Bank CEOs desperately need a map of the future but should be cautious of visions that are too neat and tidy, writes Brian Caplen.

Understanding how technology works is the easy part. Gauging its impact is a lot more difficult. The temptation is to visualise a world in which the latest technology has automated all tasks. Humans need only blink to issue their commands and have their goods delivered by drone or printed out on a 3D machine. In this world there are no shops, no bank branches, no books, no countries, no diseases, no worries – the tech evangelists have made them all disappear for a small fee.

The problem is that when technology and human beings interact the outcome is messy. Some things appeal, some things don’t. Some technologies take off, some fail. Not all humans are the same, they have different needs and different adoption rates.

Despite the faith placed in them by technologists, millennials can be surprisingly old-fashioned when it comes to choosing technologies. Surveys have shown that a majority of 16- to 24-year-olds prefer physical books to ebooks, for example, with the result that sales of physical books are rising again, those of ebooks falling.  

Similarly, predictions of the death of the shopping mall may be premature as indicated by Amazon’s $13.7bn purchase of Whole Foods with more than 460 stores across the US, Canada and the UK. Analysts say the logic behind this deal is the customer data and branding that Whole Foods brings to Amazon. Maybe so, but it is also a confirmation that stores have a future alongside warehouses and delivery trucks.

Indeed, the Amazon Go concept now being tested allows shoppers to walk around a store, take anything they want and leave without ever going to a payment counter. A customer swipes their phone with the relevant app on the way in to the store, sensors record what customers put in their shopping bags and payment is taken automatically. 

Bankers need to understand these hybrid physical and online models to figure out the payments trail and to come up with solutions that keep banks relevant to customers. 

European banks face a double challenge as – in a crossover between regulation and technology – the second Payment Services Directive and open access will bring in a flood of new competition. The banks and fintech players who get this Brave New World right will be those that understand human psychology as well as technology.  

Brian Caplen is the editor of The BankerFollow him on Twitter @BrianCaplen

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