The Limits of Self-Service Banking
The banking industry is witnessing a growing chasm between self-serve and full-service banking. This chasm is supported by many pundits, including PWC, Accenture, and Deloitte preaching the do-or-die importance of embracing digital transformation, including IoT, robots, and AI technology. The question is how far will self-service banking go, and will it support sustainable growth for banks?
To answer this question, we do not need to rely on sketchy predictions. I have often noted that if you want to see the future of banking, you only need to travel outside of North America and visit countries such as Ireland or China. These markets have already witnessed the impact of smart wallets and mobile banking on their financial services industries, and the progression is years ahead of North America. The future is only an eight to fourteen-hour flight away and can offer us clear guidance in the future of self-service banking.
Before we explore the evolution that has yet to be realized in self-service banking, we need to understand that how customers behave in banks is a direct result of two key factors: The first is the removal of transactional friction points, and this is where fintech companies have gained a beachhead in the banking industry. The other is through learned behavior developed from customer journeys in other industries, such as fast food, travel, and entertainment. These industries have been transforming themselves at a much faster rate than banks, thanks to fewer regulations and a lower cost of entry. However, these innovations do lead to some interesting insights that we can apply to the evolving role self-service technologies will play within financial services.
For example, in the food service industry new digital technologies are being introduced to remove friction points and redundant steps, enabling customers to enjoy more of what they want. In the case a great dining experience, tables enabled with tablet ordering have removed the time, pain, and anxiety of having to get the waiter’s attention, to select the right meal or wine, and to pay for a meal by migrating the entire process to a digital experience. New ordering platforms are emerging as an extension of conventional POS systems allowing food service operators to offer digital promotions to customers who are passing by, or to make menu selections based on past visits.
This process has evolved even further in China, where everything can be accomplished with the customer’s mobile phone, from selecting, to ordering, to paying, without ever speaking to a server. So, what can we learn from China and other markets on defining the edge of self-service banking?
In China, where the average financial institution averages over 10,000 branches, self-service technology has gone far beyond ATMs and iATMs, or online and mobile banking. With the advent of kiosks that allow you to open a banking account, register and receive a credit or debit card, or easily replace the card you have, all friction points in most banking relationships have been addressed by technology in China.
Markets such as Ireland, where the greater majority of transactions and payments are done digitally, the branch experience has been relegated to learning centres to help nurture digitally-savvy customers. The self-serve shift does not stop at the branch experience.
With California’s new mandate that all cars be electric within the next ten years, along with the swift advancement in self-driving technology and market penetration of digital wallets, we will begin to see the disappearance of drive-thru bank locations that will be redundant in a world where physical money has little use.
With AI and digital ledgers, we foresee any conventional banking transaction that is not driven by personal advice and service being replaced by self-service technology. In a future where most customers will have voice activated personal banking concierges replacing conventional banking interfaces, self-service will cover most of what banks currently offer, with the exception of one major factor – providing human interaction around professional advice and support.
Based on our 2017 stealth attrition study, professional advice and support to ensure a customer’s long term financial wellbeing remains the biggest opportunity for banks. Although we foresee self-serve replacing all habitual, time-sensitive banking processes, the importance of sharing financial knowledge and expertise will only grow as more options create greater confusion.
With consumers being free of what they don’t enjoy about banking, banks can focus on the more important things in their customers’ lives, such as allowing them to feel confident in their financial future by empowering them with timely and relevant knowledge only banks can provide. However, the gap between a bank’s credibility as the source of financial security, knowledge, and alternative challenges is narrowing, and it’s time for banks to put greater effort into these areas before someone else claims them.