Developments in information technology are fundamentally changing many traditional business models. Progress in the IT area is bringing about one change in particular: it is reducing search costs and allowing buyers and sellers of products and services to find each other directly on web-based platforms, without the need for a mediator, broker, or intermediary. All business models of trade are affected by this development, and this means that financial trade is also affected. However, bank customers will only turn to the new business model of web-based financial intermediation if the economic advantage of a behavioral change, in which the individual approaches the unfamiliar, is so compelling that the associated transaction costs of learning the new, as well as the initial uncertainty of action, are justified. Once the number of new users reaches a critical mass, the process of reorganization is no longer linear and continuous, but advances in bursts and exponentially. This means that, at a certain point in time, the process of system change gains so much momentum that it can hardly be controlled. In view of the inefficiency of the existing banking system, as well as the economic superiority of web-based alternatives, it seems that it is only a matter of time before a system change takes place in the banking business.
BANKING 2025: THE BANK OF THE FUTURE
Published: 01 November 2016