The future of commercial banking: Recommendations from 1999

Written by Saleh Hussain (Chair, Middle East Alumni Chapter)

This article was published in Alayam daily newspaper Bahrain on 11 August 1999 and
thereafter included in a book published in 2001 titled Future jobs, globalization and restructuring
Presented here without revision as a fascinating insight from the turn of the millenium as documented by a Henley alumnus.

In general terms, the commercial banks are busy introducing new products and services to ever increasing needs of their clients. I don’t believe that banks are in a comfortable position as the customers’ needs and demands for new products are on the increase  guided by the very fast technology advancement which makes the service delivery to customers unconventional and unimaginable.

As a banker with more than thirty years experience, ten of them in  retail commercial banking and the rest in offshore banking, I consider it appropriate that banks look for future with different perspective than the current way of service delivery to customers. The banks are advised to consider what is happening in the banking worldwide and what is expected to happen in future and compare their current situations with developments in banking worldwide.  I think the following issues need to be taken into  consideration:

• The idea of opening new physical branches by banks for delivery of service or capturing market share is on its way for demise as the international banks started to reduce physical branches or eliminate the idea of having them and replacing them with ATMs and online facilities that enable the client to avail the services dealing with machines and systems instead of human beings.
• There are good reasons for these developments such as the high maintenance cost and high capital expenditure investment. The grand advancement in technology  in service delivery  made doing without the physical branches possible. 
• The delivery of service by the Physical branches proved to be slow, Inefficient and costly. It also failed to meet the client’s demands for a fast service. Clients are acting within the changes in the way life is changing and hence  becoming impatient to wait for a service in  physical banking facilities.
• The advent of quasi banking companies and other forms of financial service providers such as those that provide small loans,  credit facilities and small credit Payable on monthly or quarterly basis, all have contributed to make the role of banks less important. Supermarkets credit/ loyalty  cards, Auto dealers which sell to clients on installment basis, furniture and appliances selling stores are examples. These companies will gradually make the role of banks less important.
• Currently you see some people with number of credit cards and in future you may see that one plastic card is enough and after that you might see the idea of a plastic card vanishes. One card could be enough to replace all other forms of cards. Such card will be operated by a password or even replaced completely by voice, finger imprint or eye recognition. These all will be used to obtain banking services through the ATMs and various computer devices.
• The merchants pay for their imports through letter of credits and remittances through their bankers. The demand drafts and letter of credit as instruments are on their way to exit.  The dealing between exporters and importers and payments of relevant transactions will be concluded through the internet - E-commerce- and settlements through E-Charge. The need for banks for these transactions will vanish.
• In future, it is expected that the customers will be able through a telephone call, to open account with any bank of their choice without the need to visit the selected bank’s premises. The bank may send the client a small device through which he can execute all the banking transactions he wants without even the need for the ATM.

I can continue listing more expected technological developments but I will settle for these as I believe the persons in charge in banks appreciate Fully these issues and may  be more. However all what I wish for is that they study these developments and get ready to deal with their consequences.

In my humble opinion, the banks need to consider the following:

• To consider these developments and others and their effects on the banks, their business, future positions and to take bold decisions to deal with them.
• The way in which the services are provided to customers in a manner that is inline with the technological developments in the market and how best the services are provided efficiently 
• Training and training of employees must be in great doses and directed towards provision of the services in which the bank wishes to specialize. In particular, the training on technological information and computer studies 
• Any employee who cannot deal with an office computer is to be treated as an illiterate and deserves to be made literate as the usage of information technology becomes the norm.
• Each bank must have a specialized team to deal with technological developments and related strategies to deal with them. Such team must not be given responsibilities other than those relating to R&D of technology and specially development of new products 
• The banks and in particular the small ones have no alternatives but to merge to form bigger banks able to compete in the market and improve the performance and increase the efficiency in the banking sector.