Mr King, an adviser to local neo-bank Xinja, worries that traditional banks’ conservative cultures have created an “iterative” – or incremental – approach to making money that has put them years behind rapidly emerging digital disrupters famous for their willingness to take risks and break through.
“Banks can survive but have to become part of this new ecosystem,” said Mr King, who is based in Manhattan and visiting Australia.
“They need to get over the concept that a customer comes to the bank branch. A bank is a platform that extends to other parts of your life if it is embedded when and where you need it.”
A new era of open architecture, which enables third-party developers to build applications and services around a financial institution, is creating competition from deep-pocketed, determined disrupters, such as Apple, which often turn traditional rivals, from newspapers to retailers, into digital superhighway road kill.
“If they can pull in your data into these systems then they can develop solutions based on your behaviour, which might not be existing banks. This is different from the traditional cross sell. It is about more optimal financial solutions,” Mr King said.
Smartphones will become even more personalised and a gateway into their owners’ financial lives.
Mr King, who failed to complete two university courses that he ended up teaching, is the founder of Moven, a mobile banking system, and author of Augmented, which is about the digital age, and recommended by China’s President Xi Jinping.
He was also a member of the so-called “Fintech Mafia”, an informal group of about 16 digital proselytisers who advised the Obama administration and Federal Reserve on disruptive technology and “fintech” – the word coined to describe computer technology, artificial intelligence and behavioural science being used in banking and financial services.
His role models are the Chinese challenger banks such as WeBank, which in about three years has acquired about 80 million customers, more than JP Morgan Chase has in the US.
The Shenzen-based branchless bank has a blockchain core that monitors marketing campaigns, transactions, applications, cyber security threats and other operations in real time.
Mr King estimates traditional Western banks are about eight years behind in research and application, which is light years in the fast-moving world of cyber-technology.
Future global leaders will combine predictive artificial intelligence based on sophisticated behavioural analysis and digital delivery where and when the consumer requires it.
“It’s about delivering core utility in real time,” he said, which could accelerate the extinction of bank branch networks.
“Credit cards will disappear over the next decade but the function of providing credit will still be provided by banks. You do not need plastic cards with 16 digits.”
Instead, a phone message will provide details on existing balance, available credit, cost of using that credit and real-time overdraft.
“You will not need to apply for credit because, based on previous behaviour, the bank will know how much credit you can afford to use.”
Mr King’s company Moven can predict a user’s need for credit 90 days out with 90 per cent accuracy.
Mortgages are also facing a digital rebirth, he predicts.
“Finance options will appear on smartphone, on your glasses, or from a smart speaker when you walk into a listed home. You will get an offer for a home loan from banks that are bidding for your business based on key data they have about you.”
Frustrated sci-fi writer
Roles of mortgage broker and real estate agent are likely to merge because property buyers like some human contact, particularly for their first purchase.
For car buying, the technology will predict financing based on offers in the buyers’ price range.
“Another option might be suggesting that the buyer might be able to bridge the funding gap by, say, signing up with Uber and committing to driving three days a week,” he said.
“The big shift in all these scenarios is that you are getting help when and where you need it. You are not having to visit a bank branch and jump through hoops.”
Mr King, who describes himself as a frustrated sci-fi writer, said the big shift in the past 40 years has been consumer willingness to rapidly embrace new technologies, particularly the post-Boomer generations that grew up with digital devices.
“I currently see changes in leadership in Australian banks. But I don’t see cultural shifts within their banks. The big concern is that the culture on how to make money is not changing,” he said.
“More than half of fintech is being driven by frustrated bankers who could not change the culture of their former employer. Banking cannot stay in the 19th century when their customers are embracing these changes.”
Pressure on banks to report quarterly made it difficult to break out of the short-term earnings/revenue cycle and drive pioneering change, Mr King warned.