Big banks function like bureaucracies in that both are tightly regulated. Because they act on an international scale in a global economy, both regulatory burdens as well as compliance costs keep increasing. From 2010 to 2016, annual compliance costs with Swiss financial regulations have more than doubled for Switzerland’s financial industry.

As a result, more bankers are openly criticizing the growing stack of rules, since a lot of their time is consumed by dealing with ensuring regulatory compliance. But many banks have adopted an ambiguous stance on the issue since the higher compliance costs gives a competitive advantage to incumbent firms, which are much better equipped to shoulder the regulatory burden then small, upstart newcomers that cannot afford to have a large staff focused solely on compliance and regulatory matters.

There are other hurdles and disincentives also keeping banks from being innovative. Once a bank is listed on a stock exchange, it has little scope for undertaking significant reforms. There are no incentives for its high earning managers to cannibalize their own business in the short‐​term, even if doing so repositioned them for the long‐​term.

Because financial analysts tend to be focused on quarterly numbers, launching an innovative low‐​fee product for example would crash revenues with dire short‐​term results. The stock price would plummet, something neither the shareholders nor the managers want because their performance bonuses would be slashed. Managers look for other ways to cut costs instead, including sacking employees.



In 2017, Swiss banks employed 93,555 people, which makes it the first time in recent history that the number of people working in the financial sector in Switzerland dropped below the mark of 100,000. Losing one’s job is always inconvenient, but even the remaining employees are suffering for it as their teams become chronically undermanned and the work load increases. As work / life balance deteriorates, the number of burnouts increases.

Adding fuel to the fire is the fact that banks live off of their artificially high nominal productivity. Although the marginal utility from profiteering off credit expansion has been shrinking, banks are still the greatest net beneficiary (besides, perhaps, the state). But that nominal productivity lets banks ignore the customer to a greater extent than if its productivity was closer to reality. A widening gap between the company and its customers is not only bad for the latter, it’s also unfavorable for a company’s employees.

The greater the distance between a bank and its customers, the less it is clear to the employee what his work in the company is good for. Anthropologist David Graeber defined this kind of job as a bullshit job in his book of the same name, an occupation that is so meaningless, unnecessary, or harmful that even the worker cannot justify its existence.

Those working in such terrible jobs may find that their conscience, named by neurologist and psychiatrist Viktor Frankl the “meaning‐​organ,” has come knocking at the door, complaining about the day‐​in, day‐​out lack of meaning. Thankfully, there are innovative startups and fledgling crypto networks that can offer both workers meaningful employment and customers a superior banking experience.

The great unbundling of banks is happening. Amazon is leading the way and other tech companies are following along. Upstart banks likes Revolut, TransferWise, N26, and Monzo are entering the field. In Switzerland, innovative financial technology firms like Viac, Descartes Finance, Yapeal, and Neon have taken up the chase.

Another great challenger to traditional banks are central banks themselves, which have been experimenting with Central Bank Digital Currency or, for short, CBDC. Similarly, to the sovereign money movement, CBDC can be viewed as a tool to cut commercial banks out of the equation by offering citizens a direct account with the central bank. Simon Dixon neatly expands on this idea here, while this article explains why central banks should consider offering accounts to everyone. Obviously, a CBDC would be a huge disruption to commercial banking, both because it would siphon off a stream of customers and revenue and because it decreases the likelihood that the central bank would bail out bypassed commercial banks in any future financial crisis.

In response, the banking industry is attempting to redefine itself by embracing what is called Open Banking. Opening up and standardizing APIs is supposed to turn the banking industry into an open data economy and by doing so foster a cooperative instead of competitive ecosystem. In practice this means that a new banking app, operated by a start‐​up, can automatically connect to the bank’s relevant client data, feeding that data to its own app thus bootstrapping the services it offers to users.

In the US this is already very much the case. A great example is Nummo, which is a personal financial management platform helping the customer to connect each and every bank account through APIs. In Europe the regulator is pushing for Open Banking with regulations like PSD2. As usual, Switzerland is taking a different route; regulation is not their preferred way of doing things, which is why the Swiss National Bank has been pursuing a more direct access model. Fintech startups can acquire what is called a fintech license, which gives them access to the Swiss Interbank Clearing system.

In this way, new actors are integrated into the Swiss payment system without needing to go through a commercial bank; they will be operating full‐​reserve banking at the central bank. Since start‐​ups with a fintech license are not allowed to do any type of maturity transformation, which means they are not allowed to directly manage a client’s money, their current account offering will truly be operated on full‐​reserve basis. In times of virtually liquid banks, this is a very interesting development.

Will Open Banking be a critical turning point in the ongoing decline of commercial banks? Yes and no. Banks will have to respond by turning into platform aggregators of data. The current state, marked by siloed banks, will transform into an open ecosystem. It seems improbable that incumbent banks will play a major role in shaping the new ecosystems. Tech giants like Amazon appear to be much better positioned to do so.

But not all hope is lost as Martin Stadler, the CEO of Altoo, a Swiss WealthTech company, argues: “Whatever bank offers the greatest API set will have a huge advantage. This implies that banks have the courage to let clients stray. If bank manages to let clients use a foreign service through its own platform, they can still keep their most valuable asset: the customer relationship.”

That direct relationship with customers radically changes most bank’s business model. They will make money by selling good advice and services that have an immediate benefit. Bankers will turn into financial amigos, caregivers, or even chaplains. Here’s an example of how Andy Waar, co‐​founder of Yapeal, envisions the future: Microservices of all types will be a gigantic business opportunity. Whether you go on a summer trip with our brand‐​new reflex camera or head to the mountains to ski, you will be able to insure your camera as well as your skis for just the relevant amount of time. You won’t be buying one‐​year insurance but an actual customized insurance policy for exactly the right amount of time.

When it comes to banking, the data driven business has a huge potential, especially if it is linked with deep, machine learning. However, working with data is a delicate business. As we know from the ongoing scandals involving AdTech companies like Facebook and Google, consumers are fed up with feeling like their privacy and data are being abused. Banks needs to reassure potential customers that they possess data sovereignty and can decide who can receive which data. Primacy in this new style of banking will be won by those organizations which win customers’ trust and as a result receive a critical mass of consumer data, gaining a lasting first mover advantage in the field.