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The Future of Banking - Part 2

Last week we gave you a peek at the upside of mobile banking moving forward.  This week, by contrast, we’ll show you the downside.

It’s important to bear in mind, however.  The downside of mobile banking isn’t anything intentional on the part of the software programmers and designers.  Nor is it the fault of the companies that distribute the finished product.  If it were, we wouldn’t be doing what we do! So don’t get us wrong: mobile banking is — or at least should be — GREAT.  Mobile banking makes paying easier, more convenient, and can offer all sorts of cool features to boot.  Junk fees can be a headache, of course, but you don’t have to worry about that if you’ve got Refundo.  All in all, mobile banking is pretty awesome.

Rather, the negative effects of mobile banking result from the unintended consequences that come with any new invention.  Let us explain.  As soon as something new comes on the scene and becomes widely available, it renders old technologies obsolete.  That is, if it serves some kind of function better than the products that came before it.  This is what was illustrated last week with the example of the telegram and the telephone, but it holds just as well in the case of automobiles replacing the horse-and-buggy.

Obsolescence can mean hard times for those companies that haven’t managed to keep up with the times.  Hence Schumpeter’s old law of “creative destruction.”  New possibilities are opened, but the future for some of the old realities is closed.  Just as the old saying goes, this is “the price we sometimes have to pay for progress.”



Luddites smashing machines on the workshop floor

At various points throughout modern history, this has sometimes even led workers to resent the technologies that put them out of work.  Mark this word down for your next Scrabble game: Luddite.  The word “Luddite” is generally applied to anyone who has an aversion to technology (you know the type, the computer illiterate), but its use originated in connection with a rebellion led by the legendary Ned Ludd.  His followers, who called themselves the “Luddites,” were known to smash machines that lost them their job.

Today the banking industry is going through very much the same thing, though to date we haven’t heard of any ex-bankers or banking employees taking out their anger on the ATM machine.  With banking layoffs approaching a whopping 160,000, however, the whole industry is in a tizzy.  Reuters reports that “redundancies [now] outpace new hires by roughly two-to-one,” and some fear that these jobs might be gone for good — at least in the short term.  “The industry is as bad as I’ve seen it,” banking analyst Meredith Whitney told NBC a little over two months ago.

Some of these redundancies are structural, it seems, while others are related to market fluctuations.  Almost certainly, the changing nature of the industry — especially in the move toward mobile and online banking — has rendered some more traditional banking positions superfluous.  With the hi-tech nature of banking today, however, this is causing all sorts of tricky problems.  Sara London writes from London: “In the high-tech, gadget-addicted world of investment banking, layoffs are becoming more complex and brutal as firms try to stop sensitive data leaving with employees.”  Software secrets and company data can be compromised if firings aren’t handled carefully.

Of course, there are ways of going about it more safely.  Some of the safety protocols for companies can even be taken by selectively monitoring access to confidential files and records, especially if they’ve been remotely centralized via the Cloud (we did a little post on this a while back).  But still, precautions are necessary.  In one instance, a computer programmer who lost his job at Freddie Mac attempted to plant a virus on the company network before leaving in order to bring its system crashing down.  It didn’t work, and he was convicted, but that doesn’t mean it wasn’t scary.  The Luddites of 1805 may have smashed some spinning Jennies.  Twenty-first century Luddites create computer viruses!

So that’s the potential downside of something like mobile banking.  But there are all sorts of causes behind the current upheaval that’s going on in the banking industry.  Changing technology is only one of them.  For our next post, we’ll take a look at the 800-pound gorilla that’s in the room: the upcoming “fiscal cliff” facing Congress.

Topics: Industry, Refundo, mobile banking, banking, refundo mobile app, future of banking


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