The changing face of retail banking
Although digital services have many advantages, banks will have to continue offering consumers a choice in how they access their bank
The digital revolution that has already transformed industries such as publishing and retail has arrived in banking. Recent research from the British Bankers’ Association found that customers will access their accounts via mobile devices 895m times this year. By 2020 that will rise to 2.3bn times. Separate data show that a year ago one transaction in 35 was via contactless payment; today the proportion is one in ten and rising fast.
To discuss the changing face of retail banking and its implications for banks and their customers, Prospect brought together panels of industry experts at both the Labour and Conservative party conferences in partnership with Barclays. Steven Roberts, the bank’s strategic transformation director, described the range of digital initiatives the bank was pursuing, including enabling acceptance of digital images of cheques to deposit funds and recent moves to enable staff to set up a branch anywhere using just their iPad and Wi-Fi or 3G connection. The ground-breaking technology gives staff secure access to services traditionally only available through the confines of a bricks and mortar branch.
However, he stressed that his experience of bringing digital technology to Barclays’ frontline staff by putting tablets in every branch had proved more challenging than expected. Uptake had been slow and many staff were embarrassed to admit that they didn’t know how to use them. “We realised that we would never be able to convince customers that digital was going to help them if our colleagues were uncomfortable,” he said. Barclays had undertaken a big project to help its staff to gain confidence with digital technologies and in the process had realised how easily some customers could feel “left behind” by the move to more digital banking.
Digital exclusion is one of the major challenges that banks face. Tom Wright, chief executive of the charity Age UK, said two-thirds of over-75s—the fastest growing group in society—are not online, while among lower income households smartphone usage is often high but many are nonetheless unbanked, according to Sian Williams, head of financial inclusion at the East London charity Toynbee Hall. One key reason why many disadvantaged “digital natives” are not using the new services is the difficulty of proving identity in order to access digital services in the absence of a job, a driving licence or a passport.
This need for “simpler, largely digital ways of proving your identity” had come up repeatedly in the Financial Conduct Authority’s conversations with companies, said Chris Woolard, the regulator’s director of strategy and competition.
However, these hard-to-reach groups are often those that benefit most from new technology. FCA research shows that where poorer consumers were able to benefit from some of the advantages that digital banking can offer, such as text alerts and better real-time information on their available account balances, unauthorised overdrafts were reduced by 25 per cent, he added.
Other digital initiatives, such as the Open Bank API project, held out the prospect of further advances by allowing consumers to share their bank data with third parties so that they could shop around for better deals, said Dan Morgan, head of policy and regulation at Innovate Finance, the body representing financial technology companies. The project would also help to standardise the data banks hold on their customers to enable better comparisons.
Although banks have seen their reputations sink since the financial crisis, they continue to be seen as the most trusted custodians of people’s personal information. David Evans, director of policy and community at BCS, the Chartered Institute of IT, argued that this widespread trust represented a major opportunity for banks to become leaders in helping people to collect and manage their personal data for their own benefit. “That’s an incredibly valuable service,” he argued. “It’s a whole market waiting to be created.”
Others, meanwhile, warned of the limitations of digital banking. Chi Onwurah, shadow minister for culture and the digital economy, highlighted the risks of digital scams and data theft and argued that the old and the vulnerable were inadequately protected. And although new technologies made transactional banking such as payments much faster and more convenient, they had less to offer in situations where personal advice and guidance were needed. “We talk about transactions as if they are relationships,” said John Penberthy-Smith, customer director at the Money Advice Service. “Just because the same people check their bank account over and over doesn’t mean they’ve got a deeper relationship with the bank.”
Ultimately, the discussion recognised that although digital services have many advantages for consumers and the banks themselves, banks will have to continue offering consumers a choice in how they access their bank and receive information from it. There is no mistaking the steady emergence of digital banking but many would still prefer to receive a paper statement or walk into a branch than to tap an app on their touchscreen.
Andy Davis is Associate Finance Editor of Prospect
Prospect and Barclays hosted roundtable discussions on the role of technology in shaping the future of banking at the Labour Party conference in Brighton on Monday 28th September and at the Conservative Party conference in Manchester on Tuesday 6th October. Speakers included Prospect’s Andy Davis, Chi Onwurah MP, Shadow Minister for Culture & Digital Economy, Steven Roberts, Strategic Transformation Director at Barclays, Tim Yudin, Director of Design and Delivery at Payments UK and Tom Wright, CEO of Age UK. For more information, please email firstname.lastname@example.org.
For an article introducing the debate please read: The digital revolution
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