There are several retail models that have remained unchanged throughout their existence, banking is most definitely not one of them. Banking has seen significant improvements over its existence, however, the way we interact with banks remains a brick and mortar branch.
Will that change with smartphone banking?
First National Bank (FNB) and Capitec Bank are leading the charge to digitize, disrupt and improve banking in South Africa as we know it. FNB with Geo Payments, FNB inContact and even opening an account with a selfie the bank aims to drive the app towards being their primary tool of customer interaction. In contrast, Capitec is taking a different direction, as they aim to create more branches allowing them to be more approachable and reach the masses.
Let’s take a step back, to look at what the current capability of smartphone banking is and the direction in which it is heading. We have all noticed majority of FNB’s, Standard Bank’s, Nedbank’s and ABSA’s bank branches are getting smaller, except Capitec and if we really think about it a reduction in the frequency of having to go into the bank. Is this as a result of smartphone banking? One can only assume that it is because we can make transfers, deposits, credit card and loan applications amongst other activities on an app. The features are included in these banking applications and the ease with which we interact with our banks is on an exponential trajectory. The question remains why is there a need for bank branches?
While that question is at the forefront of our minds, we have to look at the socio-economic standing of our country. Two factors come to mind, the first is that a large part of our population is digital immigrants (a person born or brought up before the widespread use of digital technology) usually between the ages of 45-80. The second factor is that a large portion of South Africans have an underlying mistrust, towards anything we cannot see, touch interact with, or don’t understand. Until these two factors have been addressed there will always be a need for branches regardless of digital capability.
Taking a deeper look at smartphone banking platforms
Discounting these two factors let’s take a narrowed look at how smartphone banking will affect the lives of those that currently use this medium. Some banks have already made the decision to reduce the square meterage and number of branches, in a drive for a greater bottom-line. They are phasing out the use of cheques and other forms of payment that now seem archaic. This will result in more features being added to their respective applications. So, what is missing from the current smartphone banking platforms?
Although banks have done well to include the essentials on their smartphone banking platforms, there are a number of features that they can improve on. These include SME business loan applications, home insurance applications, government grant distributions, Peer to Peer payments and loans, home affairs applications and improving the technology to replace the use of cards with smartphones. There is also much to be said about improving biometrics and security for verification as smartphone banking progresses. Adding these additional features will bode well for the long-term goal to make the branch obsolete.
The notion of replacing cards with smartphones highlights the question of what the best smartphone is to use for smartphone banking. The make of smartphone has no weight in this conversation however the features held within the phone does. To best utilize the smartphone banking service, you would need a phone, with near field communication (NFC), fingerprint sensors, a camera, and the features that define a smartphone, such as internet access and an operating system that allows for downloading and running applications.
These smartphones come at a cost, so does the benefit outweigh the cost?
There are several benefits to using smartphone banking versus going into a branch. To mention a few; the convenience of banking 24 hours a day, 7 days a week. The convenience of sitting next to someone and making a transfer to them. The convenience of paying speeding fines, electricity accounts, utility accounts. Another benefit is that of cost saving, previously people would have to leave work early to get to the bank, pay petrol or taxi costs and pay additional administration fees on transactions performed in-bank. By using smartphone banking these are all saved costs and these savings add up. Moreover, some banks have even made the use of their apps free of data charges.
Whilst there is definitely a push towards a branchless model from all banks in South Africa except Capitec, the current socio-economic standing of our country amongst other factors will not render the bank branch as we know it obsolete. This conversation, however, will have to be re-addressed in years to come. The dynamic of a bank branch may change from that of transactional to that of a trust and marketing pillar. This change should also reflect a move towards a more customer-centric approach to the development of features that a customer would want to see and use, this is imperative if banks foresee a branchless future.
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