This New Financial Trend Could Make Traditional Banking Obsolete, Say Analysts

City analysts are calling it a breaking wave: a blend of tokenised money, open banking, and real‑time rails that promises cheaper, faster, programmable finance without the high‑street middleman. In this model, value moves as quickly as data, contracts execute themselves, and wallets become interfaces for saving, borrowing, and investing. That is why some argue the traditional current account is starting to feel like yesterday’s technology. The pitch is simple yet radical: if users can hold digital pounds or stablecoins in self‑custodial or regulated wallets, pay merchants over instant networks, and earn yield in on‑chain markets, why park cash in a bank at all?

The Trend: Tokenised Money Meets Open Finance

At the centre of the shift is programmable money—value that lives on shared ledgers and can be governed by code. Stablecoins backed by high‑grade assets, experiments with a potential Digital Pound, and bank‑issued tokens are converging with the UK’s open banking regime and the Faster Payments infrastructure. Wallets can now initiate account‑to‑account transfers, embed compliance checks, and trigger conditional payouts instantly. Instead of banking products being destination websites, they become composable building blocks embedded in apps consumers already use.

Developers are pairing these rails with smart contracts and identity services to automate treasury, escrow, and cross‑border settlement. Start‑ups are offering yield from tokenised T‑bills, while corporates trial on‑chain cash management to cut reconciliation drags. For consumers, the proposition is similar: keep funds in a regulated wallet, settle bills in seconds, switch providers with a tap, and access lending sourced from decentralised liquidity pools. The result is a marketplace for money where the best rate, not the incumbent brand, wins.

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Why It Could Sideline High Street Banks

Traditional banks rely on low‑cost deposits to fund loans and generate net interest margin. If households shift balances to tokenised cash or wallet‑based accounts that pay market‑linked yield, deposits become less sticky and pricier to retain. As payments migrate to instant account‑to‑account rails and wallet networks, banks lose day‑to‑day customer touchpoints that once justified bundled fees. Merchants, facing tight margins, are already eyeing A2A checkout to avoid card costs and chargebacks, compressing interchange‑based revenue streams.

On the lending side, programmable collateral and on‑chain credit pools can route capital directly from savers to borrowers, with banks competing as one of many liquidity providers rather than gatekeepers. Treasury operations move from batch processes to continuous settlement, shrinking float income. In this world, the “account” is just a credential; the utility sits in the wallet and the network. Banks can still thrive, but chiefly as regulated nodes, compliance oracles, and balance‑sheet partners—not monopolists of distribution.

How the Economics Stack Up

Cost and speed are the obvious differentiators. Real‑time A2A payments can clear in seconds at pennies per transaction, while card rails and cross‑border wires often carry multi‑percentage fees and multi‑day delays. Programmability then compounds the advantage by removing manual reconciliation, escrow, and settlement risk. For consumers and SMEs, that translates into better working capital and visible pricing. For platforms, it creates “money‑as‑software,” where payouts, subscriptions, and compliance controls live in code, not paperwork.

The table below summarises the trade‑offs cited by analysts. It highlights where tokenised/open finance wins on throughput and flexibility, and where banks still matter—chiefly in deposit insurance, credit underwriting, and broad regulatory protection. The strategic question is whether incumbents can bundle these strengths into wallet‑native experiences before challengers turn them into back‑end utilities.

Regulators’ Calculus in the UK and Beyond

The UK is laying groundwork for this future. The FCA is expanding open banking into open finance, the Payment Systems Regulator is pushing variable recurring payments and fraud reimbursement, and the Bank of England is consulting on systemic stablecoins and a potential Digital Pound. The aim is to harness efficiency without importing volatility or compromising consumer protection. Meanwhile, the EU’s MiCA regime and PSD3 will set templates for token issuers and data access, shaping competitive dynamics across the Channel.

Key risks remain: wallet hacks, governance failures in decentralised protocols, and the possibility of rapid deposit flight during stress. Clarity on reserve quality, segregation, and redemption rights will determine whether tokens behave like cash or shadow money. Expect tighter rules on attestations, capital, and conduct, plus enhanced liability frameworks for payment initiation. For banks, partnerships and licensed token issuance could be the hedge—bringing their compliance muscle to the very rails that threaten their dominance.

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Whether this is a passing hype cycle or the next operating system for money will hinge on execution. If wallets deliver safer custody, near‑zero‑cost payments, and fairer yield, households and merchants will vote with their thumbs. Banks have advantages—brand trust, regulation, credit expertise—but they must repackage them for a world where accounts are APIs and value moves at network speed. The window for strategic reinvention is open, but not indefinitely. How would you want your money to work if you could design it from scratch today?

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