A new generation of bank customers will bypass physical branches and banking via the web almost completely in favour of completing transactions and accessing services from their mobile devices.
Financial institutions are already scaling back branches and automating teller transactions, while launching mobile apps that offer a growing number of financial services to businesses and consumers.
“Strategically, banks must strengthen their relationship with their consumers. Research shows that although consumers trust their banks, intimacy and the trust of that relationship is degrading over time, especially in younger age demographics,” says Niel Bester, senior vice-president for products at fintech firm, Entersekt.
“Banks need to shake their conservative image and position themselves to do business with people who are techno-savvy and who expect quick results.”
He says the ratio of payments to other banking interactions is more than ten to one.
“There is a great opportunity for banks to re-establish relationships at the point of payment – an environment increasingly dependent on mobile devices and apps. They can tell their customers – wherever you go, whatever you do – whatever payment opportunity is there, we’ll be at your side to sort you out securely and with confidence.”
“This way they have a broader relationship with consumers than they have during traditional banking interactions.”
Consumers don’t have to weigh up the pros and cons of a particular new payment service. Their bank can make the assessment and launch it in-app with zero initial customer enrollment effort. This allows the customer to experiment with the new service without having to fill out forms first. The relative lack of hassle means that consumers, even fairly cautious ones, are more likely than before to try mobile payments, and they can do so knowing that their bank has done the necessary to enable them to do so securely.
Bester says they also have the benefit of strong authentication already in place for security purposes.
“There is an existing trust relationship with banks. It helps drive adoption.”
Social banking is another trend driven by the youth disrupting the financial services industry. Using apps like Facebook and WhatsApp, for example, people can transfer money without leaving those platforms.
“Those transactions have tended to be person-to-person, but they are increasingly focusing on commerce – you can add an airline as a contact in WhatsApp, for example, and pay them in the same way you would a person.”
Bester says banking apps are already becoming more versatile in response to consumer needs and doing business with younger cohorts will accelerate this process.
“Generational and product awareness will be key to banks attracting and retaining customers. Youngsters want mobile banking almost exclusively while more affluent – typically older – people want access to branches, web banking and call centres.”
Banks have to provide a broad offering but from a cost point of view they should use the opportunity to encourage people to go more mobile.
“It’s a lot cheaper for banks than having to interact with a real person and it’s a trend that will continue,” he adds.
“Mobile banking is often event-driven and opportunistic. For example, a pop-up on a phone might say there’s a phone bill to pay, and do you want to pay it? Yes or no? This is responding to an event, rather than having to search through a menu to pay.
“Things like chat banking are moving towards this. I don’t want to go and look for the place where I need to transfer money – I just want to type in a box, Hey, give Johnny R20, and a chatbot on the other side, says, Yes, done. Advances in artificial intelligence (AI) tech will make this even easier in future,” concludes Bester.