Retail and transactional banking have built-in incentives for honesty, at least with other banks. Banks are repeat players in a millennia old game. The banks primarily profit by charging their clients for their services. There's little upside and tremendous downside for being dishonest.
But when investment and retail banking merged, the stable system of incentives disintegrated. Before the merger, retail banking was more expensive, but it was incredibly stable; that premium was more than worth the cost. I don't see why investment banking needs to merge with retailing banking anymore than VC firms need to merge with retail banking. It just results in a chaotic system.
In an increasingly electronic age where the technical transactional costs are quickly eroding to nothing, you don't gain much efficiency by merging these roles. The remaining transactional costs are functional and specifically serve to ensure that incentives are well-aligned internally and externally. Removing those barriers merely permits people to extract all that value, diminishing the overall value of the systems and the economy in general.
Likewise, the global value of assets is so tremendous that investment firms don't need direct access to the capital within the retail banking sector. We're quickly approaching something like $100 trillion in highly liquid investments globally.