27 November 2014

Chris Dunne

Chris Dunne - VocaLink Limited

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Mobile services strengthen customers’ bond with banks

09 July 2014  |  2585 views  |  5

 

The way bank customers access and manage their finances is evolving at a rapid pace. While the physical branch was once at the centre of a retail institution’s offering, this model has witnessed enormous change in recent years, according to a new report from the British Bankers Association (BBA) and EY. The second Way We Bank study has found that mobile and internet banking is now being used for transactions worth £6.4 billion a week – up from £5.8 billion last year.           

 

Headlines have in the last few days inevitably focused on the shift that changes in banking behaviour are having – and will in the future have – on physical high street branches. But this misses the point of how new technology is giving individuals more control over how they manage their finances, encouraging more responsible spending. For time-poor consumers, internet and mobile banking greatly enhances the relationship that consumers have with their banks. From settling utility bills to paying back friends, it provides the ability for people to conduct essential transactions, wherever they are in the world. 

 

Across the UK, early adopters of the online platforms and the latest mobile technology are already seeing the benefit. This is especially true of those who live in rural areas that, over the last decade, have seen a steady decline in the number of bank branches available to them, although more needs to be done to improve the reach of broadband and mobile networks in these areas.  At a national level, the statistics for new services are phenomenal; mobile and tablet banking apps have been downloaded more than 14.7 million times in 2014 and internet banking services typically receives more than 7 million log-ins every day.

 

Of course, the industry can’t afford to rest on its laurels. Consumers and business customers expect internet and mobile banking services to become faster, more convenient and more intuitive. If, collectively we were to stand still and stop developing new offerings then they would feel let down and therefore there has been considerable focus on developing industry-wide mobile services, such as Paym and Zapp, that everyone can access.    

 

Change hasn’t happened overnight. The major milestone in the evolution of payments in the UK was the launch of real-time payments in 2008 in the form of the Faster Payments Service. This allows businesses and consumers to transfer funds electronically between accounts held at participating financial institutions in seconds – instead of the two to three business days it used to take. Take-up has grown every year since the scheme went live and in 2014 the three billionth real-time payment was processed. From the start of 2012 every bank account was reachable through faster payments and provides the foundation for new mobile services.           

 

The fact that mobile and internet banking is now being used for transactions worth £1 billion is a big achievement and one that has the power to bring enormous benefit to the UK economy. Furthermore, it cements Britain’s position as a global leader for financial services technology. But despite all the change, physical bank branches aren’t completely dead. The BBA report points out that more than 2,000 bank branches have been refurbished in the past two years. This is case of looking to the future whilst supporting our banking heritage.

 

TagsMobile & onlinePayments

Comments: (5)

Vishwanath Thanalapatti - Risk Management Professional - Toronto, Canada | 09 July, 2014, 11:33

The report further underlines the adoption of technology by the masses. The trends have been visible from last few tears. Online to Mobile and there on to mobility with devices converging as the underlying technology is very similar.

The good thing in this study is people by and large have overcome the fear of security while doing transactions digitally. And branches will continue to exist in a form that offers niche and specialised services. Financial inclusion is assuming a new definition.  

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 11 July, 2014, 18:45

Internet Banking has been around for over 10 years and Mobile Banking, for over 3 years. So the two technologies have collectively around for 6.5 years on an average. Rise in volume from 5.8B to 6.3B works out to 10.35% yoy growth. With total banking transaction volume likely to exceed 1T GBP, Internet + Mobile @ 6.3B GBP collectively account for < 1% of the total. Any consumer Internet technology that has these kind of numbers in its 7th year would be written off as massive failures. While I'm personally a fan of both technologies and have been using them since inception, numbers simply don't justify the exuberance.

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Dean Wallace - ACI - York | 14 July, 2014, 15:27

Hi Ketharaman,

The 1T GBP you mention, is that all banking or just the bit that handles retail and consumer bill payments? I would have been interested if Chris' article mentioned in the first paragraph what the 5.8-6.3bn was as a slice of the total pie and what is the applicable pie (come on Chris, I know you will have that info tucked away ;-)

I did a quick calculation and the growth is just over 8% in a year. Given the hype I'd agree, that doesn't seem earth-shattering. Internet banking came of age in a world where branch was the norm. But branches have been closing to cut costs, and the new internet is a smartphone app which is far simpler to access (functionally, as well as technically) with relatively invisible cost to the consumer (unless you buy prepaid phone). 

Seems to me consumers are demanding the choice. Accenture published findings today that "1 in 4 Brits consider using digital only banks", supporting the notion of choice and keeping the branch. But change is in the air, and millenials are the future, not us aging folks :-)  

Normally I'd agree with your statement on not justifying exuberance, but can you imagine any bank that would pull out of the race at this point in time? Their challenge is to create a valuable service that keeps/attracts customers, and helps them lower the bottom line.  Now the merchant angle, that's a different story...

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 15 July, 2014, 11:15

@DeanW: My guess of GBP 1T transaction value was only for retail banking. Since I make heavy use of Internet + Mobile Banking, I don't want banks to pull out of the digital race. On the contrary, I want them to enhance these two online channels. But, with a lukewarm yoy growth rate of 8.62% [(6.3-5.8)/5.8*100%] - yes, you're right, it's just over 8%, sorry my previous figure of 10.35% was wrong - I won't blame them for not doing so. We saw an attempt to ban cheques on the basis of irrational exuberance not supported by numbers. This was followed by not only reinstating cheques but making it easier for customers to process cheques via Mobile RDC. The same way, banks who're shutting down branches will get disappointed when they find low offtake for their purely digital channels. At that point, they'll start using digital aids to get more bang for their branch bucks. I see Tablet Banking by ICICI Bank and Van Banking by RBS - where bankers equipped with technology visit customers to provide face-to-face service - as two good examples of such an omnichannel strategy.

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Dean Wallace - ACI - York | 15 July, 2014, 11:56

Ketharaman - I like your point re Omnichannel. Yes, that would be great. I think it would take a very brave bank to pull out of the mobile space given the attention it is gettingn in the industry. And as you point out, from an economics point of view, it might even look like that attention is unwarranted at present!

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Chris Dunne

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Payment Services Director

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VocaLink Limited

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Ketharaman Swaminathan
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