification information three times as three separate silos are used to process information and services, even sometimes across their differing payment rails. In this way, banks have no single, cohesive view of their customers.
For many years, all banks worked this way. However, with challenger banks offering real-time payments and notifications and GDPR in the EU and UK forcing banks to adopt the same KYC regulations across entire organizations, banks need a single customer view. And due to their size and intractable modus operandi, they can’t seem to achieve this anywhere near quickly enough.
Traditional banks have failed to offer a fair and sustainable business model or even maintain secure lending strategies. They are simply too big to adopt a full-scale solution to replace their infrastructure, brick and mortar costs, technology, and antiquated operating models. Their hierarchy, outdated mainframe systems, siloed business models, excessive paperwork, hidden or difficult-to-understand fees, and payment schedules have been the subject of criticism for several years.
A Move Toward Progressive Policies
The traditional finance industry is now undergoing a radical shift, driven by new, progressive banking and finance attitudes. Increased competition from FinTech and experience-driven banking has left many legacy institutions behind. Today’s quickly shifting financial landscape shows the swift evolution of the core “utility value” of banking.
Investors, startups, companies, and institutions today expect fair, sustainable banking, increasingly based on providing social value and options for personalization instead of pure corporate social responsibility. Competition and changing business models, as well as mounting regulation and compliance pressures, leave many institutions searching for banking products that serve individual and corporate needs. Today’s investors and borrowers are savvier and better informed than ever and expect more from a bank – social value, transparency, and the inclusion innovations like DeFi can offer.
Can banks use fintech to increase their profitability while building a future for their customers? The opportunity may demand a culture change in banking management as well as structural and technical advancements. Most traditional banks cannot make these changes quickly or efficiently. Many will partner with fintech services for new opportunities in payments, online debit/credit card management, automation of services, and virtual financial products.
One Solution Coming Together
One solution to this fractured behemoth of traditional banking is EQIFi, powered by EQIBank – the trusted digital bank, founded in 2015, serving nearly 180 countries worldwide. EQIFi provides a single ecosystem streamlined to a more sustainable financial services market using innovations like DeFi. Innovative financial services, including fixed-rate products, variable rate products, interest rate swaps, and yield aggregators, will be available to all customers through a single platform, not siloes of processing, through endless paperwork. EQIFi offers customers a cohesive, all-inclusive, and savvy solution for wealth management and growth.
Customers of EQIFi may apply to open accounts with EQIBank, one of the world’s leading digital banks. EQIBank’s jurisdiction is recognized by global bodies, including the Group of Twenty (G20), the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF). As a result, customers may rest assured that their trust in EQIFi is well-placed.
Looking toward a future of financial health through a holistically conceived, developed, and executed DeFi platform, powered by a licensed and regulated digital bank, EQIFi stands above the banks of yesterday, today, and into tomorrow.
The EQIFi Team