By Richard Handford

Banks have never been particularly popular institutions but even so the current time must rate as a low point. On top of the ongoing banking crisis, we have had the Libor scandal in the UK as well as a US investigation into money laundering at HSBC. Of course there are calls for a shake-up in the banking industry.

One suggestion is that competition is the answer. Hence the acquisition by the UK’s Co-operative Bank of 632 branches from rival Lloyds TSB was hailed as a move that will have major implications for consumer banking. Maybe so, but the Co-op’s successful bid is a very traditional threat to the established order. Given the severe loss of trust in the banking industry surely a more radical proposal would have a chance of success? And any non-traditional approach would presumably involve a strong element of mobile technology, as well as an online and social media strategy.

One would have thought the time is ripe for an approach that uses mobile technology to deliver a service to smartphones and tablets not just to subvert the traditional bank-client relationship but also to control upfront investment and ongoing expenses.

Yet all the innovation in this area with mobile technology is not heading to banking, it’s all pointed towards the payments market. Look at the likes of Google, PayPal, Square, Isis or Starbucks. It’s all about payments and not about reinventing the everyday business of having a current account, savings and loans. Even the inflated expectations that frequently surround Apple are not predicting it is about to enter the banking market.

Users are set to be bombarded with digital wallets for credit, debit and loyalty cards as well as for vouchers, coupons, tickets and passes, but an alternative to existing banking services? You must be joking.

Ask anyone who knows and they will say regulation is the barrier to entry for newcomers to the banking market. Nick Holland, principal analyst with the Yankee Group, told me there is “a deep dissatisfaction with banking. It’s extremely shocking what happened with Libor” and agrees that mobile technology “is a means to cut through today’s business models”. But regulation deters entrants, he says.

Likewise, Dave Birch, a director of Consult Hyperion, pointed out to me that core banking is heavily regulated and also made a fair aside that “regulations are complex and as far as I can see often pointless. They did nothing to prevent the banking crisis.”

While Holland says he has a spreadsheet with “70-80 names” of players interested in the mobile money market, he adds the caveat “there are so many variants out there but with no pedigree”. When it comes to banking, he says: “Consumers and merchants would still rather go with a traditional player, something tangible"…

Customer conservatism then is a second factor that stymies mobile banking. Or does it? Perhaps only if we expect a full-on assault on the traditional experience. Dave Birch has another idea, what he describes as “near-banking”. Under this model, competitors pick away at parts of the banking market, for instance a company like Zopa, which offers online P2P loans and has taken a share of the UK personal loan market.

In fact, Birch says we might see the emergence of such services which when bundled together equal what is available today from a bank. In addition to Zopa for loans, a bundle could include a player such as Mint for the front end and Google for payments, he says. Together they represent a near-banking experience.

There may even be that there is another brand that aggregates these services and presents them to the consumer, probably a brand with which they have a particular affinity. It might not be the neat solution that regulators or the media want to see for transforming the banking model but this patchwork effect could be the means to effectively introduce more choice. Whether it succeeds in averting another banking crisis is quite another matter.

Richard Handford

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.