Karen Scott-Howman: Customers drive banking innovation
OPINION: "The horse is here to stay but the automobile is only a novelty – a fad," said the Michigan Savings Bank president in 1903. He was advising Henry Ford's lawyer not to invest in the Ford Motor Company.
Where bankers may once have shunned technology, the opposite is true today.
This century we've seen a massive leap in access to personal digital technology. That's clearly reflected in how we're now banking. These technological advances mean we're managing our money in ways that many did not foresee.
What's behind these changes, and what does the future hold?
The extraordinary evolution in banking today is largely driven by changes in customer preferences, and competition both inside and outside the banking sector. Banks have embraced technology in the quest to provide an ever more seamless experience for their customers.
Remember the good old days?
We used cheques a lot more, and made bank account deposits and withdrawals by visiting our local bank branch, filling in handwritten forms; all within civilised "bankers' hours" from Monday to Friday. You might've found yourself caught short if you didn't withdraw enough cash for the weekend. Bank branches were an essential part of every community for both households and businesses.
Things started to change in the 1980s when ATMs appeared. You could finally get cash at the weekend! Since then innovation in banking hasn't stopped.
Now we take for granted 24/7 access to banking services. While banks have retained branch networks, the vast majority of banking transactions today are done though a range of other innovative channels.
That includes being able to call your bank's contact centre from the comfort of your own home, or anywhere else for that matter, seven days a week. If you'd rather not speak to a customer service representative, you can do most of your banking yourself, either at home on a computer, or on the go with the banking app on your smartphone.
Banks are constantly improving the functionality of their internet and mobile banking channels. As well as meeting your everyday banking needs, online and mobile banking allows you access to a huge amount of the latest information about your bank's products and services, financial capability tools, and how they're contributing to your community.
As little as five years ago, the thought of banking on your mobile phone would not have occurred to most of us. Now we can even make everyday payments using our mobile phones.
The age of the mobile wallet is here. While contactless card payments still seem fresh and innovative, it's now possible to make contactless payments simply by waving your phone over the payment terminal. The mobile payment app on your smart phone holds your bank card information, which is used to make mobile payments.
Mobile payment apps also have the capability to store loyalty cards, public transport cards and special offer vouchers. Soon that wallet stuffed with cards will be a thing of the past. It will be possible to conduct most everyday transactions on your smartphone.
Current innovations are propelling us towards banking that is seamless and integrated with other personal technology. Nobody wants a mortgage; they want a home. Nobody wants a student loan; they want an education. In a similar way, banking is likely to become more focused on life events and personal aspirations, rather than financial transactions. Given the drive for seamlessness and convenience, it's quite possible that the future of banking means you won't even realise you're banking.
This innovation in banking services has come in response to customer demand and behaviour.
In a highly competitive environment, banks have worked out that attracting and retaining customers is essential to their success. To do that we need to keep our customers happy. And to keep customers happy, we've vastly improved access to banking services. Better access to banking services mirrors the industry's customer satisfaction ratings. The latest Consumer NZ banking survey found that 86 per cent of bank customers are satisfied with their bank.
While banks are constantly looking at what's next in providing even better access to banking services, we're also conscious of meeting the needs of all our customers.
That's why bank branches remain an important banking channel. While the look and feel of bank branches has changed over time, they still provide access to traditional banking services. The focus of branches these days, however, is more on providing advisory services. Branches also help us to maintain a physical brand presence in the communities that we're part of.
Customers overwhelmingly now prefer to use more convenient ways of banking, which means some branches no longer make commercial sense. They're often replaced with smart ATMs that can accept and count notes and coins, which are instantly available as cleared funds in your account.
Some banks are also providing digital educators, to help customers learn how to get the most out of online banking services.
Customers aren't the only ones driving changes in banking.
Other digital enterprises are challenging banks in their own sector. They include peer-to-peer lenders and alternative payment platforms.
Once again it's about providing people with seamless and convenient financial services. Banks operate in a very competitive environment, which is good for both our customers and the industry. We welcome the entry of the "fintechs" because it encourages us to keep improving the experience of the all-important customers we seek to attract and keep.
It's an exciting time for banks and their customers. We can enjoy innovations undreamt of even a few years ago, while retaining traditional banking channels. Banking as we know it will continue to change over time, and customers will continue to drive those changes.
Karen Scott-Howman is the chief executive, New Zealand Bankers' Association.