30 years ago banks were scary places with long queues, wood panelling and a remote bank manager. Things are very different now. As a nation we only go into the bank occasionally these days and most of our transactions are carried out either online or through an app.
This quiet revolution has mostly gone unnoticed and has been taking place since the first internet banking service was introduced by Nationwide in 1997. But its seeds were truly sewn with the birth of PayPal. With the successful integration of PayPal into online shopping, this has pushed the financial industry to incorporate technologies to ease all areas of banking.
The major shift has come from a change of attitudes to online and mobile banking. Five years ago online banking was fraught with difficulties and the majority of people were suspicious of it. But opinions and habits have changed. In 2009 only 50% of people were interested in doing online banking due to security issues, but by 2013 87% of people said they would do it (Source: OfCom Media Literacy Tracker 2009-2013). Now online banking has become a way of life, with £6.4billion transferred every week online. Indeed, it is reported that 85% of Tesco Bank's transactions are now done via the internet. (Source: BBA Report, It’s In Your Hands)
The mobile world that we now live in means that people now want banking on the go. Early adopters of technology drive innovation and increasingly do everything on the go, hence the emergence of mobile banking as the next logical step. In 2010 the first mobile banking apps were launched and now mobile banking is becoming 'the norm'. Take up for mobile banking is even proving to be faster than its online counterpart a decade ago and this could be due not only to the flexibility it offers, but also to the level of control a person can have over their money. For example between 2011 and 2013 the frequency of people that used their phone to check their bank balance once or twice a week has risen by 6% and the overall percentage of people actually using their phone to check their bank balance at all has gone up 15% in the same period (Source: OfCom Media Literacy Tracker 2009-2013)
With the introduction of the BBA’s (British Banking Association) new payment app, PayM, things are going to get even easier. PayM allows you to send money direct to another person with just their phone number. No more sharing bank details, having to know account numbers and sort codes, all you will need is a mobile number. So far nine banks/building societies have signed up to this, including Barclays, HSBC, Lloyds and Santander. Banks are realising people want ease of use and this app is an example of them working together to achieve that. And it’s working. In PayM’s first month of operation there was a new sign up by a bank customer every 7.5 seconds. (Source: BBA Report, It’s in your hands)
Payment by text is already here and more innovation is on the way. Cheque imaging is coming and following on from the iPhone 5’s fingerprint technology, and further biometric techniques, we could soon see these incorporated into bank card technology. In a recent Blog by Peter Bayley, Executive Director of Visa Europe, he stated that “the days of the plastic card are coming to an end” (Source: VisaEurope.com). This is why so many banks are watching and funding the UK’s growing Fintech sector. Peter Bayley sees a time when user data and a smartphone become one. For example, you always buy a latte on the way to work, about the same time, at the same place every morning, if your phone’s GPS can pin you there you won’t need the full verification process to pay for your latte. This is already one step closer with the recent introduction of the Barclays bPay technology; a prepay contactless payment bracelet (Source: bpayband.co.uk). Not to mention the possibilities using near field communication (NFC), which has already been used to allow people to pay with a virtual wallet.
A knock on effect of mobile banking is the slow decline of the physical branch. Only 10% of Natwest and RBS transactions are forecast to take place in Branch in 2014, down from 25% in 2010. (BBA Report, It’s in your hands) Ross McEwan, CEO of RBS Group, even claims “Do you know what our busiest branch is in the UK? It’s our mobile app on the 7.15am train to Paddington”. And banks won’t mind this decline; it will reduce their overheads in terms of rent, rates and wages. Add to that the costs for a transaction on a smartphone, which are about one tenth of the cost of a bank teller processing the same transaction, and the future seems pretty certain (Source: WashingtonPost.com).
So is mobile banking the way we bank now? The answer we believe is yes, but that is not the whole picture. In a recent survey carried out by Juniper research, it was found that more people will be using mobile apps for banking rather than going online by 2019 and the number of users will go up to 800 million (Source: BankingTech.com).
But with all that said, people still currently prefer to carry out big transactions online, not through their phone. Also when it comes to important decisions or complaints people still prefer to visit an actual bank. So currently and for the foreseeable future the whole picture is a multi-channel banking system that allows people control and flexibility with the majority of our day to day banking conducted through our phones. It seems this will be the status quo for a while yet, but as Millenials and early adopters age it will be them that drive what the norm is. We know already that they prefer to do things on mobile and have fewer hang ups about using mobile devices to do this. The future of banking is definitely going to be mobile, the question is just how long until that happens.