Forget banking reform, only IT can save Britain's banks in the post-branch world

Banks must put smart technology - and the customer - at the heart of their business model...

Banks are facing their most significant shake-up in 100 years as a result of the Independent Commission on Banking, led by Sir John Vickers. But rethinking IT will be central to creating a new business model for banks, says David Butler, CEO of customer engagement advisors TripleIC.

A new business model for retail banking is emerging, and IT has a crucial role in enabling it.

The credit crunch and the bank bailouts have made banking a headline topic, and so much of the nation's economic wellbeing is entailed that no government can sit back and watch the bank go bust. Should these big banks be statutorily broken up? Should they be restrained, kept small enough to let them die?

One essential element of free market economics should be that failed competitors go to the wall. The survival risks to banks largely inhabit their investment divisions. Backing the wrong horse in this market segment - such as dodgy debts and mortgages, derivatives whose value is immeasurable - can bring banks to their knees.

In contrast, retail banking is comparatively risk free. They just borrow your money, mark it up and lend it to me - or vice versa. Should these two business models be allowed to coexist within a single bank?

Behind these foreground stories, however, lurks a narrative affecting every person or family in the land and depending crucially on IT.

TripleIC recently conducted a study of 1000 retail bank customers, a sample carefully chosen to be nationally representative. We asked them what confidence they had in the retail banking sector. The results were quite shocking.

Perceptions of trust graph
Image: David Butler/TripleIC

How can these depressing statistics be improved? The answer depends crucially on the wider use of IT and - even more importantly - on the better use of IT.

One fact that emerged clearly from our study is that...