Bain: banks need to redefine to remain
Consumers have embraced contactless payments provided by third-party companies and started to neglect cash transactions; banks are losing out.
Over the years, with the advancement of technology, the world has found itself amidst an era of revolution; old software and systems have been looked at and refreshed with modern efficiencies, suitable for a society that wants things on-demand, at all times.
This change has been seen across all sectors but, when it comes to retail and hospitality, that desire is increasingly prevalent, which is causing a stir in the banking world. Digital payment companies have met the demand of consumers by offering contactless payment systems that allow people to make purchases by simply flashing their card at the traditional chip-and-pin reader. As a result, there’s far less physical cash being exchanged, which is diminishing the conventional importance of mainstream banks.
COVID-19 brought a strange new norm to the world around us. As soon as it came, we saw the banking behaviours of global populations drastically change in several ways. Bain & Company’s new survey of roughly 10,000 consumers in eight countries, powered by Dynata, plus a separate NPS PrismⓇ survey by Bain of 20,000 US consumers, both analyse these behavioural shifts in detail and suggest implications for banks.
However, it should be remembered that the adoption of a new alternative to cash transactions was on the rise long before the pandemic. A new wave of digital-only banks, like Starling and Monzo, rely wholly on the use of cards over cash and enhance the consumer experience through contactless and e-wallet methods.
Despite this, Bain did find that “once COVID-19 struck, many survey respondents tried contactless methods for the first time, and a significant share of respondents used these methods more often during the pandemic.
“These experiences proved good enough that contactless usage promises to increase further in the future. Cash and other traditional payment methods, meanwhile, have declined significantly.”
Digital banking has been expanding for many years, and the pandemic has arguably fast-tracked their growth while simultaneously lowering in-person branch visits, which “fell sharply in most countries.”
After analysing Bain’s survey results, there are three key lessons to be learnt from recent banking behaviours:
1. Banks must improve their digital sales pitch. Relying on in-person locations for sales is no longer the way forward.
2. Reshape the cost base─again. Efficiency is something that banks are always looking to improve on, but it’s time for them to become more aggressive and creative about their cost initiatives.
3. Fix the workforce to augment virtual talents. Nobody knows what the aftermath of the pandemic will look like, but we know that the world won’t work quite as it did beforehand. Banks need to embrace modern agility and be flexible with staffing locations and roles. This is one of the most important factors of organisational success in an increasingly volatile world.
The faster the banking sector works on these three key factors, the sooner they’ll adapt to modernisation and recover from the global fallout. If they do so successfully, the banks might be able to “build a more robust, multichannel business that is appropriate for consumers’ increasingly digital behaviour.”
CMA warns UK and Irish banks over bank transaction histories
Specifically, the CMA named prominent challenger bank Monzo, the Bank of Ireland, NatWest Group, and Virgin Money as not providing customers with records of their bank transactions within the maximum outlined timescale (40 days after closing the account).
Such information is crucial not only for ensuring a smooth transition from one bank to another, but also to provide a foundation for credit applications in the future.
According to the Retail Banking Market Investigation Order 2017, 95% of bank and building society customers should receive their bank transaction histories in at least 10 days.
Reputation: A bank’s greatest asset?
Of the 150,000 customers affected, Monzo was by far the main contributor - 143,000 (95.3%) - with the other three dividing the remaining 7,000.
The extent to which the magnitude of its mistake is attributable to being a digital-only bank is not clear, although it may give some customers pause for thought. With a superior customer experience being among the bank’s greatest assets, continued reputational damage is something that it cannot afford to sustain.
Although the CMA’s action in this instance has been to issue each bank a warning and order the immediate dispatch of all outstanding information, it has warned that future breaches will carry heavier consequences. Measures could include legally enforceable compliance audits on a yearly basis.
Helping customers get a better deal
Condemning the banks for negligence that could negatively impact customers’ desires to take out loans or mortgages, Adam Land, CMA Senior Director of Remedies Business and Financial Analysis, promised that his organisation would remain vigilant to similar behaviour moving forward.
“Banks must comply with all the rules – that includes providing a full transaction history promptly.
“We will be watching closely to make sure these leading names stick to their word and don’t let their customers down again. The Bank of Ireland, Monzo, Natwest Group, and Virgin Money should be in no doubt that the CMA stands ready to take further action if these failures are repeated.
Image source: gov.uk