Dear Banks, it’s so over.

The discussions about whether banks have a future or not are never-ending. For a long time, I held back, not wanting to commit myself. However, the longer I follow developments in the fintech sector, the more I come to the conclusion that it will be very difficult for the traditional big banks.

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Why should big banks have no future?

I see three reasons that ultimately convince me:

1. the banks have messed it up

The problems that the banking sector has brought to the economy and society in recent years are manifold. The scandals, the disappearing service orientation and the numerous cases of mismanagement have left their mark on society. Banks, and thus unfortunately also their upright employees, have suffered a massive loss of reputation. The credibility of banks is now low. This saying, for example, sums it up nicely:

2. the significance of money has changed fundamentally

I maintain that we will never return to the interest rate levels of the 1970s. In my opinion, this has to do with the fact that capital is available to a much greater extent. Anyone who wants a loan today, literally for anything, will get one.

The credit economy (read also financial economy) has fundamentally decoupled ownership and property to such an extent that almost everyone has access to and benefits from everything. Today’s credit-financed ownership structure could not be financed at credit conditions like 40 years ago. So interest rates have to come down. And money must be printed. This is slowly removing the foundations of the basic business model of traditional banks.

3. fintech: decoupling the bank in banking services

However, the third argument weighs the heaviest and is ultimately the one that tipped the scales for me: with the introduction of more and more technology in the banking sector, the typical banking business model is being dissected. What we are seeing in the fintech sector is that the various banking services are now being provided by independent companies.

As an executive at a major bank, this must be frustrating at times: individual services are being created to the left and right that better solve parts of your own business. What used to create synergies, the bundling of capital and administration, is now almost completely replaced by technology. Nobody would build a full-service retail bank today to provide financial services.

This is a good development for society and therefore the economy. Just think back to the financial crisis, in which the “systemic relevance” of banks was a major issue. A large bank is an economic risk for a company, so to speak. Therefore, splitting up the business areas into different independent players is a step in the right direction.

Decoupling approaches: Fintech start-ups

Want a few examples? You all already know: the following services are cheaper, faster and better to use than anything the big banks offer.

TransferWise
With TransferWise, foreign currency transactions can be processed quickly, cheaply and easily. The concept is simple: TransferWire simply matches the various requests against each other and performs a debt exchange. For example, if you want to exchange 1000 EUR for USD, TransferWire, to put it very simply, looks for someone else among its users who wants to carry out the reverse transaction. And swaps.

LendingClub
LendingClub is the market leader in the crowdlending sector. There are quite a few very similar services in Europe. The concept is simple: as a borrower, you can post your desired amount and lenders can offer shares of the loan. This is simple and efficient and creates relatively high returns with relatively low interest rates for borrowers.

Number26
Number26 is certainly no stranger either: Europe’s online current account. Opening an account is super easy, the support is good, there are no fees and for a few weeks now there has also been an overdraft facility. This is what a current account should be like in 2016 from a consumer perspective.

Robinhood
Robinhood allows you to trade securities via an app. The trades are free and the app is really well made. Unfortunately, Robinhood can only be used in the US at the moment, but international expansion is currently being driven forward and we will probably soon have Robinhood in Europe too. And that’s how they make money.

Swanest
Swanest is an online broker that provides a portfolio assessment for private investors. The tool is super-easy to use and provides information on the composition of portfolios according to risk aversion.

The list of fintech start-ups is almost endless. Of course, not all of them will make it and many are still in their infancy. And yes, the banks won’t be dead tomorrow. And regulation is still around. And, and, and.

But let’s not kid ourselves. What benefits and pleases customers in the long term will prevail. Banking will need it. Not banks as we know them today. Sorry.