The Death of the Traditional Banker?

What is happening in our banks? Are bankers becoming an endangered species? To answer these questions, we must remember the roles of the banker and how they have evolved.

Execution of Payments.

The ability to credit a beneficiary without physically handing over cash was long the exclusive domain of banks. However, over time, payments have become a commodity. Today, no one is surprised that a payment can be made from a computer or a phone. Furthermore, this almost sovereign function of banks is being challenged by new entrants offering payment options outside traditional banking channels. The proliferation of new startups, known as Fintechs, points to even more changes ahead in this area.

Foreign Exchange. 

Buying and selling foreign currencies, whether in cash or via account transfers, was also important for banks. But with the transition to the Euro, foreign exchange needs dropped significantly. Today, it is often easier to obtain foreign currency banknotes from a local ATM than from one’s usual branch, where exact amounts frequently need to be ordered several days in advance.

Trade Finance. 

Bills of exchange and documentary credits are payment methods dating back to the dawn of the Renaissance, when Lombard bankers from Tuscany or Venice financed European trade. These instruments still exist, but they are used less and less in a globalized world where familiar counterparties prefer to transact via simple wire transfers.

Credit Provision.

This function is hugely important, as it directly fuels economic activity. By re-employing the deposits entrusted to it (liabilities side of the balance sheet), the bank expands the money supply in circulation through lending (assets side of the balance sheet), creating a multiplier effect on the money supply in the economy. This function remains essential, but the way it is performed has completely evolved. Credit decisions are increasingly made based on ratings and credit scoring, to the detriment of human judgment, even if the latter still plays a role.

Investment Advice.

This function remains important, but it too has undergone major changes. Where bankers previously managed assets hands-on (clipping coupons, etc.) and provided access to investment products, today they must primarily offer advice. This advisory role is being challenged by other independent players such as asset managers, family offices, and others. Furthermore, the sheer abundance of products, stock market volatility, and the current low-interest-rate environment make providing advice delicate, though no less important for it.