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Is consumer education a barrier to banking innovation?

Last week Google announced a partnership with Citizens Advice to offer consumers guidance on online security and privacy issues. Despite the rapid rise in e-commerce and online spending, there are still significant fears about how safe the internet really is. A recent poll by Ofcom found that 26% of UK internet users had concerns about the safety of their personal details, 14% were worried about privacy and 13% about fraud.

But how much is the fear of security a problem when it comes to the adoption of new online/mobile financial tools and services?

Many people regularly shop online, reflected in the Government estimate that a quarter of the £408 billion e-commerce market in the UK is consumer retail. Specifically in financial services, 90% of people now use online banking according to Mcafee, proving that fears around security of financial details are surmountable.

However, there is lots of evidence to show that the perceived risk of newer banking tools, such as mobile apps or mobile web access, remains high. The banks and mobile industry must work together to mitigate the security risks posed by mobile banking. The development of a Secure Element to house encrypted payments and banking information on the phone (much in the same way that the Chip stores information on a bank card) is good example of the progress being made.

However, I think that the Google and Citizens Advice collaboration is a real learning point. Regardless of the technical progress made in terms of security, without consumer education, the perceived risk will remain. The whole industry needs to do more to educate consumers on the reality of using digital services in a secure manner.

James Richards (Director, Mobile - IE)

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Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 November, 2011, 17:51Be the first to give this comment the thumbs up 0 likes

Did you really mean to say "Is lack of consumer education a barrier to banking innovation?" in the title?

I believe that rapid spitfire reactions by trigger-happy regulators is a far bigger barrier to mainstream adoption of banking innovation. Take the case of IVR and mobile channels. Responding to higher perceived risk of payments made via these two channels, India's banking regulator has been quick on the draw to mandate OTP and two-factor authentication for them. The ensuing escalation in transaction friction has been so high that many people have virtually written off these two channels for making payments.

A Finextra member
A Finextra member 29 November, 2011, 04:13Be the first to give this comment the thumbs up 0 likes

‘while I completely agree on the point of educating, I also feel that banks have the responsibility of ‘empowering’ customers as well. While education can bring in the theoretical aspects to address their concerns, but ‘practicality’ will be through focused empowerment programs. Banks along with their partners need to have a dedicated team engaged in identifying the right target segment and a representative sample drawn from different customer segments, guide, train and enable them on tools, techniques and the use of technology in security. Also use such enabled groups to empower and spread the knowledge & confidence to other customers as well.

I also see banks going forward moving towards partnership driven approach in developing products & services that will include customers as their core partners in co-creation. They will be part of the product design, product development, product delivery and product distribution. This shift will bring customer closer to production.

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This community is for discussion of developments in the e-banking world, including mobile banking. This can include all the functional, business, technical, marketing, web site design, security and other related topics of Internet Banking segment, including public websites of the banks and financial institutions across the globe.


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