In 1995 the average UK customer of HSBC visited the branch just over twice a month; in 2012 they only popped in just over three times a year. This illuminating statistic came from Brett King in an entertaining presentation today, where he drew parallels
with the destruction of high-street book shops, HMV, Blockbuster and the like.
In traditional retail environments, customers walked into physical stores to buy physical goods. The first wave of e-commerce meant that the same customers could sit at home in their pyjamas whilst ordering their books and CDs. This is digital shopping
for physical goods; still a lot of value in the business model. The big, destructive change came when the goods turned digital too: iPods and Kindles mean that shoppers now shop digitally for digital goods. Cue the collapse of some traditional retailers.
Can this happen with financial services? King certainly thinks so, and I agree. The compliance barrier means that at the moment online banking is largely a digital replication of a clunky, difficult branch process, meaning that you have to overcome a lot
of friction to get things done. The best innovation removes friction, as I keep finding out every time I use the Amazon iPhone app to buy half a dozen CDs of 80’s soft rock classics with a few ill-advised keystrokes.
The danger for the established banks is that new entrants (such as Moven) will provide a frictionless service that also adds value through loyalty rewards, discount codes, budgeting tools and a host of other things that ensure the consumer interacts with
that brand far more than they interact with their account-holding bank. All the good stuff – relationship building, brand loyalty, upselling opportunities and so on will be taken by the upstarts and the current account will just be the place that your salary
gets paid and your direct debits get collected.
Since customers in the UK no longer visit their bank branches, and can go to any bank ATM to withdraw their cash, then the last bastion of bank brand contact is the logo on their debit card and the logo on their online financial services. The banks need
to raise their game significantly if they want to avoid becoming just the back office for the new kids on the block.