The future of banking is a topic close to my heart.
I only realized this earlier this year while chairing a conference on traditional forms of banking versus modern smartphone banking. I constantly find myself trying to engage with older members of my family on the move toward smartphone banking, only to be met with reluctance and apprehension.
For people of my generation, smartphone banking comes naturally. Visiting the bank, standing in long lines, meeting your relationship manager is not something I have ever done in my 33 years of existence. And why should I when I can transfer money with the touch of my finger and make investments through an app.
So, when my parents, who live in India, tell me that they have to go to the bank — a place that has become their second home over the years — to make an investment, it baffles me.
For me, the debate is a conflict between the old and the new. Why is it that people resort to new-age banking? Personally, it is to save time, for a better user experience and integration with other aspects of your life.
Let’s not forget that we live in a world where since the 2008 global financial crisis, banks are suffering from a trust deficit. A number of consumers lost a lot of money during the crisis and want to steer clear of more established banks, while also moving toward more favorable rates from smaller operators.
However, technology while being your best friend can also be your worst enemy in the form of cyberattacks — a few of them we have already witnessed. There’s also the issue of data privacy.
And while mobile phones have become an extension of our body, not everyone is completely savvy and still needs handholding and personalized care. Are the big banks ready for this challenge as they go digital?
Established lenders are also facing immense challenges from fintech (financial technology) firms such as Zopa, Revolut and Monzo that are quickly joining the ranks of Europe’s big tech firms. Recently, the Financial Times reported that after a fresh round of fundraising, Monzo — founded in 2015 — could be valued at up to US$1.5 billion. Similarly, another fast-growing fintech firm Revolut has a market value of US$1.7 billion.
With the move toward automation, these banks are also having to put a lot of resources on training and building systems that facilitate these changes. Big banks are already under a lot of pressure due to heavy regulation and thinner margins due to lose monetary policy from central banks. Are they in a position to spend on this resource building?
We have seen several big banks closing their retail branches as part of a restructuring drive and pushing toward a mobile-based system.
But they face massive competition from high-end fintech companies in providing a smooth experience for users. It’s a long road ahead for banks and it looks like they may need a little handholding themselves.
By Spriha Srivastava