Banking faces its digital revolution
All over the country there's a revolution quietly simmering away. This battle won't be fought with bursts of gunfire, but at the simple touch of a screen.
New technologies have repeatedly shaken the fusty old world of banking and they now stand on the edge of a new tipping point, says PWC financial services partner Sam Shuttleworth. This time it's not caused by the internet: "It's by the growth of mobile phones – and specifically, smartphones."
As young tech-savvy customers start to expect digital banking at their fingertips 24/7, the sanctity of the brick-and-mortar bank branch is under attack.
One in three Kiwis now has a smartphone, according to web technology firm Go-Globe, which makes us the ninth geekiest country in the world.
Now the banks are scrambling to develop and upgrade smartphone apps, which run all the core functions of banking with a few juicy extras – like using the phone's GPS to track down the nearest ATM or branch.
As apps and phones improve in functionality, the traditional interaction between banks and customers is set to be turned upside down. The digital natives of Generation Y are leading the charge, Shuttleworth says, and they're demanding more from their banks.
The phenomenon is documented in a PWC report, which reckons young guns are less concerned about cost savings and more interested in how smoothly banking integrates with digital living.
Imagine repaying a debt that you owe to a friend through Facebook, or getting tweets when someone transfers cash into your account. It sounds far-fetched. But nothing should be ruled out, Shuttleworth says – the last few years of technological advancements have taught us that.
Now the children spawned in the 1980s and 1990s are starting to reach the peak age for financial consumption, and the banks can't afford to ignore them. It's a big juicy sector to latch into – and the first lender to move will take the advantage, Shuttleworth says.
Bank of New Zealand obviously knows which way the wind is blowing. It had the first smartphone apps on the market, and is one of the only banks to cater to the holy trinity of iPhone, Android and other smartphone operating systems.
"We've gone from zero to 44,000 users in less than a year," says spokeswoman Erica Lloyd.
"With mobile, the landscape changes so quickly – it's easy to get left behind, so we knew we had to move quickly."
The secret weapon behind such alacrity? An in-house team of tech geeks cloistered away in Wellington, who worked furiously in the early days to get coverage across all three platforms.
Now they're slaving away at a "long list" of new goodies to bring to market, refining and adding to their existing apps.
Westpac is nipping close at their heels. The bank's latest apps make the leap beyond core banking services to actually creating added value. Take the Impulse Saver, for example – a big red button that sits on your screen, which at a touch transfers a preset amount of cash into your savings account.
But judging by reviews of all the banking apps available, there are still a few wrinkles to iron out. Other banks are learning the hard way that you can't just cram normal internet banking into an app interface.
ASB Bank's FastNet Classic gets top marks for being available on Android and iPhone, but garners a sad 2.5 stars from app store reviews: "Poor design, and not consistent with iPhones UI [user interface] design", wrote one disgruntled user.
Then you have ANZ National, which is working on an Android version of its popular iPhone app. Bringing up the rear – understandably – is banking minnow Kiwibank. But even the little green bank has apps for both iPhone and Android in the pipeline – clearly no-one wants to get left behind.
The developments in banking are just one facet of an even wider mobile movement.
Financial services, computing and communications are converging, says Mastercard country manager Albert Naffah.
Last month, Naffah predicted New Zealand was ready to switch to mobile payments "in a dramatic way".
Those words were – unsurprisingly – prophetic. Just last week, the major telcos joined forces with the bank-owned eftpos operator Paymark to develop a new payment system using microchipped smartphones.
Forget a cashless society – we're talking about a walletless society.
According to Mastercard, the availability of mobile internet is a key enabler for adopting mobile commerce. And yet their own research shows only 8 per cent of those surveyed made online purchases using phones in the last month. Although we're teetering on the edge, we still haven't taken the plunge.
The mobile banking uprising is similarly hesitant to spark into life – we have all the weapons, but someone needs to hurl the first molotov cocktail.
New Zealand's mobile uptake has been estimated at 10 per cent. Compare that to figures from the PWC report, where world leaders like India and China are climbing over 50 per cent.
"It's going to take off," says David Tripe, director of Massey University's centre for banking studies. "But the point of a rapid takeoff, from past experience, could well be some time away."
For someone whose life work is in banking, Tripe is refreshingly grounded: "It's only banking," he says, dismissively. "How excited really – when it comes to the crunch – are people?"
The banks are doing their bit, but any good revolution has to be driven by the people. While we might not get weak at the knees at the thought of mobile banking, it's a very different story overseas.
That's partly because we don't know how lucky we are here, says Tripe. Mobile banking facilitates easy person-to-person payments, something New Zealanders have long taken for granted.
"Some of the things that are happening in the US are a consequence of a relatively clumsy and inefficient payment system," he explains.
The side-effect of that clumsiness is those countries' mobile banking apps are now leagues ahead – in the US, you can even snap a photo of a cheque and send it to the bank to cash.
So, sparking the shift may require some added-value, change or useful application – but Tripe doesn't know what that might be.
"If I knew what the answer was, I could tell you when it might happen."
The convenience factor of banking at your fingertips might even be enough, but how useful is it to check your balance every 10 minutes?
Surprisingly handy, apparently. Consider that Westpac gets as many as five million balance requests a month. Their Cash Tank app, a petrol gauge that shows at a glance if you're cashed up or running on fumes, has proved very popular.
And with the great mobile movement waiting in the wings, the last bastion of physical banking is looking undeniably shaky. A string of new technologies – ATMs, eftpos, internet – have steadily frogmarched the main street bank branch towards obsolescence. Is mobile banking the final nail in the coffin?
Tripe likes to ask people what function bank branches will perform in 20 years. There's no correct answer, of course, but "not much" seems like a reasonable guess.
If you're pleading for an extension to your loan, it's hard to imagine not having to deal with your bank manager personally.
But Tripe reminds us there are other channels available; plenty of professionals already think nothing of working remotely through phone or video calls.
There is, of course, the comfort factor.
"There's some suspicion that people like the idea of having a bank branch somewhere near them, even if they never go to it," Tripe says.
And Shuttleworth thinks some core functions, like signing off mortgage contracts, won't be so easy to replace. The composition or size of the main street bank branch might change, but it won't disappear, he reckons.
Nevertheless, as he says, "the digital age is upon us". It's time to trade tanks for touchscreens, and machine guns for mobiles – the revolution is looming on the horizon.