By Antonella Comes, CMO, Auriga
Recent consumer research findings have either indicated big opportunities or severe challenges for the finance industry in the coming years. This blog post will take a look at some key trends that banks should take note of, from the rise in mobile banking to the fall of ATMs, and how they can maximise on the opportunities.
How can we maximise on the rise in digital banking?
According to new research from personal finance comparison website, finder.com, 16% of Brits will have opened a digital-only bank account within the next five years due to convenience. Almost one in 10 adults (9%) indicate that they have already registered with a digital challenger bank, equalling a staggering 4.5 million Brits.
This trend is reinforced by another consumer study, where 39% of respondents shared they prefer doing their banking using an app, this figure has shown a steady increase since 2017 (30.2%). Simultaneously, the preference for online banking has fallen from 45.2% in 2017 to 38.6%; this is the first time figures have fallen below apps.
Auriga insights: what can traditional banks do to stay competitive?
It comes as little surprise that Gen Z are most likely to go digital, with 15% stating that they’re already banking with current popular challenger banks. Despite their popularity it isn’t for everyone, the main reason existing customers remain with legacy banks is due to their positive customer experience – they’ve been treated well and have built a good relationship over time.
With consumer habits and expectations drastically changing over the last decade, by investing in their IT systems traditional banks are able to retain and attract new customers and help them realise their full saving potential and understand their personal needs. The exponential growth of emerging technologies enables them to offer app-based solutions, just like fintech rivals, as well as a true omnichannel experience; financial institutions are increasingly more inclined to invest with the goal of offering customers improved service and experience.
Therefore investment in IT systems is not an IT decision alone but part of a bigger picture – the Corporate strategy. The greenfield approach is one way in which financial institutions can economise in relation to digitisation and innovation.
This means developing new services from scratch without interfering with pre-existing, legacy infrastructures attached to business processes, while also reserving valuable resources. Monzo and Starling are already reaping the benefits of this approach and provide mobile-only services, without competing with the complex architecture of legacy IT infrastructures faced by high street banks.
Are we moving towards a cashless society?
Independent research company, Which?, and Link, the UK’s largest cash machine network carried out a survey of 12,000 people to gauge the impact of a reduction in free-to-use ATMs. The results identified more than 200 communities in Britain dealing with poor ATM provision, or no cash machines at all.
While 80% of respondents said that access to free cashpoints was important to their everyday lives, there seemed to be a heavy consumer dependency on ATM usage, with just under half (44%) using a cashpoint at least once a week. However UK adults are only using cash for certain transactions.
Only 10% of the UK adult population - around 5.4 million people - made either one or no cash payments per month in 2018; which marked a jump of two million people compared with 2017, when 3.4 million hardly used cash.
Auriga insights: there’s a rise in operational costs
High and rising operational costs of running ATMs and the convenience of contactless digital payments seem to be pushing the use of cash closer to extinction. Nevertheless, it is too early to write an obituary for the ATM. Financial institutions investing in their ATMs will be enjoying inherent advantages, such as increased customer engagement and enhanced opportunities and services.
ATMs need to be redefined. All fleets of ATMs can do much more than deliver a mono-service of churning out bank notes, and there is real demand for ATMs to offer wider services (bill payments, currency exchange, loan applications) and improve the customer experience by integrating the ATM in their complete omnichannel strategy. There are relatively low technical barriers in optimising ATMs, the greater challenge is actually getting banks to stop perceiving the machines as “cash and dash” devices. For instance, smart ATMs can predict a customer’s habits and pre-set fast withdrawals for regular transactions.
With banks investing large sums into their marketing activities and digital transformation they need to ensure the strategy is replicated across all channels, or they will risk missing out in the future. Digital is redefining the customer journey and implementing digitisation in banking is synonymous with a true omnichannel banking architecture, whereby the ATM is fully integrated with all other banking touch points.