In the modern world, savings serve as an essential buffer against the unexpected and help us to prepare for the future. Banking accounts are the most common way to save, with 97% of the UK population using at least one account.
But banking accounts are changing, and today’s offerings would have been the stuff of science fiction only twenty years ago. Let’s take a look at recent changes in banking, and what banking accounts will look like in the future.
Banking account history
While some form of banking has been around since about 4,000 BCE, banking as we know it emerged in the late 16th century. These early banks took deposits, lent and exchanged money, and issued secured bank debt.
After World War II, technology progressed, bringing automated teller machines in the 1960s, telephone banking in the 1980s, and online banking in 1999. With the rise of internet-enabled smartphones after 2007, mobile banking was inevitable; as Artificial Intelligence (AI) and chatbots developed, conversational banking was next.
The Covid-19 pandemic pushed banking online, along with almost everything else. Slow adopters were forced to innovate or lose customers. And innovate they did.
Today’s digital banking accounts
Like it or not, we’re in an online world. The graduates of 2021 have never known a world without the internet, and those of 2031 will never have known a world without smartphones. For those accustomed to the instant gratification of the online world, traditional banking feels slow and clunky.
According to Juniper Research, more than half the world’s population – 4.2 billion users – will access digital banking services in 2026. Already in 2021, 2.5 billion use digital banking. But what’s the advantage of digital banking?
Compared to traditional banks, digital-only banks have lower overheads so they can offer the same services at a lower cost, with lower fees, higher interest rates, and (being online) a more responsive customer experience.
In a recent survey quoted by Juniper Research, 50% of UK customers felt that traditional banks’ online systems only serve the banks. In contrast, they felt that digital-only banks serve the customer.
Tomorrow’s banking accounts
Even an otherwise great bank can offer a terrible online banking service. Open banking, a recent development, lets you share your banking information securely. Companies can use this information to offer personalised services such as budgeting or investment advice, or a centralised money-management dashboard. As secure data sharing and AI expand, we’ll see more imaginative personalised offerings like Credit Kudos.
Credit Kudos’ AI monitors borrowers’ behaviour through open banking. When it sees sustained healthy financial behaviour, it automatically lowers the interest rate. This is a win-win: responsible borrowers pay less, bias is reduced, and the lender has a clearer insight into its true risk exposure.
Banking hasn’t escaped the rise of the bots. At some forward-thinking banks, bots already answer simple questions like balance enquiries and account details, saving customers time and reducing friction. As AI progresses, this so-called ‘conversational banking’ will only expand.
Juniper Researcher Damla Sat observed that certain banks “have progressed with well-planned and executed digital transformation strategies, and other banks need to build similarly broad and revolutionary roadmaps, or they will be left behind by more agile competitors.”
Banking as a service
Imagine starting your own internet service provider (ISP). If you had to lay your own cable from scratch, then it would be almost impossible to compete with the big companies, but because new ISPs can pay to use existing infrastructure, we have competition, and consumers benefit.
Banking as a service (BaaS), the most important banking development you’ve never heard of, does the same thing for banks. The BaaS provider provides the invisible ‘nuts and bolts’ that make a bank work behind the scenes, while another company provides the platform or interface that customers interact with. This means that you can interact with the nimble startups who are actually good at customer service and user-interface design.
The basic functions of banking accounts haven’t changed since the 16th century, but technology has, and banking has grown along with it. Fifteen years ago, contactless cards were the new thing on the block. Today, it’s digital banks and BaaS. What will it be in twenty years? Only time will tell.
One thing we can be sure of is that banking accounts aren’t going to disappear. If you’re not ready to commit to a digital bank account just yet, then check out our best savings accounts and make sure you put something away for the future.