Technology has the potential to create seismic waves of change through banking that will alter consumer habits further, but the industry will need to work hard to maintain trust and to ensure some customers are not left behind in the banks of the future. This is the conclusion of a comprehensive banking futurology report published by CYBG.
The way we interact with and look after our money has changed beyond recognition in the past decade and the ‘Bank to the Future’ report from CYBG points to more rapid change on the way.
But new consumer research shows that while most of us embrace digital, human interaction remains critically important for the banking experience. Digitalisation can make banking more efficient, but it reduces banking to a commodity when it is really a service; banks of the future will only prosper with human touch customer service.
The research gives us the clear message that 81 per cent of consumers would still want to speak to someone, or to visit a branch, no matter how advanced technology gets. And customers are almost twice as likely to oppose all processes turning digital in banks compared to supermarkets, fast food restaurants or clothes shops. Only dealings with health professionals can match dealing with money in terms of concerns about digitalisation.
Perhaps the most surprising result was that there is no change in the percentage of different age groups when asked about the importance of being able to talk to someone at the bank. Amongst those aged 16-34, 78 per cent value the human touch, and only three per cent rule out being able to talk to someone as being important (for those aged 35 and over, 81 per cent value the human touch). The importance of face-to-face or talking to someone on the phone increases with more complicated transactions – for example taking out a mortgage where 80 per cent value the human touch; and particularly if something goes wrong – like fraud on an account (87 per cent).
CYBG commissioned renowned insight company, Foresight Factory, to compile the ‘Bank to the Future’ report. The report’s key conclusions include:
- How we interact with banks is already changing rapidly with increasing acceptance of new technology. The report makes bold predictions for the adoption of new technology with:
- Over four in ten (42 per cent) people using voice commands via smart devices by 2025;
- A similar proportion of consumers (45 per cent) will have used a virtual reality (VR) headset by 2022;
- We all experience the rapidly spreading use of contactless payments. The report predicts a coming trend for wearables whose popularity is evident with 17 per cent of total consumers owning a wearable device, rising to 29 per cent amongst Millennials. We are used to wearables for tracking fitness and soon the measured life will extend to tracking finances;
- In turn, the use of wearable devices will soon be complemented and ultimately replaced by biometric payment methods. Biometric identification will greatly enhance security for consumers when carrying out banking activities and will reduce fraud. One in five consumers (20 per cent) have already used their fingerprint as a form of identification to make a purchase, with a further 28 per cent interested in doing so. Consumer research showed that all demographics already trust finger prints and retina scans more than chip and pin for payment security.
- Budget tools will become more precise and sophisticated. The recession a decade ago left abiding budgeting habits in the British population with two out of three of us saying that we carefully manage our finances every month. However, this falls to 29 per cent amongst Generation Z (those born after the mid-1990s). On the other hand, their grandparents’ generation over the age of 65 are budgeting enthusiasts despite an antipathy to using technology for this purpose. Those with incomes of less than £18k are far less likely to use digital budgeting tools than those with incomes over £75k when arguably it would be most useful for the lower income group. The report provides a financial inclusion challenge to the banking sector.
- Banks will need to build trust by safeguarding personal data and addressing cybercrime worries. The report concludes that three quarters (74 per cent) of consumers, of all generations, would like more control over personal information they give to companies and the way it is stored.
Mark Curran, Director of Payments and Open Banking at CYBG, said: “This report makes some bold claims for the future, for consumers and for banks. Wearables will revolutionise payments, customers will adopt budgeting technology making them much more aware of their finances, and biometrics will help reduce fraud. This is good news for customers but banks must raise their game to improve financial inclusion, maintain trust and, above all, make sure that they don’t lose the human touch.”
“At CYBG we have a clear vision of the type of bank we want to be in the future. We are committed to investing in technology to continue to increase convenience and functionality, but we will not lose sight of the fact that the customer is what matters the most and there needs to be a balance between digital progression and human contact.”
“Understanding what the future holds in banking is vital in helping us prepare our business, so we can best support our customers. This report provides invaluable insight into where we are and where we are going - not only as an industry, but as a society. And actually, in many ways, it has revealed that the Future of Banking is already here.”
Thom Almeida, Senior Analyst at Foresight Factory and author of the report commented: “Banking as we know it today is undergoing a period of transformative change driven by emerging technologies, shifting consumer expectations and regulatory developments. In order to take full advantage of future opportunities, incumbent financial institutions must identify their core strengths such as brand recognition and established branch networks, and meld these together with key learnings drawn from FinTech innovation.
“Within the fast-moving financial services landscape, it is important to consider which customer groups are currently underserved by FinTech innovation. While younger and more affluent demographics are most receptive to new banking applications, older consumers as well as small- to medium-sized enterprises are often overlooked despite the huge market potential.
“Open banking, smart budgeting tools and chat-based interfaces have been introduced relatively recently but are already shaking up the financial services sector. Perhaps even more so, the emergence of biometrics, artificial intelligence and virtual reality are set to have a significant impact on banking in the future. Banks that are able to harness these new technologies correctly, while maintaining sufficient human-based customer service and safeguarding personal data, are most likely to succeed.”
-  Censuswide, The Survey Consultants – Additional consumer research to support the ‘Bank to the Future’ report was carried out among 2000+ respondents from all demographics and regions of the UK from 8 to 11 March 2019.