By Eirik Venberget
Whether people had to go to the bank, or there was a run on them, banks have always had a physical presence in communities, almost regardless of how small that community was. Inside the banks sat people who were primarily responsible for the bank’s money – and they guarded it diligently. For borrowers that meant it was difficult to get money or credit, and if they did the bank would closely monitor how they spent it.
In the last years, however, this has changed, as witnessed by the closing of numerous local branches. Much of this has been blamed on millennials’ expectations of banks and money, but ought perhaps to be seen as a larger shift in business practices in the banking sector. Just think about it; when was the last time you used physical money? Or better yet, when was the first time somebody asked you precisely that question? More importantly, this trend has hit banking in every single one of their key areas of business. We use a fraction of the physical money we once did, we pay our bills using online services, we can get funding for potential business ideas through crowdfunding, get micro loans from communities whose primary function have never been lending, and investment and savings advice from apps rather than expensive bank advisors.
The banks have been aware of their ever diminishing importance since the advent of the ATM machine. Suddenly customers who previously had to queue for withdrawals could have instant access to all their hard earned cash. The once esteemed occupation of retail banking was diminished to one of customer support, rendering the retail banker analogous to a pilot without a plane. Technological solutions for payment and the handling of money might seem like a technical issue. For society, however, it reflects an increased amount of trust in the institutions that provide these services. Because frankly, storing wads of cash under your bed seems bizarre in societies that have never experienced real, structural, financial or political instability. In many countries this is still reflected in the eschewed balance between the technical solutions for payment that are present, and how many people actually use them. In this aspect, especially in Europe, there seems to be a clear north-south divide, correlating with our trust in government and each other. According to the Boston Consulting Group and the magazine The Economist, in Norway each person on average did 456 card transactions in 2015, while in Italy the same number was only 67.
As countries and companies continue to develop technical ways for us to handle our money, we must all be vigilant to the fact that even the trust in physical money never grew in a linear fashion. In many countries this is still reflected in the eschewed balance between the technical solutions for payment, and how many people actually use them. While we currently live in a zeitgeist of believing fintech innovation will solve our every need, remembering that our trust in money is ultimately not technical at all, is crucial.