What do you want from your bank in the future?
Will you ever trust your bank again? Or are you excited about paying bills on your mobile phone? Join our online debate...
Saturday 18 September 2010
Britain's banks were back in the firing line this week. The Financial Ombudsman Service reported that nine out of 10 complaints that were rejected by banks in the first six months of the year had to be overturned in the customer's favour. The picture painted is of a banking industry which doesn't listen to its customers and doesn't care about such old-fashioned qualities as good service or value for money.
Coming three years after the collapse of Northern Rock and two years after Lehman Brothers went bust, it's obvious that trust in our once-proud banking institutions is at an all-time low. Is there anything banks can do to regain our trust? What can we expect from them in the future and how will it improve the way we bank?
The Independent is launching a major online debate on the future of banking next week – at www.independent.co. uk/bankingfuture – with guest blogs and videos from a series of banking bigwigs and leading consumer figures. Bankers set out their vision of the future, while consumer campaigners explain what they expect.
Leading the online debate is Peter Vicary-Smith, the chief executive of Which?, who was instrumental in forming The Future of Banking Commission earlier this year. The commission made a series of recommendations in June.
"Banks must be structured so that they can fail without the catastrophic consequences to their customers and the wider economy that we have seen," Vicary-Smith demands. "We believe that a key to achieving this would be the creation of 'living wills', detailing how the collapse of a bank would be managed. What's more, a new class of 'safe haven' accounts should be established with a 100 per cent guarantee, but which would only be invested in safe assets and would therefore have a lower return," he says.
"Finally, to tackle mis-selling and the sales-based culture disliked by customers and branch staff alike, banks should cease paying sales commission to front-line staff. Instead, staff should receive bonuses linked to levels of customer satisfaction, the fair treatment of consumers, and resolution of complaints."
Andrew Hagger of Moneynet.co.uk, who writes our weekly Money Insider column (p68), believes the future doesn't necessarily look so bright for banking customers. "I think we'll move even more towards a three-tier banking system where you will be able to have a basic bank account and ATM card still available for free – but if you want anything extra such as an overdraft facility you'll end up paying a monthly fee, possibly as part of a packaged account," he warns.
Meanwhile, he predicts that more well-heeled customers will be bombarded with bespoke services, for which they'll be charged a fat fee. In short, there will be still more costs and charges in the future. That's a vision that alarms many, of course.
But in return, the banks are beginning to promise us more convenience as they embrace greater use of technology, such as mobile phones. Matt Colebrook is the chief executive of the HSBC-owned online bank first direct, which was launched in 1989. He says the immediate future of banking will be driven by mobiles.
"The mobile phone has become the ultimate intelligent device, and I predict in the next three or four years it will become the predominant channel for banking services," says Colebrook. "The next generation of banking customers view their mobile phone as their information terminals, which means that businesses will have to adapt to make sure they provide their services in a format that is easy to use through this medium."
Hagger agrees. "There will be a continued move towards contactless cards and mobile banking, particularly with apps for iPhone and iPad. Hopefully, with increased technology, banks will be able to market products via text or email that are more in tune with a customer's individual financial situation as opposed to the blanket or scattergun marketing that takes place at present."
Chris Skinner, chairman of the Financial Services Club – a talking shop for bank bosses – says social media will play an important part in people's relationships with their bank in the future. "Technology is now a social channel, and banks are struggling to work out how to be social. After all, so many of them are, by nature, antisocial. Looking to the future, it is technically possible for a consumer to build their own bank using plug-and-play apps from different providers to suit their individual requirements," says Skinner. "This will be a challenge to banks, requiring them to open up their closely guarded systems and technologies as customers are now in control."
It's through social media such as Twitter and Facebook that banks will hope to regain trust with customers in the future, says Colebrook. "I have no doubt that social media will become a serious factor in customers' decisions," he says. "The big frontier for the banking industry is trust, and conversations, whether between a bank and a consumer or between consumers themselves will be absolutely key in establishing the groundwork for the industry to build that trust."
Is it ever going to be possible for Britain's banks to regain the trust of fed-up customers? The banks will clearly do whatever they can to rebuild trust, but the battle may actually be built on customer service, not technology or price, says Hagger. "Customer service as opposed to price will play a bigger part when it comes to consumers choosing a bank, especially now that complaints data is published for all to see," he says. "It will be interesting to see if the Metro Bank customer-centric strategy proves a success when rolled out on a bigger scale – something I'm sure the established high-street players are monitoring closely."
Jan Smith is managing director of the banking consultancy, The Virtual Company. She believes that the growing popularity of online banking, along with improvements in technology and security, could lead to even more bank branches being shut, alongside the proposed scrapping of cheques in 2018.
"There is a generation of children coming to the market in the next five years that has grown up in a world where virtual interaction is the norm. How important will a branch network be to these customers of the future? Will they even want to talk to a human being to do their banking?" she asks. She points to the success of online giants such as Moneysupermarket. com to suggest that banking in the future could become much more of a transactional relationship.
However, if customers still want branches, the banks would keep them. Smith says: "The banking system doesn't change by following a process. It isn't branches being replaced by telephone, in turn being replaced by online and mobile phones. It's about reacting to customers whatever they need."
Colebrook echoes that view. "When we introduced telephone banking, it was a reaction to customers who wanted a different way to access their banking. As new ways to bank mature, the industry will have to evolve to deal with the technologies."
The bad news is that new technology is unlikely to lead to cheaper services. "While new technology can bring cost-saving benefits to banks, it's unlikely these will be passed on to customers," warns Hagger.
So how will we benefit? Through greater convenience and easier ways to move cash around, allowing us to take control of our money.
Is that what you want? Add your opinion to the debate at www.independent.co.uk/bankingfuture
'It would be nice if online banking was more usable'
What do the future customers of today's banks want from their finance institutions? More transparency about charges, a more usable experience online, and more ethical responsibility, according to Joshi Eichner Herrmann, a 21-year-old undergraduate at the University of Cambridge. Here, he sets out his vision for the banks of the future.
"The banks need to be much more transparent about the way they make money and how they charge us. In the long term, no one appreciates having a great interest rate on their savings if they are hit with sudden inexplicable charges when they use their card abroad or mistakenly surpass their overdraft limit.
"It would also be nice if the banks made online banking a bit more usable
before they expect everyone to give up visiting branches. Both banks that I use have rudimentary websites that log you out if you hit the "back" button, or time you out when you go to make some tea.
"If they can't make a system which is secure without requiring us to carry around a silly little calculator-like device in our pockets then maybe they should invest a bit more in the technology. Technological advances have made lots of things we do – like checking our emails or reading the news – really easy to do on the move, but banking hasn't reached that stage yet.
"Another thing I would hope for in banking is ethical responsibility. I think the heightened awareness of social and environmental issues in recent years means that more people will demand that their bank pays attention to the impact its borrowing is having on the world.
"It simply isn't palatable in the 21st century to know that your money is helping out arms firms in South America or funding GM crops in the subcontinent, and people would appreciate more choice in this respect."
Simon's piece will be followed by five blog posts examining the future of the banking industry. Follow Banking Future on the Independent blogs.
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