The future of banking

As technology provides consumers with new, smarter options, there’s been a seismic shift in the banking industry. Where previously the focus was on customer acquisition and the sale of products, today it’s about putting the customer at the centre of all banking transactions.

By Patricia Moore. 

In 2014 the chairman of Lloyds Banking Group warned that the banking and finance sector would face more changes in the next 10 years than it had in the previous 200.
While essentially the digital revolution is the key driver of those changes, the 2015 EY Global Banking Outlook noted a number of trends which, they predict, will change the face of banking, as we know it, over the next couple of decades.

These include limits on the global banking model – nationalism versus globalism, as economic challenges push nations to adopt protectionist trade approaches that could affect the ability of a bank to enter or exit markets; the continued growth of state involvement in the structure and daily operations of the banking industry; trade flows which will require global banks to have strong regional partners; new markets; an aging global population; customer relationships; changes in the payments sector and, the need for new financial products.

As banks consider just how many of their current services could be delivered digitally and which they may choose to quit, predictions are the bank of the future will see consumers banking on the go; cheques – indeed all bank-related paperwork – will have disappeared; authentication will no longer rely on cards (iris-scanning biometric technology at ATMs is already being trialled in the US); ATMs will offer customers made-to-measure experiences, and branches will be leaner and more responsive to customer’s needs.

We may even have followed the example of Sweden and Norway, where the compulsion to accept cash as legal tender has been removed, and become a cashless society. (Ironically, one of Sweden’s best known cash-free campaigners is Bjorn Ulvaeus, the man who wrote Money, Money, Money for ABBA.)

ASB is already preparing the next generation of customers for this eventuality with its recently launched cashless moneybox, a digital makeover of their iconic elephant, designed to help children understand the value of money as we move towards a cashless society. And, in spite of having a bunch of bright new banknotes, New Zealand has one of the lowest cash holdings, per capita, in the world.

As consumers we have a peculiar relationship with banks. They may offer the smartest store-front on small town main streets – if indeed they still occupy bricks and mortar on those streets – but it’s hard to get excited about banking. “No-one particularly wants to bank,” says Westpac CIO Dawie Olivier. “No-one wants to buy a mortgage – but everyone wants to buy a home; no-one wants to finance a vehicle but everyone needs transport for their families.”
As technology provides consumers with new, smarter options, geared to today’s fast moving business environment, there’s been a seismic shift in the banking industry. Where previously the focus was on customer acquisition and the sale of products, today it’s about putting the customer at the centre of all banking transactions, says Olivier.
“Understanding where we can add value to customers’ lives and how we can do that in as simple and low-friction a manner as possible. That’s the critical change and the key driver in banking today.”
It’s a change happening across the board. “More than ever the future will be about the customer, understanding their changing needs and how they want to do business will be central to success as a bank,” says ANZ’s, Fred Ohlsson, MD, retail and business banking.

“The most successful technology will be so aligned to customer’s needs that they stop seeing it as technology. It’s just something that helps them get on with their lives.”
Meeting this test will be as much about knowing your customer as it is about knowing technology, says Ohlsson.

“It’s about understanding what they expect from you in terms of digital capability, insights, culture and how customers want to connect with you – then delivering this rapidly on a scale that changes the game.”

And while it may be the ‘new normal’ it will never be a fixed destination, he says. “Customer preferences and behaviour won’t stop changing.”

Banks build up a significant amount of customer information that’s traditionally been used to drive sales-style metrics rather than enabling them to better understand the customer as a person, says Olivier. “The question now, is how we leverage the newer technologies, such as the big data tools available to us, to actually form those pictures.”

Westpac’s new ATM reward voucher scheme, whereby customers are offered tailored deals, at retail and service outlets when accessing an ATM, is an example of what understanding customer data, can achieve.

“It shows we understand the environment in which you do your banking and in which you live,” says Olivier. “In essence it’s us putting together your desired lifestyle with the best facilitators of that lifestyle and incentivising you to keep on living that life.”

DIY solutions are also playing a part as banking steps into the future. Through their online fund switching tool, ASB’s online KiwiSaver access gives customers the ability to move their money between funds and monitor movements in their balance; Card Control, via the ASB Mobile app, allows customers to manually manage their credit or debit card functionality by locking or unlocking a range of payment types should a card be misplaced or lost.

A mobile wallet
It’s estimated that by 2020, 80 percent of the world’s population will have a smartphone or wearable which will enable them to carry out online banking transactions. An app will turn a mobile into a mobile wallet, the digital equivalent of that bulging physical accessory we all cart around, and transform the way we pay for goods and services.

The technology’s still relatively new – New Zealand’s first mobile wallet was launched only in March this year – but, according to the US based Gartner information technology company, by 2017 the global market for mobile payments with be worth US$720 billion – up from US$235 billion in 2014.

“Ultimately, contactless mobile payments could mean people no longer need to carry a physical wallet full of debit and credit cards and cash,” says ANZ’s Ohlsson. “The wallet’s potential to enable people to make mobile payments anywhere, any time is exciting.”

However he points out that it will only be a success when it is as ’ordinary’ as the physical wallet it replaces.

“The full potential will be reached once the wallet and terminals are rolled out on a scale that makes it accessible to all and wallet payments are so commonplace they are considered routine. We see contactless mobile payments as the way of the future and are ready to play a major role in making them mainstream as quickly as possible.”
Bill Gates, who famously commented that in the future we’d still need to do banking, but wouldn’t need banks, believes that in the next 15 years, two billion people worldwide, predominantly in the world’s poorer nations, who don’t have bank accounts today, will be the main beneficiaries of mobile banking.

So are tellers an endangered species? Customers look for consistency across a bank’s different channels – the internet, mobile apps, the systems and procedures in a branch, says Olivier. “They’ll continue to come to the place where they can get advice and guidance. This puts pressure on tellers to step up into higher-order service roles as opposed to transactional.”

That said, Olivier believes ‘swathes of activities’ banks have undertaken in the past, will cease to exist over the next few decades. “This is really exciting because so many of those activities have held back innovation.”

But first, banks need to decide where they want to compete and come up with compelling offerings.

“There are literally thousands of disruptive start-ups, pseudo and true financial service organisations, that are taking on every single aspect of banking. Do we want to challenge them all? It may be a case of integrating or co-interest and the like but we certainly have to have a very keen view of what the competitive landscape looks like.”
Just a few years ago the idea of doing your everyday banking on a mobile phone was almost unimaginable, says Fred Ohlsson. “Today ANZ’s goMoney banking app alone is used by half a million New Zealanders. By striving to move beyond innovation to the new normal, we’re continuing to meet challenging customer needs with solutions that turn the unimaginable into the commonplace and help customers get ahead in life.”  

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