The fintech industry has seen an explosion of growth in recent years, giving consumers new platforms that deliver convenience and choice straight to their fingertips. The market is rapidly growing and, by recent estimates, is thought to be worth in excess of $100 billion.
That may be welcome news to consumers who are joined at the wrist to their mobile device. But is there a wider downside to society, and could the changing nature of consumer banking leave some people behind?
Jason Maude, Chief Technology Advocate for Starling Bank, says: “The biggest risk of digital-only banking is, if something goes wrong, they may have a harder time getting through to someone who can help them. They can’t just walk down to a building on their high street and go in there.”
Maude explains that, from a regulator’s perspective, there can be no doubt about the reliability of technology for digital-only banks. “At Starling Bank we employ ‘chaos engineering’ to deliberately take down, crash or eliminate our own servers in production and the reason we do that is so that we can prove and guarantee our resilience and make sure that we are truly resilient against faults and failures,” he says.
More than 4.5 billion people now have access to the internet – close to 60% of the world’s population – yet, according to the World Bank’s Global Findex Report published in 2017, 1.7 billion people are considered ‘unbanked’. It’s a problem even in developed nations. In the US, more than 7 million households (5.4%) are categorised as ‘unbanked’ according to a 2019 FDIC survey. In the UK, the Financial Conduct Authority (FCA) puts the number of unbanked adults at more than a million.
Damon Roberts, Director of Digital Banking for TSB, explains: “Not everybody can use digital or indeed are comfortable with it. Covid has helped with that a lot but you have vulnerable customers, there’s unbanked people who struggle with digital and might not have access to devices, devices can sometimes be very old and then you have a technical challenge there in terms of supportability. There’s a more social element to it that I think banks need to consider, because if everybody was a digital-only bank it would exclude a decent proportion of society, which is not what banking is here for.”
Even for consumers who are confident online, losing that human connection to their bank can be disappointing. As Maude elaborates, that is why Starling – a digital-only challenger based in the UK – has put such a large emphasis on customer service.
“One bit of our organisation that we haven’t really tried to automate away or move away from is our customer service. We have phone lines manned 24/7 to be able to tackle customer queries because it is really important that customers know that is there.”
It’s an aspect of the client relationship that Michael Rennie, Chief Digital Officer for Cynergy Bank, also recognises. “We have relationship managers and bankers that are out there but we talk about ‘human digital banking’, so we want to keep the human face because we don’t want to lose the opportunity to build those relationships,” Rennie tells us.
“They’re still critically important to how we bank and how we operate, so we want to keep the human face but we want to digitise everything behind that. We’re incredibly efficient and we can obviously provide the right services at the right time, and shorten that cycle time, but we want to still allow our bankers to get out there and meet customers. The risk [with digital-only banking] is that you start to lose those personal relationships if they’re only interacting through an app or through a browser.”
At times, that ‘luxury’ of having customer support becomes a necessity. Studies have repeatedly shown that consumers still value human interactions, whether that takes place in person or online. For complex financial transactions, the trust and reassurance that comes from physical banking can make all the difference.
“I think one of the big risks is in misunderstanding the way you bring digital into a banking relationship,” says Jacqueline Morcombe, Area Vice President for financial software company nCino. “It’s really about the way the customer is willing and able to interact with the financial institution. If I’m going to apply for a mortgage – my very first mortgage – when I click the button and transfer more money out of my bank account than I’ve ever spent in my entire life, I want to know that there’s a human being there. That’s a personal preference of mine.
“Perhaps some years down the line when I’m doing a renewal after the second time, I [might not] want to interact with anyone anymore for that because I know what I’m doing and I want that digital interaction. I think that’s something that’s incredibly important.”
Maude agrees that, for transferring large amounts of money or taking out a loan, human interaction is crucial. But he stresses that interaction doesn’t have to come directly with the bank.
“I absolutely want to interact with a human being. I don’t necessarily have to interact with a human being from my bank though,” he says. “Maybe I want to interact with a specialist mortgage broker, maybe I’d like to interact with a business advisor, and so on. But I don’t want to have to go and print out a load of bank statements to take over to them for them to look through manually. I want to just click a button and go ‘transfer my data please’.”