To Bank or not to Bank
Have you ever thought about how banking works, used to work, could work, should work or possibly will work?
All of these questions can throw up different answers based on your age, experience, proximity to technology, geographical location or just the time in which you’re framing your question.
Traditionally, banking (in it’s simplest explanation) has all been about safe storage of assets, and a return (interest) for you for providing your assets to the banks to repurpose in other means while you safely store it with them. This goes right back to medieval days – groups like The Knights Templar and beyond.
We as humans are strongly driven by fear, uncertainty and herd mentality. These are not designed to be fearmongering statements or doomsday prophecies of any form, merely facts as to how we traditionally frame problems and the solutions we implement to counteract them.
The Banks we know
When you look at the banks we all know and use today what springs to mind?
Do you use them because you trust them, identify with them, appreciate the services they provide or believe in the messages they send out?
Again, this may seem extreme, which is not the purpose, but in all honesty, how closely do any of those statements ring true with your banking relationship?
For the most part we use our banks out of necessity – our employers will only transfer into a certain subset of banks, so we select one to get paid every month.
We want to buy a house and we need a mortgage, which our bank provides, or a car or pay for an expansion to our home, go on holiday, the list goes on – again capital is required from our bank.
The recurring theme here is we are using our bank due to a combination of fear for the security of our assets and necessity borne from the embedded world the banks have created that prevent us from doing anything without them, and perhaps most importantly, JUST BECAUSE…
Putting your money in the bank is what any sane, responsible adult does – that is what we have been taught and preconditioned to do…but is it truly necessary?
The Banks we don’t know…most of us…
Now we look to the new world banks that some of us may be familiar with and others have heard of, but most of us know little to nothing about, prematurely dismissing them as “juvenile” or “risky” or even worse “stupid”…simply because we don’t understand them!
The ‘banks’ I’m speaking of are the virtual banks and financial services players that are emerging (some of these have actually been around for multiple years already but in various stages of maturity).
Today it is possible to have a single card that virtually links all your payments (Debit / Credit / etc. it makes no difference) to a single card. You no longer need to carry those massive wallets or purses with multiple, I’m talking 10 / 20 + cards just because you’re part of 30 different membership / rewards programmes and various credit card schemes, etc. – every card you have can pair to this single card.
The exciting prospect is that the benefits don’t stop here – with new virtual banks emerging that are mobile/app only from day one we are seeing barriers to entry rapidly deteriorating – consumers in the new millennial and centennial generations who have no aversion to these technologies and lower fear thresholds see benefits from immediate access to their banking services via smartphones and other devices.
Other capabilities that are already a reality today are virtual IBAN numbers and credit cards – allowing you to create short term codes for international transfers or a virtual credit card for your upcoming holiday which then ceases to exist once the requirement is fulfilled – banks again lose the ability to charge their high fees for international transfers under this model.
Further to this, these ‘new’ banks don’t have high street presence, less staff and remarkably low overheads in comparison to the established banks with a very embedded global infrastructure – the traditional competition of who can get the most branches to cast the widest net becomes entirely redundant when your ‘branch’ is an app and any customer can get access to it from the mobile device.
The impact on our banking environment
Until we see the uptake and usage of these new apps it is impossible to say just what impact this will have, but one thing is certain – options are expanding in a way they have never been able to before.
Other potential benefits to consider are the interest rates that a bank can offer if its operating costs are far lower than its competition due to lower inherent overheads that simply can’t be ‘saved away’ when you’re taking a physical first approach.
Another question to consider is the human connection?
Are we scared of a bank that is primarily an app…do you feel safer because you can walk into a branch and complain about the service you did or didn’t get. Will it feel more or less secure if that branch visit is done from the comfort of your home via video / voice call and the experience is very much the same but you don’t need to schedule a walk in session?
The expected response is that once we can’t walk in and connect with a human we lose trust, however if you have easier access to a human interaction, albeit via video call will this really make you distrust a service to the extent where you sacrifice on optimisation of said service purely because you’re not ‘familiar’ with the new delivery of an existing service?
A great many of us will naturally shy away from new methods – as a society we are resistant to change, but as always, new generations will pick up the baton and make the ultimate decision – if the dynamic millennial and centennial generations accept these new mediums then it is only a matter of time until they are making decisions which impact all of us and these new banks become increasingly prevalent.
When you look at mass firings in existing high street banks such as Lloyds TSB in the UK it is clear that my generation and the coming workforce have different expectations from our services industries and we see things differently. I’ve just started the discussion on the reasons why…