Fintech White Paper: Accenture and the BBA say digitisation must become ‘business as usual’ for finance.
Digitisation is changing many industries across the world and altering the way we as individuals and companies operate. Banking is no different.
While banking has been on a path towards digitisation for a number of years, it is the advent of the mobile device that has dramatically accelerated the pace of change. We have gone from almost nobody banking via their phone to millions of people using their apps to check their accounts and make payments every day.
This is changing not just the way we bank but also the way banks have to interact with us. The number of people going into branches to do their banking is falling dramatically (by around 30% in the last three years) and visits are often now for more complicated issues.
Many of these products are no longer offered solely from within the banking industry. Digital is helping to break down barriers to entry and the pressure is on to ensure that banks are as up to speed as their potential competitors in the products and services they are offering.
Even new banks are divided on whether to offer universal services. Metro Bank, for example, wants to build up to around 200 stores, a fraction of what the incumbents have but sufficiently large to give it a significant footprint when combined with its mobile offering.
This contrasts to more established banks whose task it is to ensure that their omni-channel offerings are seamless, so that a customer feels at ease whether they are walking into a branch, using the app or talking to someone on the phone.
Another challenge for the banks is to modernise their IT systems to enable the more advanced digital services to be delivered. This is a major test for the banks given the pressure from regulators and politicians to ensure continuity of service, particularly as customers are increasingly used to being able to access banking services 24/7.
The balance that regulators must strike is protecting consumers and ensuring stability, while not hampering innovation or competition. That can be done by focussing on regulating activities rather than merely institutions, ensuring a level playing field between the banking and non-banking sector.
What this report shows is that banking ten years hence is likely to be dramatically different from today. If the banks get it right then everyone can be a winner, but it is a massive challenge and the journey has only just begun.
The rise of digital and how the banks have responded
The digital revolution is gathering pace across all sectors, with consumer behaviour and innovation driving a rapidly expanding market.
We have seen digital evolve from a mere channel for distributing product into the core of the proposition in its own right. The new ecosystems businesses are creating are providing further fresh opportunities.
The banks have made significant strides in developing their digital offering and a wave of innovations has driven a boom in the day-to-day usage of their digital services. The growth has become explosive as internet access has been supplemented by the use of mobile devices.
For the industry as a whole, we have seen the use of mobile UK banking services more than triple with monthly usage levels of 8% in 2010 jumping to 27% by 2014. YouGov polling carried out for the BBA in June 2014 showed that only 16% of customers never use online or mobile banking.
This digital offering is changing people’s behaviour and enabling them to control their banking more effectively. Lloyds estimate that around 60% of mobile banking logins are simply to check balances and statements.
Banks have also enabled customers to ask for alerts to help them control their accounts better. Lloyds Bank alone sends 3.8 million text messages to its customers a week. Such messages are normally triggered by customers approaching pre-defined balance levels or to warn them that they are likely to incur charges.
All of this gives bank customers the opportunity to adjust their balances more effectively and reduce unwanted account charges. In our conversations with the banks this ability to empower the customer is a key driver behind the digital offering that banks are making.
This is an extract from Digital Disruption UK Banking Report, from the British Bankers Association in partnership with Accenture. www.bba.org.uk