November 01, 2010

The brick and mortar retail banking industry must innovate or it will go the way of recently-bankrupt Blockbuster Video. Or the dinosaur, for that matter.

Such is the message of Aaron Greenspan, CEO of Think Computer Corporation and creator of mobile payments solution FaceCash, in a column featured yesterday by The Huffington Post.

Greenspan predicts a massive shift in consumer banking over the next several years, driven by access to technology such as smartphones, alternative payment services like PayPal and the inefficiencies of ACH as a transaction processing solution in an era where real-time is the expectation.

Simply, Greenspan supposes, the retail banking industry's sluggishness in adapting to consumer behavior will be its downfall:

Given current market trends, retail banking as we know it today will no longer exist by 2020. Even by 2015, almost all small retail banks will be struggling, and even some of the large banks will be trying to re-invent themselves as software companies as they are confronted by competition from more agile and technologically adept competitors: the people who make your cell phone. Aside from the obvious challenges posed to banks, the rapid pace of change will present challenges for consumers and government regulators as well, who may not immediately comprehend the various facets of the new financial paradigm.

It's not the first time we've heard this recently. Author and consultant Brett King has been championing the concept of consumer-centric banking for the better part of this year in promotion of his book "Bank 2.0: How Customer Behaviour and Technology Will Change the Future of Financial Services."

Further, mobile and social media were part of the buzz at last month's BAI Retail Delivery conference in Las Vegas, as a number of payments providers such as PayPal, Obopay and MFoundry were showing off solutions that bridge the gap between pure alternative payments solutions and bank-provided services.

Whether the talk of the retail banking industry's extinction is hype, new technology, the proliferation of mobile and an overall shift in consumer behavior are the underlying reality driving the conversation.