Why are banks pruning their branches after years of growing them? What is the purpose of a bank? To grow savings, get a loan, make and receive payments.
With crowd funding sites like zopa, lending club, ilend and umpteen other crowd funding sites, individuals can cut the middleman and take direct control of their investments or get a loan. Venture capital, PE and debt funds are better capable of evaluating the risks of investing and lending to businesses. NBFCs (Non Banking Financial Institutions) in India – an umbrella that includes micro financial institutions (MFIs), Asset backed financiers (housing, auto and consumer) have better infrastructure like geographical coverage, understanding the market, credit score of borrower, than banks to cater to customers. Focused lenders that lend to infrastructure, agriculture and export sectors are better placed in their sectors than banks. Crypto currencies can’t be written off and will comeback as they offer an almost no transaction charge transfer of money. New payment solutions like mpesa by Vodafone and Square (and the look alikes) serve merchants better than solutions provided by banks. So why do we need a conventional bank in its current form?