Banking On Superhuman Experiences
Envisioning An Unorthodox Future For The Banking Industry
I didn’t go into Apple because it was a tech stock. I went into Apple because of the value of their ecosystem-Warren Buffet
Imagine a scenario where every retail bank is like Goldman Sachs’s platform Marcus which is a pure play digital bank. It accepts savings from its depositors on an exclusive online platform by offering much higher yield (in bps) than other savings platforms/banks without any minimum deposit needed, much simpler terms and conditions coupled with FDIC insurance. In fact, platforms of the future can offer yields comparable to high yield corporate bonds which are usually perceived to be riskier than treasury bills or government bonds. On the other hand, Marcus provides personal loans and other consumer credit at a higher rate than the deposit rate making a healthy Net Interest Margin (NIM) without the burden of investments in branches and headcount of a traditional bank. The problem is that the online model can be easily replicated. In a perfectly competitive world, this would mean differentiation based on rates i.e. a price war or a race to the bottom. How, then, will digital banks compete, if at all they are named as such, in the future.
