Almost every major industry has undergone disruption and transformation in recent years, not least the banking sector and while transformation was already well underway, the Covid era has acted as a catalyst – accelerating the pace of change.
Two years on from the first lockdown, I wanted to reflect on some of these innovations and how they have changed the banking sector – for the better.
The rise of the digital branch
Do you remember the last time you went into an actual bank branch? If you don’t, then you’re not alone. Even before the pandemic, I struggle to remember when I last visited a bank in person. In fact, a recent survey from KPMG found that one in five Brits haven’t visited a bank branch since before the pandemic.
It’s easy to see why with banking apps increasing their capabilities, enabling users to carry out many tasks usually associated with the branch – such as checking deposits, statement reviews, money transfers and opening new accounts.
The next step, as my colleague Xavier Larduinat rightly puts it, is for banks to start offering near-field communication features from their apps. This in turn will see a number of other applications that could optimize the payments journey for consumers – from tipping service staff and splitting bills with friends, to enabling P2P payments by putting smartphones back-to-back.
Boomtime for biometric payments
While many people have turned to mobile payments over the last year, and we have seen the contactless limit for card payments rise in many countries, both payment functions have their limitations, particularly in terms of transaction limits. This is being addressed with the uptake of biometric cards.
The premise of these cards is simple – requiring users to authenticate payments using a personal trait that is unique to them. In the case of biometric cards, this is just their fingerprint. In theory, you could pay for high transaction goods above the contactless limit, without losing the convenience of just tapping your card. These cards are also built with data protection at their core (as the fingerprint data stays locked inside the card’s chip) which is an important consideration in an age where consumers are – rightly – increasingly concerned about their personal details.
Risk management in an ever-digital world
The move towards offering digital services is inevitable for banks and financial institutions; it’s an expectation that is set for consumers in other parts of their lives, whether using Uber to get a ride or streaming a movie from Netflix.
However, the rise in fraud has highlighted the importance for banks to conduct risk assessments when digitizing services.
The sophistication of tools designed to track and identify fraudulent customer applications have improved exponentially. The last year in particular has seen functions like ‘device profiling’ grow in savviness, meaning banks can remotely understand if a smartphone has been used to open multiple accounts. Combine this with behavioral analytics in the form of population profiling, looking at statistical averages and geo-localization, to try and spot those hiding behind TOR browsers, financial institutions have a powerful set of tools designed to spot trends that link to fraud.
Switch to sustainability
With many of us stuck at home over the last year, numerous businesses and consumers alike have used this opportunity to reappraise their impact on the planet.
The financial sector has used the last year to reflect on its own impact and has seen a wave of innovation designed to enshrine and protect sustainability as a result. Banks are starting to look at smart ways to repurpose waste plastic and reduce our reliance on first use PVC for the creation of credit and debit cards. In the digital sphere, they are also trialing ways to cut down on paper usage. One such example is by replacing PIN codes sent in letters by the post with Digital PIN codes sent by SMS or through the mobile app. This doesn’t just have a positive impact on the environment but also helps to save logistical costs and improves the customer experience.
The Covid-19 pandemic accelerated the decline of cash – in the UK, volume of payments using notes and coins dropped by 35% in 2020. In parallel, it also showed a rise in contactless payments, online transactions and the use of mobile wallet apps. This shift in behavior will – in time – improve banking sustainability as circulation and production of notes and coins begins to slowly decrease.
In many ways, the pandemic has acted as a circuit breaker, helping different sectors and industries to review damaging practices and banking has been at the forefront of making these changes over the last year. It’s also helped members of the public, like you and me, reduce our environmental impact when it comes to banking with less travel to branches, cutting-out paper statements, and the increased use of digital payment cards.
What other banking trends have you seen since the pandemic? I’d love to hear your thoughts about whether you’ve seen an acceleration of digital services in the financial space. Drop any thoughts in the comments.