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Facts speak for themselves: a lack of innovation in financial services is failing society

As you may have read, recently published findings from consumer charity Which? have revealed consumers are not happy about the number of bank branch and ATM closures we’re seeing. Key findings show that of those interviewed:

  • Nearly nine in ten (86%) said they’d visited a bank branch at least once in the past year;
  • Eight in ten (83%) said branches should stay open for those who are unable or unwilling to use alternatives;
  • More than three quarters (77%) said we need branches in case there are technical problems with digital alternatives.

We know why banks are closing their doors – operational efficiency - but the bigger question is why aren’t they investing in alternatives in the world of smart banking to make up for the shortfall in access to financial services these changes are creating?

If bank branches are to continue to close, which looks likely, the banking sector needs to radically rethink its approach to technology if rural communities are to continue to have access to financial services. Qualifying this Ceri Stanaway, Which? Money Editor, said: “The true scale of bank branch closures in recent decades is staggering - and has left millions of people struggling to access the vital financial services and cash that they need.”

Innovation in the banking sector has been stifled by large organisations that have consistently failed to deliver anything new. In the ATM space, for example, there is potential to create ‘bank-in-a-box’ facilities, replacing branches and alleviating much of the stress of closures for the public and banks alike.

Yet, the sector refuses to invest in technology that could move ATMs forward from delivering a small number of basic functions to offering advice, loans, mortgages and much more. More broadly, the sector refuses to invest in technology that is not vulnerable to service outages, further dimming any prospect of real alternatives to in-branch banking.

This chronic lack of innovation in financial services is an issue that surpasses the responsibility of banks and I welcome the Government’s interest in the area. Putting communities at further risk of facing further financial exclusion simply cannot be allowed to happen.

Innovation and technology sit at the heart of this problem and its solution. Rethinking it is perhaps the only way to recreate a lasting sense of equilibrium when it comes to financial services and society.

Bank recognise that this is causing customers a problem, but at present their solution is to deploy fleets of community bankers to meet the needs of those people affected. I for one am not convinced this is a long-term, sustainable answer.



Comments: (3)

Melvin Haskins
Melvin Haskins - Haston International Limited - 12 December, 2018, 09:021 like 1 like

Another alternative is sharing branches in a rural community. One shop with services from six or more banks, be there humans or video links, it does not matter. In addition, a free to use shared ATM. This reduces overheads to a manageable number.

A Finextra member
A Finextra member 12 December, 2018, 11:00Be the first to give this comment the thumbs up 0 likes

I'd agree @Melvin Haskins. A shared branch concept is possible by using the same open minded approach to deploying modern technology and innovative processes (rather than simply trying to shoe-horn 4 or 5 existing branch models into a single location)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 December, 2018, 18:34Be the first to give this comment the thumbs up 0 likes

On the ATMs of many Indian banks, it has been progressively possible beginning early 2000s to pay bills, book train tickets, topup prepaid mobile phones, make donations, apply for loans and avail oneself of many of the bank-in-a-box facilities. However, this reminds me of an old saying about ice creams: "There are 284 flavors of ice cream but 84% of ice cream sales are vanilla".

Likewise, more than 90% of ATM transactions are cash withdrawals. The thing is, ATM is a queue-based device, where so many people are there to withdraw cash within a few seconds. Mixing up other transactions that take several minutes defies the basic purpose of an ATM.

Not sure whether banks in UK have refrained from supporting more features on general-purpose ATMs out of apathy or whatever but, going by my observation in India, British banks are right in doing so - there's just too little adoption of non cash withdrawal features on an ATM.

That said, there's a case for equipping some ATMs with branch-in-a-box features aka Kiosks. On that count, I think British banks have done a good enough job. Over 10 years ago, both my banks in UK had at least two 24/7 kiosks just outside many of their branches. Not sure if they've shut down those Kiosks now due to poor adoption.

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