Blockchain-powered financial services. AI agents in charge of your money. And the end of physical money. These are just some of the banking concepts, according to founders and VCs, that will become commonplace in 10 years.
The fintech industry has created some of Europe’s largest companies, with fintechs such as Revolut, Klarna and Monzo garnering millions of users and billions in revenue.
And it continues to attract the attention of VCs. According to Sifted data, close to $700m has been funnelled to European banking startups since the beginning of this year.
The banking industry is also continuing to change with the advent of emerging technologies such as AI and blockchain. With that in mind, Sifted asked key fintech-focused VCs and founders what they think the industry will look like in 10 years.
The invisible bank
Several of the fintech founders and VCs Sifted spoke to believe financial services are going to become so automated that banking itself will almost “become completely invisible”.
“Everyone in fintech gets excited about building apps that help people invest more, save more through education and transparency,” says Adam French, a UK-based partner at Singaporean VC firm Antler. “But here’s the reality — most people absolutely hate thinking about money.”
French cites the example of Uber — which he says removed the “awkward payment barrier” at the end of every taxi ride — as a model of how banking apps will be built in the future. For instance, he imagines a world where an AI wealth manager could automatically refinance your mortgage when a better deal is available or move money between accounts to optimise interest.
Danai Antoniou, cofounder of AI agent startup Gradient Labs, agrees. She envisions a world where a consumer can set personal finance goals — such as saving 10k for a house deposit — and an AI agent will handle the budget setting and execution. Businesses will also reap the benefits by entrusting payments, reconciliation and cash flow to AI agents that can handle their financial operations.
“The shift is from managing your money to directing your money,” she says.
In a similar vein, one science fiction-esque idea Antoniou would like to see realised is the ability to use your projected salary as collateral for borrowing for major life decisions, which would be repaid from that future income stream.
Using industry trends, employment data and salary progression models, the system would enable users to borrow against their likely future earnings. She claims this would enable people from disadvantaged backgrounds to take up otherwise unaffordable opportunities in education.
Repayment would happen automatically when you actually earn that income and would adjust if your career path changes.
“It’s something along the lines of selling equity in your likely future self,” she says.
Blockchain banking
To make those invisible front-ends possible, the technology powering the next generation of banking innovation will have to become faster and more efficient in the back-end. One way this will be done is through blockchain technology, says Adriana Restrepo, former Revolut exec and cofounder of blockchain bank Deblock.
“Right now, banks have very complicated settlement processes,” she says. “I think blockchain technology will help simplify that with time.”
Currently, moving money relies on a complex and clunky settlement process involving multiple intermediaries that typically uses legacy technology.
Restrepo imagines a patchwork of instant payment systems — like the UK’s Faster Payments and the Single Euro Payments Area in Europe for domestic payments — and blockchain technology for international payments. Stablecoins, a type of cryptocurrency pegged to a fiat currency such as the US dollar, are touted for their potential in making international payments faster and cheaper.
Diana Biggs, a former HSBC exec and advisor in the fintech and digital asset space, says the increased reliance on blockchain technology will result in more choice for consumers.
“Consumers won’t be locked into a single provider or geography,” she says. “They’ll be able to move money, assets, and even identity credentials instantly across platforms, whether sending stablecoins internationally at near-zero cost, or holding tokenised assets in a wallet they control.”
She says this will unlock new product verticals such as tokenised assets, the concept of real-world assets represented as ownable tokens on a blockchain, and decentralised financial markets where trading and lending are run on blockchains without a central intermediary.
Death of the plastics
And as these new technologies become more commonplace, it’s going to accelerate the end of physical cards and cash.
“Physical payment cards will certainly become a thing of the past,” says Antoniou. “Because the idea of carrying a piece of plastic to prove you have money will be as absurd as carrying a physical photo to show someone what you look like.”
Biggs agrees, telling Sifted physical banking services such as ATMs are likely to become increasingly rare.
“In countries such as China, India, and Brazil, leapfrogging is already evident: mobile wallets, QR codes, and real-time payment systems dominate daily life,” she says. “In the U.S. and Europe, the transition will take longer, as card-based systems are deeply entrenched and still feel ‘good enough’.”
The fall of the UK?
The UK is often cited as one of the first countries where bank-issued contactless payments became commonplace. But not everyone thinks the country will be able to continue this tradition of banking innovation in the decade to come.
Deblock’s Restrepo says it no longer makes sense to found a new banking startup in the UK, describing the UK financial regulators as “not very business-orientated”.
The UK is home to many of the world’s most famous neobanks including Revolut, Starling and Monzo. But Restrepo claims new banking startups aren’t choosing the country anymore. Headline-backed Deblock, for instance, instead chose to become regulated in France.
“I think the FCA hasn’t realised yet that Brexit has happened and they’re not the most startup-friendly regulator any more,” she says.
Still, not everybody Sifted spoke to sees the UK’s place as a fintech hub declining. Antler’s French says “the UK is well-positioned” to remain a leader in banking technology.
French points to the country’s fintech talent and history fostering innovation through regulation as evidence. He also says the UK’s size — in comparison to the US or China — is an advantage as the country is small enough to implement changes quickly that can then be scaled globally if proven to work.
“The challenge will be maintaining that lead as others catch up,” he says. “But right now we’ve got a real first-mover advantage that I think we can build on.”
Read the orginal article: https://sifted.eu/articles/banking-10-years/
