It seems that we can scarcely do anything these days without opening an app to help us do it better, quicker or cheaper, whether it is making a call, watching a TV show or even doing the weekly grocery shopping.
Perhaps it was therefore inevitable that the surge in online banking over the past few years would occur. After all, the industry has always been eager to innovate in its branches, with the first ATM appearing some 50 years ago. Today, the majority of major branches feature automated tellers inside that can fulfil almost all your personal banking needs.
Banks were also quick to realise that customers are keen to avoid having to venture out to a branch if possible. Most high street banks started to offer telephone-banking services in the 1980s, long before the concept of conducting financial transactions over the phone became the norm. Then, on the eve of the new millennium, Barclays launched its online banking site, and changed the landscape of the industry forever.
The rise of online banking
Where Barclays led, other banks were quick to follow, and within two years, 80 per cent of the major banks had an online offering. Today, well over half of us routinely use online banking, while less than a third use traditional branches, according to a survey by Roy Morgan Research.
These trends continue to rise year on year, and while the main players still maintain a high street presence in most major towns, we are forced to wonder how long they will continue to do so. Already, a number of branches are reducing operating hours, and Saturday opening is becoming something of a rarity.
Of course, the main benefit of online banking is convenience. Not only can you check your statements and conduct most transactions from your desktop or a smartphone app without leaving the comfort of your living room, but you can also do so 24 hours a day, seven days a week.
Yet, the benefits go far beyond this. As online banking has become ever more ubiquitous, customers have become both better informed and more demanding as to the service levels they receive. At the same time, bank overheads have reduced, making it easier to accede to customer demands without a serious impact on margins.
Thus, we have seen transaction times slashed, service offerings broadened and bank charges reduced or even discarded. Clearly a win/win for every customer.
More transparent times
Modern day banking has, in many ways, expanded on what we like best and minimised or eliminated the painful side of managing our finances. This is down to a combination of stricter regulation and greater interactions between the bank and its customers, who play a far more active role in managing their own money.
Probably the most well-known example of this is the long and painful story relating to payment protection insurance. We have all received those annoying telephone calls, but the point behind them is that thousands of people signed up to a service they neither wanted nor needed, and were left severely out of pocket.
Today, this simply could not happen, but it is a mess that is still being cleaned up by all the major banks. Lloyds PPI Refund bill is by far the largest – it has paid out more than £17.4 billion, and there is clearly much more still to come. Although Lloyds was hit hardest, all of the high street branches were involved in what has been described as the biggest mis-selling scandal of all time.
Regulation and the concept of keeping the customers satisfied are great motives for banks to provide a better service these days, but there is an even more compelling one. This is good old-fashioned business sense.
A generation ago, if you wanted to make a payment, transfer some money to a loved one or find a good investment, you went to the bank. These days, you go online and type a search into Google. From making an instant transfer overseas to investing in gold and bitcoins, you will immediately be offered a range of service providers, along with their various commission rates.
Very few of these will be banks in the conventional sense of the term, indeed most are online businesses with negligible overheads. To remain relevant and competitive in the modern environment, the traditional banking institutions will need to offer flexibility and the best possible rates. That can only be good news for consumers everywhere.
Founder Dinis Guarda
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