The financial services industry has gone through some drastic changes, not least the methods with which individuals complete financial transactions. From gold, to cash, to phones, methods of paying for goods have come a long way in a short space of time.
Today, transactions are being processed from the comfort of home or on the move thanks to the evolution of mobile technology. Apple has revolutionised this new development with its product Apple Pay, a digital payments platform which offers a cheaper, faster alternative to old-skool financial payment processes like Swift. Does being cheaper, however, mean it is good enough to ensure trust and security?
Banks are still currently one of the most trusted institutions when it comes to handling and storing customer data. However, consumer trust and banking cybersecurity postures will be tested by criminals. One only has to look at the recent security breach at TalkTalk, which affected thousands of its customers, who are now battling to reclaim their personal information stored online.
Digital interactions will be the primary way customers and their banks connect with each other. Mobile banking accounts for almost a third of all interactions between bank and customer. According to Brett King, founder of Moven, there has been a 90 per cent reduction in bank branch visits, which coincided with the evolution of digital banking. The public are voting with their finger tips and traditional banks must ensure customers have a consistent experience, no matter where they visit.
The move to digital banking has many benefits for banks too, particularly the customer data that is being created and collected every second of every day. The data collected is often stored in separate silos within the bank's IT infrastructure, where, consequently, applications in the middle layer pool the data together in a coherent form. By analysing this data, banks can build a portfolio of new products that suits the needs of the individual, the hard part is getting to that data, and that is where the development of internal IT infrastructures becomes useful.
The introduction of Apple Pay has exacerbated the need for banks to improve their current technology architecture. Apple Pay is becoming extremely popular among those that have iPhones but there are rivals who offer similar services and technologies. bPay for instance, has used its platform to offer consumers promotional offers based on the purchases they make. This platform, which is provided by Barclays, is an ideal illustration of the direction payments are moving towards and confirms the fact that traditional banks are trying to catch up.
Some banks have started this journey of offering a more advanced digital experience, with Nationwide rolling out video banking, which they say will replace face-to-face meetings with bank branch managers. This is to offer services to individuals who live in rural locations, who might have to wait weeks for the opportunity to discuss mortgage plans or to receive financial advice.
Digital transactions are opening financial services to new markets, giving emerging economies, where it might be difficult to open bank accounts, an economic impetus and offering economic independence to the masses. Digital accounts are allowing individuals to transfer money and make payments with only a mobile phone and a text. A particularly useful case is the popularity of mobile banking in Africa, where it is rare to open traditional branch bank accounts. Most people in Africa have a mobile phone which has boosted the adoption of mobile banking and shows the usefulness of technology in providing people with an essential service.
Technology startups and inventions will not signal the end for traditional banks but they are highlighting the fact that people are open to alternatives. This means it is crucial for banks to accept the changing nature of banking and payments and move with the crowd. Banks need to make new technology as accessible and useful as possible to improve the customer experience. If they can improve the services they provide to their customers, banks will retain them for longer by showing true value.
While it is obvious technology businesses have disrupted the banking sector with their offerings, particularly in the realm of payments and money transfers, they still have some way to go to supplant the established giants who have centuries worth of experience.
The opportunity is there for technology companies to move into banking but it will take some time to convince the masses they are trustworthy enough. For banks to thrive in the digital age, however, they need to explore new markets and widen their customer touch-points. Increasing customer interactions using new technology, or even just partnering with young, nimble technology providers will offer banks the opportunity to not only survive, but excel, thanks to their experience in the industry and deep knowledge of their customers.
Max Speur, COO, SunTec