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Data from Accenture 2014 Digital Banking Survey
Data from Accenture 2014 Digital Banking Survey

In 1990, the top five banks controlled 9.67% of the industry’s total assets. In 2015, the top five banks control 44% or approximately $6.7 Trillion in assets.

The financial democracy that stimulated small business and middle class growth in the 1950s and 60s, has transformed to an oligarchy in which one percent of the population owns 48.2% of the world’s wealth.

For future economies to survive, this wealth needs to be redistributed.  It is doubtful that government will evolve quickly enough to correct this destructive trend. Open Secrets reported that in the 2010 election, one quarter of one percent of the population made 68% of the contributions to Congress. Special interest governance inhibits the ability for progressive change.

How Did We Get Here?

Prior to 1990, community banks and credit unions controlled their market share through customer loyalty.  Relationship banking was at its peak.

Early Internet users were provided with information and data centric remote access. Gen-X began demanding alternative remote solutions to make banking more convenient. Digital banking emerged, spearheaded by big banks that had the capital to invest in new technology.

Community bank and credit union customers demanded the same digital options and in order to compete, these financial institutions gave up the advantage of relationship banking to provide online access. Once customer loyalty was removed as a differentiator, consumers made choices based on cost. With a mass customer base allowing for economies of scale, larger financial institutions have increased market share at the expense of local community banks and credit unions.  The opportunity to mentor, advise and upsell a client based on relationship banking was lost.

Too Big To Succeed

According to a Kasara study, 78% of Americans blame big banks for the 2008 financial crisis. “Too Big To Fail” translates to “even though their systems and policies are antiquated, our government will bail out big banks because they have huge lobbies.”

The erosion of big banks’ control is already happening. The future is now, as new tech advances and high growth demographics are entering the market.  It begins with Apple Pay, Bitcoin, Lending Tree and PayPal. It continues with all Fintech disruptors who develop digital banking innovations. Fintech companies and community banks have an edge in adapting to this future market with an ability to iterate quickly through many new advances.

Top Five Reasons Big Banks Will Fail

  1. Legacy code and systems – approximately 70-80% of banking software and systems in big banks is obsolete.
  2. Long cycles of change – can take years to make critical decisions.
  3. Distanced from customer base – digital banking has precipitated erosion in customer loyalty.
  4. Hubris – assuming the federal government will always be there to back their ineptitude.
  5. Regulations – ironically big banks are strangled by the very regulations they lobbied to put in place.

What’s Next?

The solution is a shift to center that allows community banks and credit unions to again compete with big banks.  It is easier for these financial institutions to adopt new systems and adapt to change. The ability to make these agile decisions to service customers will create business growth.  The cost for the “next big thing” for community banks and credit unions is far less than the infrastructure needed for past online banking platforms.  The advantages of economies of scale are lost for big banks.  The renewal of community banking will impact local communities, their economies and survival of the middle class.

Remote convenience does not translate to “Do It Yourself”. For the first twenty years of the Internet, it was what banks could provide given the web’s limitations. The Internet was an information vehicle to develop transaction-based digital applications allowing remote access. This system required customers to become their own personal bankers and tellers. The trade-off of remote convenience was worth the effort.

The future of banking involves more than processing transactions. Financial advice is the reason 30% of banking customers visit their branch, and is the gestation of 70% of revenue. Financial vehicles such as loans and retirement accounts, which result from financial advice, are major profit generators. By disenfranchising clients who use remote digital options, banks have diminished opportunities for cross-sell and up-sell to customers visiting the branch to conduct transactions.


Internet platforms evolve rapidly and have created a new era in digital remote connectivity. Bandwidth and network growth now support instant remote communication. Customers expect one-tap solutions on their mobile devices, giving them instant service satisfaction. Current mobile banking solutions are patterned after existing web versions with too many features and screens to be effective using new devices.

Boomers might wait 30 minutes on an 800 number call; Millennials will not.  According to the Accenture 2014 Digital Banking Survey, “56% are interested in having a video chat with a bank representative by accessing a link on their bank’s website, mobile or tablet application”. Within 8 months of launching on Amazon Fire HDX, 75% of customer contact comes via their new video Mayday button.

How Do We Get There?

Easy, single-feature, Fintech solutions are a strong innovation focus in Silicon Valley. Today’s consumers expect immediate and visual contact.  They want service. “Do It For Me” has replaced the “Do It Yourself” trend of the past. Banks who respond quickly to this trend can recapture loyalty with a new customer centric focus. Rather than treating client interaction as a negative aspect of per transaction cost, it becomes a profit center.  The realization that each customer contact is an opportunity for growth and profit will enable those banks to recapture and grow market share.

Disruptive change in the financial sector is inevitable and exciting for the future of banking. Fifteen trillion dollars in assets are at stake. History reveals that economies rebound and thrive when all are involved with the benefits of financial stability, and not just the top one percent. Oligarchy fails and democracy succeeds. Redistribution of wealth is a mandate and no longer an option. The next digital evolution is here and Fintech innovation is leading the way back to economic democracy.


Bill Saris
Bill Saris

Bill Sarris, CEO and Co-Founder of Linqto, Inc.

American Banker and BAI named Linqto in the “Top Ten Tech Companies to Watch” for 2015 and last month Linqto received Monarch’s “Most Innovative” award for Business Banking. Bill Sarris, CEO, is a recognized expert in streaming technology and has developed banking solutions for twenty years. Linqto’s clients have included Microsoft, Intuit, Digital Insight, NCR, Google and Stanford. Linqto’s interactive banking communication suite includes Personal Banker and Community Banker. For additional information, contact [email protected].