Digitisation, Trust and Regulation

Written by Jason Morris on Thursday June 25, 2015

I attended the BBA conference last week in London, it was a pretty long day but well worth the effort.  There’s some exciting changes facing the banking sector over the next few years and many of these were discussed at the event.  The three areas highlighted as being the key challenges for the sector include:

• The evolution of customer preferences 
• Regaining the customers’ trust, and;
• The increased regulatory burden

Some interesting questions were raised on these and other subjects, and some thought-provoking answers were provided by the great and good of the banking world.  Through the discussions that took place I found that these challenges are intrinsically linked, the development of one area has a direct impact on the others. 

In terms of the evolution of customer preferences, one of the subjects covered was digitisation, an ‘off the scale’ growth area in banking.  There’s been some publicity around this subject in thepress recently, showing the number of times customers checked their accounts through their mobile phone has increased ten-fold in the last five years, from 86 million times in 2010 to (an expected) 895 million in 2015.

The term ‘bank in your pocket’ was mentioned a few times to describe mobile phone banking, quite a cute and catchy phrase, and I’ve no doubt it’ll continue to be used as digitisation continues to grow.  By 2020 customers are expected to check their accounts through their mobiles a staggering 2610 million times.  It would seem that customer preferences are evolving in a very specific direction.

So how does this development link in with increased regulation and regaining customers’ trust?  

Well one could argue that by having much less face-to-face interaction, banks are distancing themselves even more from their customers, so how will this help banks to regain the trust that’s so clearly missing?  Surely, banks will find it almost impossible to truly connect (in the emotional sense) with these customers to begin the trust-building journey.  

Now, many will argue that trust can be built from a remote position, perhaps clever marketing techniques will be able to break down the wall between the two parties?  I’m not so sure.  The damage to trust created off the back of PPI, Forex, Libor, Northern Rock, RBS bailout etc runs too deep in many customers, so how can remote banking turn that around?

As far as regulation is concerned, banks are already dealing with ring-fencing, the senior managers regime, conduct and culture issues, EU 4MLD, solvency II to name just a few.  Mobile phone banking, and the practical risks this raises, could provide further hindrance to this already packed agenda.  Culture and conduct have a direct link to re-establishing trust with customers, e.g. where the right behaviours result in the right outcomes for customers will help build the necessary trust.  Will those customers using the ‘bank in their pocket’ be able to see the benefit of these behaviour changes as well as those who still have a face to face relationship?  Will they be bothered one way or the other anyway?  You could argue that remote customers choose that method of banking because they want to remain disengaged.  Perhaps they no longer ‘value’ their banking service, and the convenience of banking through their mobile is an easy solution.

With digitisation on the increase, this mind-set could spread wider and, as you can see, can impact on other key areas.  Whatever happens, you can see that the next few years will certainly be an interesting time for the banks

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