By Zana Busby, Consumer Psychologist.
Arguably, the sector that has seen the most change in this digital age of ours is banking. Not so long ago, going to the bank was as much a part of the weekly high street ritual as going to the Post Office or going to the supermarket. However, the advent of digital banking, together with many high street banks closing branches, has taken money management out of the hands of the bank teller – and into yours.
This is important to the retail sector for several reasons. Over 70% of UK customers now use online banking services while Europe’s digitally native banks, those without any high street presence, claim to have roughly 12 million users. Money can be accessed and sent instantly. Likewise, the setting up of standing orders and payments is now momentary.
Banking obviously has a huge impact on retail because these services have a near total monopoly over how we use money. But like all tech revolutions, the real change is not in how we now do things differently, but how we think about things.
Open Banking and other key legislation allows banks and financial companies to securely access your data once permission is given by you. This means we’re able to switch banks at the touch of a button and it also means we’re able hold a plethora of services on our phone: from accountancy, to credit cards, to mortgage offers, to current accounts, to pensions, to foreign currency, to stocks.
That represents a democratizing and welcome competition in a sector formerly associated with stuffy men in suits. Like so much of retail it’s now all about choice. Finance was once blighted with something called ‘The Advice Gap’. If you had lots of money, banks gave you lots of nice services, good advice and free theatre tickets; everyone else got the bog-standard current account with a ‘free’ cheque book. Now you can shop around, access the stock market, get a pension, sell a house or buy a gold bar all on your phone and without having had to win the lottery to ‘qualify’ for a bank’s ‘private office’.
But we are losing some things too. High street banks used to have a good relationship with retail, offering vouchers and discounts to market town partners across the land. That has now diminished as clients look for a better FX rate on their app, rather than a free piggy bank. The financing of the high street itself has also changed as new retail startups look for low rates synonymous with digital ease of use when it comes to their accounts.
People talk about ‘Netflix finance’, whereby you can select what you want, when you want it; you don’t have to wait for the bank to decide what it wants to give you and when. By looking at my banking app I can discern how much I have spent on clothes, sandwiches or petrol this month and adjust accordingly. Imagine that service combined with retail, where you’re able to manage your finances and do your weekly shop all through one app… no wonder Amazon is looking at this space so seriously.
But it can go too far. There is still a core of consumers who aren’t digital, who need personal banking services and postal communication. Events such as the infamous TSB crash won’t instil them with the confidence to go digital just yet. They need to trust the tech, but more than that, they need to trust that they will be looked after if the tech fails.
That relationship between digital service provider evangelicals and core sceptics is represented across retail. It’s a challenge but, hopefully, it means the best will succeed. Why? Because it puts a premium on trust.