Death of banking as we know it

Posted by Flux on 

27 August 2013

What is trending?

Banks globally are strategically repositioning their business with a new view on growth – growth in the new world order means adopting new technologies and applying a concept of banking of the future. In fact, banking of the future is not banking as we know it. Banking of the future is taking shape as a remodelled financial services industry providing more varied offerings to customers. Strategically, the view is to shift from a product centred view to a customer centred view.  This shift is largely due to the crucial role the banks played in orchestrating the global market collapse of 2008. For the first time customers and consumers were handed a first-hand peek and experience into the greediness of banks and also altered the view of banking as a trusted institution. Consumer trust was broken.

The financial services industry is now revisiting the importance of service, personal interactions and regaining consumer trust. In an effort to regain that trust, this industry is evidencing a proliferation of new services such as online payments, social banking and new business models. Now more than ever, the financial services industry will be driven to innovate and serve the customer with the greatest depth and value possible.

Why it’s important?

There is one fundamental at the core of this – trust. Consumers need to trust their financial services providers (banks) solely because banks are the custodians of our most valuable asset – our hard earned cash. But it’s not just a case of trusting them with our savings; we also need to trust that they’ll treat us fairly by giving us decent interest on our money or by not overcharging us.

Digital disruption has been a key trend that has introduced concepts such as social enterprises, social banking and new ways of doing business. The digital economy is becoming far greater and has introduced a tipping point for the financial services industry as a whole. Brett King in his seminal book: “Bank 3.0” references today’s society as being one of “hyperconnected consumers”.  By 2016, the average customer will be using their phone for mobile banking or payments once a day, 20 to 30 times a month on average. Customers will be using a tablet or internet banking on a PC or some other screen seven to ten times a month. They’ll be visiting an ATM three times a month. That makes around 400 digital interactions with a bank brand via technology in a year according to King’s “Bank 3.0” book.

What’s the butterfly effect?

New technologies mean that the traditional banking revenue margins are now being challenged by new competitors. The industry is forcing a hard introspective look at itself and reassessing existing business models.  Google Wallet is prime example of the true butterfly effect. In May 2013, Google announced Google Wallet users based in the US would be able to send and receive money as an email attachment. There is no fee for payments made from a user’s Google Wallet balance and it is free to receive money. This again evidences how the customer/consumer is empowered in an open and transparent transaction.

More so, traditional banking institutions are tapping into the realm of the future of the financial services industry. Mobile platforms are key. East Africa has seen the proliferation of M-pesa and mobile payment platforms such as FNB’s cellphone banking pay2cell etc.  In more traditional markets, mobile diffusion has also taken off. BNP Paribas launched Hello bank!, a full-service bank which is only available via mobile devices. The bank’s services include apps tailored for mobile banking and allows for customers to enjoy waivered fees and premium rates. Other similar financial services providers in the same vein are GoBank.

Moven solution is one product that allows customers to  see how much they’ve spent in a certain outlet over a specific period. The Moven solution will tell the customer that they’ve spent R1000 that month in that outlet, suggesting a change in financial behaviours and patterns of spending. This is a massive advantage compared to plastic and cash. This is where personal finance management is really going to come into its own. In South Africa, Christo Davel and his start up 22Seven proved how such solutions are applicable to our local market.

An IBM report states that regaining trust in customers will be about safety, knowledge, sincerity, fairness, sharing practical wisdom and trusting to be trusting. Perhaps, one of the interesting innovations to emerge is Nuance. A solution in banking that proves that banks can regain trust by being trusting themselves. Nuance Mobile Vocal Password is a voice biometric authentication solution designed to provide smartphone users with an easy yet secure app authentication experience. No more passwords and enhanced security, which bring to the end user more self-service capabilities. US Bank announced it will soon begin offering voice control technology to users of its FlexPerks mobile app, using Nuance technology.

In other ways that the financial services industry as a whole is trying to regain customer trust is through acts of sincerity and goodwill. Launched in San Francisco in October 2012, LendUp offers small, low-rate loans to low-income users. Lending is determined through data analysis based on demographic, credit history and information sourced from social media including Facebook and LinkedIn. First-time borrowers with no or poor credit can access a single payment loan (of up to USD 250 for a maximum of 30 days) and pay up to 15% of the loan amount, plus fees.

The pioneers and global hotspots?

The digital revolution has pioneered opportunities in the industry to revive itself. However, the rise of the consumer and being entitled to trust has been more instrumental in pioneering the shifting change in the way banks package their services and go about their business. The pendulum has swung back to help customers and consumers.

Global hotspots for innovation are varied with emerging entrants in the financial services industry mostly gaining rapid diffusion in emerging markets particularly Brazil, India and China. The US remains, perhaps most affected by distrust of customers, firmly focused on innovating the financial services industry followed closely by other developed nations in Europe.

The biggest hotspot is undoubtedly the global digital economy.

By Saint-Francis Tohlang

About Saint-Francis


Saint-Francis is a cultural student of life; keenly perceptive and observant of shapers of culture and the post-modern climate. He is obsessed with contemporary culture and the human carnival. His research areas and interest are media markets and strategies, communications, youth culture, mobile culture and the online media ecology strongly rooted in an anthropological perspective. Tohlang has an MA in Media from UCT.

Image credit: Moven


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