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Modern banking: what's changed in the UK?

Banking is changing. From commercial banking to investment finance, and even central banking, how we manage our money is changing.

But is it better or worse for you? And what does the future of banking look like? 

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The origins of modern banking 

Banking has played an important role in thousands of years of human societies and even pre-dates the modern idea of money.

In Ancient Egypt, where grain was the main currency, banks were used to securely store grain.

And it was the Ancient Greeks who first put in place a monetary system of loans, deposits and storing wealth. 

But it was the Roman use of temples to mint coins that may have first spurred the architecture of modern banking.

Over hundreds of years, banking systems grew and became important sources of power and wealth, such as in the early Italian city states of Venice, Florence and Genoa whose ruling families built vast fortunes through banking.  

How has banking changed in the past 200 years? 

Through the industrial revolution and growth of international commerce, central banks moved beyond financing governments and royal families and became more closely tied to the activity and financing of commercial businesses, kickstarting its role in powering the private sector.

Since then, new technology has seen banking become more localised, with the invention of cash machines and electronic payment systems during the 1960s and 1970s. 

So, what's changed in UK banking?

Cryptocurrency

The internet has led to multiple transformations in banking, with one of the most consequential innovations being cryptocurrency.

While more volatile than traditional banking, cryptocurrencies have grown rapidly in popularity over the last few years.

Today, more than 9,000 different cryptocurrencies are available for purchase.

Through both cryptocurrencies and the underlying blockchain technology that powers them, a new age of money management is beckoning.  

Branch closures 

Almost half of the UK’s physical banks closed between 2015 and 2022.

With the slow decline in usage of cash, fewer people are entering physical banks, making these local branches less viable. 

Although many younger demographics may have never set foot inside a physical branch, the decline in stores represents a major challenge for older demographics and those with limited use of digital software who are much less confident with digital banking. 

Increases in cybercrime 

Financial cybercrime represents a major security risk for businesses and households everywhere today.

UK residents and businesses are losing as much as £2.5 billion a year due to fraud and cybercrime.  

To counter the growing threat, leading banks and financial regulators are increasing the amount of protection on offer, such as with personal data encryption and two-factor payment authentication.

However despite efforts, there is never any protection that can conclusively protect people from financial scams

Technology & digital disruption

The financial technology (FinTech) sector has grown rapidly in recent years, bringing digital and online banks into the mainstream of consumer banking.

Challenger banks such as Monzo, Revolut and Starling all offer current, and usually savings, accounts to consumers, all without any physical stores.

Savers can now access their funds from wherever they are in the world, through a mobile phone app.

For people confident enough to do their banking on the go, these new banks can offer a convenient way to spend and save. 

Through open banking legislation (see next point), the UK has gone further than many other countries in quickly adopting digitally enhanced forms of banking. 

Open banking 

Data powers many sectors of the modern economy, and banking is no exception.

Open banking is about creating networks of consumers, banks and third parties, where financial data can be shared widely and fluidly – but also securely. 

From accessing personal banking histories to carrying out credit checks and even getting mortgages approved, open banking could lead to traditionally slow processes being carried out much faster. 

But as ever, there are risks.

With so much public data made quickly accessible, more people could be at risk of new and advanced kinds of cybercrime.

Should businesses not manage or store data securely, confidential personal data could be used by criminals to potentially detrimental effect. 

Is modern banking better for consumers?

Whether or not evolutions in modern banking have made managing your money easier or not is up to you.

The rise of online banking has certainly made money management more convenient for many, removing the need to source out local branches to ask questions and withdraw cash.

And for those willing to explore how cryptocurrencies and open banking can help them reach their financial goals, the future of banking is even more promising. 

However, change never comes without some risks.

For those less confident in digital technology and online safety, the loss of physical banking branches poses a problem.  

But one thing is clear: banking will continue to evolve at pace with new technologies and consumer appetites.

From more convenient online banking to AI-supported crime prevention, banking is set to develop further.  

Managing your money isn’t always easy.

Speaking to a financial adviser can help you find a solution that works for you. Find one today with Unbiased.  

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We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Kate has written for leading publications and blue chip companies over the last 20 years.