Big Read: The digital revolution changing the way you manage your money

Steven Faulkner says electronic transactions make up at least 40 per cent of his ice cream truck sales.
GRANT MATTHEW/Fairfax NZ

Steven Faulkner says electronic transactions make up at least 40 per cent of his ice cream truck sales.

Technology has changed everything from how we purchase goods to how we pay our bills. Reporter Brittany Baker looks at how the digital world is changing your bank and the way you think of money. 

When Steven Faulkner hands a cone through the window of his ice cream truck he takes an eftpos card in return.

"People don't carry cash anymore," he says. "If I go park down at the beach, people won't have any coins but they will be carrying a card."

Stephen Bowe, head of digital at Bank of New Zealand (BNZ), says the ease of access to bank accounts has skyrocketed the ...
BNZ

Stephen Bowe, head of digital at Bank of New Zealand (BNZ), says the ease of access to bank accounts has skyrocketed the number of online transactions.

When Faulkner took on Tinkle Bell ice cream three years ago, he says the first thing he did was add an eftpos machine, even though ice cream trucks are typically associated with loose change. 

But now that he's accepted electronic payments, he estimates 40 per cent of sales are made through a card payment and that trend will only continue.

  

More bank branches will be digitized as people continue to use online services to deal with money.
GRANT MATTHEW/Fairfax NZ

More bank branches will be digitized as people continue to use online services to deal with money.

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It might not seem like it but Faulkner is at the forefront of a long-running revolution that is changing the way we spend, manage and even think of money. 

Paper notes and coins are becoming less and less popular in favour of electronic transactions that reduce money to a row of numbers on a screen electronically transferred between two parties without any human middleman 

Westpac general manager of consumer banking and wealth, Simon Power, says the traditional branch and bank conversations ...
Westpac

Westpac general manager of consumer banking and wealth, Simon Power, says the traditional branch and bank conversations is "definitely" changing.

And while we are spending more than ever, the way we are electronically managing our money is largely why brick and mortar bank branches are either closing or struggling to turn a profit from the decreasing number of people that do come through their doors. 

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For Faulkner using eftpos not only provides a bit of security and reduces the need to visit the bank, it also helps ensure a sale to parents who increasingly carry little or no cash.

"Kids will run up and ask, 'have you got eftpos', and when I tell them I do, I watch them run down to tell mum.

TSB Bank general manager of customer sales & service, Steve O'Shea, says banks can no longer make decisions solely on ...
ANDY JACKSON/Fairfax NZ

TSB Bank general manager of customer sales & service, Steve O'Shea, says banks can no longer make decisions solely on commercial viability. He says customer service is major point of difference.

"Then I see her drop her head because that used to be the excuse for years," he laughs.

It should come as no surprise that more and more transactions are done via electronic services. In February 2016 there were a total of 123 million card transactions in New Zealand, or about 27 transactions for every one of New Zealand's 4.5 million people.  And this number is set to grow.

Stephen Bowe, head of digital at Bank of New Zealand (BNZ), says there will be a natural reduction in cash as people continue to turn to faster options in dealing with their money.

Less people carry cash while electronic transactions are on the rise.
GRANT MATTHEW/Fairfax NZ

Less people carry cash while electronic transactions are on the rise.

And ever-increasing ease of access to banking has skyrocketed the number of online transactions.

"Banking has always been based on this idea of physically going into a bank," he says.

"But now the number of people using mobile is ridiculous.

For most retirees NZ Super is not enough to live on, says Claire Matthews, Massey University.
None

For most retirees NZ Super is not enough to live on, says Claire Matthews, Massey University.

"We're dealing with 14 million more transactions than we were before."

BNZ is not alone in this technological shift. Banks throughout the country are seeing less people walk in the door to deposit cash, withdraw money, or sign off a cheque.

Westpac has 90 per cent of transactions occur outside branch locations, general manager of consumer banking and wealth Simon Power says.

"In the last five years, we've seen online log-ins increase by 61 per cent and in the last year mobile log-ins have increased by 33 per cent.

"The way people are banking is definitely changing. You've got to think beyond the physical branch presence."

As less people visit the bank, the cost of keeping them open becomes bigger than the profit those branches can make. Branch closures have rippled throughout the country, usually leaving smaller communities without a bank and greatly reducing the number of branches in cities.

There are likely to be more closures yet as more and more people migrate to online banking and may only need to visit a branch for big ticket items like mortgages. 

To a degree Taranaki has been shielded from the worst impacts of these closures with the homegrown TSB Bank still able to operate branches in most towns around the province. 

Steve O'Shea, TSB general manager of customer sales and service, says its this sort of presence that preserves the bank's customer-driven reputation.

But it doesn't make it easy, he says.

While the financial institution has increased its staff numbers in the last year, expanding its branch numbers outside the region, the bank's latest reported profit was $20.1 million behind the preceding year's profit of $85.6m.  

In response to the drop-off, O'Shea points to the organisation's recent investment in both people and new technology.

Like its larger competitors, TSB has also seen a reduction in over the counter transactions, he says.

"They're probably reducing upwards about 10 per cent per annum.

"That's a large number of transactions that people used to come and do that no longer do."

Yet this hasn't convinced the Taranaki bank to close the doors of its smaller branches, no matter the increasing costs of newer technologies, as O'Shea says customer satisfaction is the major point of difference between banks.

"As more and more options come into play, it doesn't mean you can always just rush out there and chop the other ones away." 

"Yes, it's got to be commercially viable but, if you aren't seen and truly a part of those communities, you're not going to grow your business."

Reviews are always underway - this is true for every bank.

And as customers overwhelmingly choose "more convenient" ways to bank, chief executive of New Zealand Bankers' Association Karen Scott-Howman says the look and feel of branches will continue to evolve.

"This means some branches no longer make commercial sense."

She explains branches are already being equipped with smart ATMs, which can accept and count notes and coins that are instantly available as cleared funds in an account.

"The focus of branches these days is more on providing advisory services," Scott-Howman says.

Kiwibank communications manager Bruce Thomson agrees.

He explains that while services such as loans and opening accounts can be done online, the complexity and "magnitude" of these conversations were enough to pull people into a branch.

However, Thomson admits banks were feeling the pressure.

"If you look into the future, is it a cashless society? We don't know. But it's probable that cash will continue to diminish."

Dr Claire Matthews of Massey University is not sure if the cashless society will happen but she does see technology's enormous impact on the finance industry.

She says services such as the phone-based Apple Pay and online payment giant PayPal can be a competitor to traditional banks but they can also be utilised as a tool for opportunity, pointing to ANZ as an example of one bank that had embraced Apple Pay.

Technology has has already positively changed the way people pay for parking or donate to an organisation, which can now be done by the simple action of sending a text, Matthews says.

While she recognises the changing face of banks can be upsetting for some, she says after initial investments, the cost savings are significant.

Matthews uses "ballpark figures" to explain: "A branch transaction will cost $10, while an electronic transaction is $0.15. And to use the ATM is $1.50."

And while this means a reduction in bank branches, she believes banks will always have a physical place in the community, saying people have an innate need to see a branch is available should they ever require a visit.

"People want to be able to know there's the option," she says.

"They want to drive by and just wave. They may never actually go in, but they want to know they can.

"I think it has to do with them dealing with your money."

Faceless services at a fingers' reach, Matthews adds, could not replace banks as each app, text and transfer "ultimately goes through the bank".

"So the banks continue to be involved in the background somehow because you still need that repository."



 - Stuff

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