The future for local banks

Jesper Bo Jensen, Ph.d., Futurist / 24. nov 2017

Discount or luxury

The small and medium-sized banks are at a crossroads with the choice of discount or luxury. Either they’ll continue the automating of customer services, systematizations of customer concepts, calculations of customer costs and cost-based fee specifications or a supplier of private, financial luxury will be developed that are focused on having the time for their customers and understanding them. The customers want high quality for a low price or something very special. The middle-ground in the financial sector is threatened and faces a development that can be likened to the development faced by retail up till 2009.

The customers have changed

Customers have changed in the past years: Good wares of a high quality for a low price are wanted. Products that are okay and don’t make much ado. “Value for money”. This development will break through in the financial sector up till 2020.

The challenge is to adapt the services in the bank to the customers – and not the other way around. Tailor made packages for a low price or solving individual problems for customers. There are many areas to deal with when it comes to individual solutions: Individual pension planning rather than package solutions with whatever business partners you have at the time. House financing tailored to the individual family rather than pre-made loan types. Financing senior living or a solution for the youths who are on the move, about to travel, study or live abroad.

The banks have to understand people’s lives – or just provide the cheap standard solutions. You need to understand that Danes have four types of private economy:

1. He hands everything in and is given an allowance

2. They have a shared economy and one joint account in the banks

3. They have a shared economy and each have a bank account – separate banks too perhaps

4. They don’t have a shared economy and have separate banks

The last two are growing and contain customers with high earnings and high turnover. The other categories are diminishing or disappearing. Without an understanding of this, the customers will most likely be treated incorrectly.


The future small or medium sized banks are glocalized – a contraction of global and local. You need to be based locally both customer- and employeewise.

At the same time, banks need to take up global challenges of relocating administrative jobs from Denmark. The back-office functions that can be handled in Asia will in 15 years be a matter of course to have handled there. In the beginning many will distance themselves from relocating jobs, only to follow the trend later on. It has happened in the textile industry as well as the aeroplane industry. It’ll also happen in the financial sector.

Two types of money institutes in 2020

The local discount bank is getting paid for all services directly in the shape of fees. The interest is ultimately in line with the market and profits on loans are low. Customer treatment is automated so very few customers are seen in the branches during the day. Many branches are therefore placed in side streets, above street level and other less exposed places in cities. Customers arrange meeting times with an employee only on certain occasions. Advice is given mostly online via video meetings with employees. In return the bank is accessible more or less 24/7. Much of the bank’s work is produced by a large Indian back-office that provides the same services for many banks. The largest competitors are the two largest banks in Denmark, who for most private customers only offer the discount bank services. It’s of course named something else – discount isn’t ‘comme il faut’ in the financial world.

The personal local bank offers solutions for financial challenges for all people. It’s expensive, but nice to be a customer. You have the same advisor for many years and you’re offered customized solutions rather than pre-made packages. Lifelong customer relationships and events that happen during life are the frameworks for developing services in the bank. Branches are placed in the center of cities in busy streets and popular squares. There’s a tasteful interior design in the meeting rooms and customers are regularly invited to events in the bank and in meeting rooms at hotels and conference centers. There’s a decidedly individual attunement of internet offers and customers can of course always get in contact with the bank. Back office is abroad much like the rest of the sector. The competition consists of other banks of the same type.

There are more of the first and least of the last – much like retail today, where specialty stores have a far smaller turnaround than discount super markets and low-price warehouses.

In a 100 years

In a hundred years the financial sector is either part of numerous online-nets or integrated in the personal, private counseling. Dedicated money institutes are of course still around, but they’ve taken a step back and have become wholesale-businesses who have agreements with the nets and the advisors for private customers. In regards to businesses, financial retail sales still exist and their degree of sophistication are much higher than today. The big got bigger but the small are still alive. Even in a 100 years there isn’t any proven benefit of large scale operations for banks larger than Amagerbanken.

Published here 2017

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