Change is the law of life: Innovations in the Banking Industry
In her debut Financial Statement blog, Nike Amthor analyses how technology has transformed the banking industry and the way how customers bank in 2013
Online banking, mobile banking, chip and pin – all recent expressions that would have sounded alien twenty years ago and have now become part of our way of life for everyday banking. Many, including myself, would find it hard to go back to the days when customers needed to visit their local branch and queue to carry out their banking operations. Technology has transformed the way we bank and is one of the main drivers behind the accelerating pace of innovation in this sector.
Nowadays UK bank customers can conveniently manage all their banking needs on the move 24/7 through online or mobile banking. According to Ipsos MediaCT’s Technology Tracker, nearly one in two adults (45%) in the UK checked their bank account or other financial holdings online within the last three months. In 2007 only a quarter (24%) used the internet for financial holdings1. Contactless payment, payment via mobile phone (Barclays Pingit) and RBS Mobile Chat, a mobile phone application through which customers can directly contact dedicated business banking advisors and aiming to reduce call waiting and in-branch queue times, are all but a few examples of the latest technology-driven innovations affording ever greater flexibility to UK customers in effecting their day-to-day banking.
Recent innovation in retail banking has also led to increasingly personalised customer service. For example, American Express UK card holders are able to benefit from personalised offers and savings by registering their American Express card with Foursquare, a mobile phone application proposing offers to users based on their current location. Barclays introduced personalised debit cards at the end of 2012, allowing customers to print personal photos on their debit card. They also launched a free shopping service providing customers with offers based on their spending pattern and habits. These examples highlight how not only technology but also data mining, a knowledge based concept to turn raw data from multiple sources into useful information, have become key to enhancing customers’ banking experience, which was also emphasised by Dan Bolland (head of Global Retail Analytics at Barclays) in July 2013.
For customers who still want to have a personal face to face experience, another type of recent innovation has focused on improving customers’ in-branch experience. More banks are now opening branches over the weekend to allow customers to visit branches outside their working hours. In particular, Metro Bank has gained a competitive advantage by keeping all of its branches open seven days a week. RBS has allocated £700m to refurbish more than two thousand branches between 2013 and 2016. An extreme example of this push towards providing the best possible in-branch experience can be found in Canada, where North Shore Credit Union in Vancouver aims to create a boutique lounge atmosphere for its customers by offering a concierge service, coffee bar, hot towels and child area.
What other innovations could we witness in the near future? At the crossroad of personalising customers’ banking and enhancing in-branch experience, the concept of “institutional memory” aims to facilitate the sharing of customers’ preferences, interactions and dealings between all of the bank’s retail teams. The objective of this approach is to provide a customer with targeted offers on banking products via the medium that is most appropriate to them. Other potential future innovations are likely to target increasingly customised banking services and facilitation of everyday banking operations.
Innovation is a driver of client value and can therefore contribute to business growth, more specifically in the current context of customers re-assessing their relationship with banks following the scandals that have rocked the banking industry. Furthermore, by opening entry barriers, innovation can play an important part in facilitating and stimulating competition among retail banks. This is one of the key objectives identified by the Chairman of the Treasury Select Committee and widely endorsed by the main UK political parties as a means of protecting customers against future bank failures. Yet it remains to be seen how many resources UK banks’ will dedicate to innovation in retail banking given the current general focus on increasing the size of banks capital reserves to meet regulatory requirements.
“For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future” (John Fitzgerald Kennedy)
Notes
1. Research carried out in Quarter 2 2013. Fieldwork was conducted, using our face-to-face omnibus. Ipsos talked to a representative sample of circa 1,000 consumers from across Great Britain, including: (Circa) 100 tablet owners; 450 smartphone owners ; 400 social networkers; 400 gamers, including 250 Wii owners; 100 PS3 owners and 150 Xbox 360 owners.
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