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Retail Banking: 1960s to 2020s


A look back at how banks face technological challenges.

BRUSSELS, 2 December 2016 – ​​​Today's retail banking sector is experience its biggest boom of Fintechs. But it is not the first time that retail banks are facing technological challenges. 

In the 1950s, the retail banks had to develop new strategies as companies stopped paying wages in cash. Banking transactions through the use of cheques was booming, which forced banks to find new and efficient instruments for cheque processing. This was an important revolution. 

In the 1960s, the ATM's (Automated Teller Machines) made their first appearance. Banks had to adapt to the newly created needs from their customers. Banks had to ride the wave of rising income, current accounts cross-selling, consumer credits among other factors. This was the start of a technological revolution. Computers did their apparence in the bank sector. Nowadays, we can not imagine a bank without a computer network.

Retracing technological challenges 

On 25 November, the European Association on Banking History (EABH)  in colllaboration with the Geschellschaft für Unternehmensgeschichte, retraced the technolocigal challenges faced by the retail banking sector in a workshop called Retail Banking. 1960s to 2020s.

The workshop was hosted by the Bethmann Bank in Frankfurt. Bethmann-Bank​ CEO Horst Schmidt served as host and opened the debates. 

Pierre Mounier-Kuhn from the French National Centre for Scientific Research (CNRS) and Tom Petersson of the University of Uppsala, both gave a very clear presentation of consecutively the French and Swedish case on how the retail banking industry had changed during the 1950s and 1960s. New challenges were drawn at the retail banking sector and made them adapt to the new environment of new customer requirements and financial needs. Bankers played a major role in shaping the technology. As in 1950s there was a boom in current accounts, cheques among other services. Banks needed to reduce their operational costs through the introduction of technological innovations, mechanization of the banking process, cheque processing systems. At the same time, this created a need for more technically skilled personnel, investment in training of bank employees and other efforts.  Modernisation, which included computerisation, was a matter of prestige. Computer rooms and data centres became a publicity tool.

Starting from the 1990s, banks lost their grip. A growing disintermediation for the individual consumers emerged. Banks no longer were interested in the financial intermediation for individuals – marked by high-costs with high volumes and low margins – but became far more interested in companies. The banks developed new strategies including investment banking, international expansion, internet banking, aggressive selling, resulting in the far-too-familiar 2007-2008 financial crises. The growing gap has been breached by the rise of shadow banking, Fintechs and other new entrants.

Are the traditional banks able to close the gap again?  

The University of Amsterdam's J.P.B. (Joost) Jonker challenged the audience with his lecture Surviving climate change: European retail banking's uncertain future interpreted from its past.  Is there a way forward for retail banking? Dr. Jonker made a striking comparison with whales stranding on a beach. He posed the questions: What do we do with them? Do we let them die? Do we try to drag them back in the sea?

Savings banks: the German success story

Thorsten Wehber from the Wissenschaftsförderung (DSGV) reacted on Dr. Jonker's lecture by presenting the success story of the savings banks in Germany. Dr. Wehber identified several key factors for the historical success of the german savings and retail banks to the contrary of the commercial banks:

  • They remain independent
  • Limit in business (no international expansion) 
  • Knowledge of the local market
  • Extensive Network
  • Education & Training of their bank managers

Savings banks in Germany have the same challenges as the other commercial retail banks in other countries, such as regulations, low interest rates, digitization, demographic changes and sustainability.

The Spanish banking industry post crisis

Carles Maixé-Altès presented the case of the Spanish retail banking industry after the crisis. Dr. Maixé-Altès stressed that the loss in diversity in the Spanish savings and retail banking sector is not leading to an improvement of the financial conditions for households and SMEs. Rather to the contrary, we see an increase of financial exclusion in Western European countries, which is seen as a worrying trend. The retail banking sector is confronted by a highly important challenge: the need to invest in digitisation and low interest rates that force them to reduce their operational costs by closing branches.   

The workshop had also a lively round table discussion between some representatives from Fintechs and commercial banks. Yassin Hankir, CEO and founder of SaveDroid, Lars Olsson, co-founder of Cashlink and Gernot Overbeck, co-founder of Fintura, went into discussion with Jan Schilbach from Deutsche Bank Research and Santander Head of Marketing, CRM & Product Management Frank Eggeling.

Fintechs: friend or foe?

The major question on everyone’s lips were: Do we need to see the Fintechs as competitors or rather allies? Fintechs have a huge advantage on the traditional banks concerning areas like IT, regulation and compliance.

However, the main trend that came out of the round table discussion is that the traditional banks do not have to fear the Fintechs. Most Fintechs are not interested in replicating the traditional banks for payments. To the contrary, do Fintechs have to worry about bein​g integrated, incorporated in the infrastructure of the traditional banking dinosaurs? The future is about collaboration.

Fintechs are highly adept at attracting customers – the consumer concentrated front-end – and compensating the weakness of traditional banks –the back-end. Fintechs rely on the traditional banks for their strong infrastructure, branding and trust.  

The worry by banks compounds should companies like Google or Amazon start offering financial products as they have a significant user base who trust them.

Another challenge and concern raised during the round table discussion was data protection, which is also a strength of traditional banks and considered a rather grey zone area for the Fintechs. What happens with the customer data? Fintechs are currently making money by leveraging the data by converting the financial and behavioural data of their customers.

Retail banking challenges ahead

To conclude, the retail banking sector has some challenges to address compared to the Fintechs:

  1. Their IT legacy, which is a handicap compared to Fintechs, as the latter can start 'fresh' with a clean plate;
  2. Branch closures – how far can they go in branch closures without losing their brand, their visibility and trust;
  3. Fintechs can focus on a specific market segment;
  4. Cross-selling becomes increasingly difficult; and
  5. Cumbersome Regulations – Fintechs are not considered as banking institutions so they do not need to comply with the heavy and strenuous regulations. Regulators want to foster innovation and are therefore less strict with Fintechs.  


Exploring challenges further at WSBI-ESBG Innovation Conference


​These questions can be more deeply explored at the Innovation Conference on 26-27 January 2017.

>> Visit the WSBI-ESBG innovation conference page

>> Learn more about the roots of savings and retail banking

>> See: Position on digitisation

>> See: Position on data protection and data flow​​