If a bank were a person, how would it look? Close your eyes and picture it for a second.
Eighty bucks says you’re picturing a man, and he’s in a suit. He probably has white hair, maybe a moustache, and he’s sitting behind a heavy oak desk, rifling through a stack of papers. He might even have a pocket watch.
What does this say about our perception of banks today?
If you asked someone 50 years ago to anthropomorphize a bank, chances are they would think of their actual banker: the smiling face they dealt with to get their car loan, secure their mortgage, finance their business and plan their retirement. Their relationship with a bank centred around a branch, pieces of paper and physical exchanges that happened in one place.
That relationship, just like the model of banking it represents, is a thing of the past. The notion of going into a branch to conduct an exchange of paper feels increasingly like part of a bygone era. A few factors have played a part in changing how we interact with banks:
- (1) Mobile workforce: Millennials are on the move. While their parents chose to put down the kind of roots that permit bi-weekly bank visits, the new workforce does business anywhere and everywhere—they are bi-coastal and international. They are less likely to buy cars and homes because those long term investments don’t suit their lifestyles—so there are no significant monthly payments tethering them to a major bank. If they work in both London and Berlin, they want to be able to move money between currencies without incurring high bank fees and they certainly won’t bother visiting a branch to do it.
- (2) The gig economy: Direct deposit is one of the banks’ final strongholds, and typically incentive for any salaried employee to stick with a particular financial institution. But as the “gig economy” spreads and entrepreneurial millennials choose self-employment over a steady paycheque, that bastion may crumble. The choice of flexibility and independence means multiple sources of income so direct deposit holds little value.
- (3) Smartphones: From downloading a new song, to purchasing an outfit or ordering lunch—we are used to getting everything NOW. Consumers don’t want to deal with bank hours, wait for a bank teller, or sit on hold because you’re experiencing higher than average call volume. They want to click a few buttons or get instant service from a smart bot—and they don’t want to pay high fees for it.
- (4) Open systems: It’s not just the hardware that’s changing our expectations. Systems are increasingly integrated—open APIs mean third parties can connect and users can tailor a stack of tools to their specific needs. Rather than tapping into the heavy infrastructure of a bank, customers can cherry pick financial services and make their perfect suite of tools.
- (5) Machine Learning: The sophistication of data analytics and chatbots means that, in many instances, a machine can respond to our needs as well or better than a human. Artificial intelligence is driving a new era of customer experience, and phone-adverse millennials—so accustomed to instant messaging—are happy to engage with intelligent bots.
When all these factors add up—and our consumer expectations aren’t met—our affinity towards a single bank unravels, leaving gaps for new non-traditional financial services to step in.
Go back to your aging, white haired, mustachioed bank. Now picture, dodging around him, a handful of young whippersnappers with hip haircuts and Apple Watches. They are efficient, agile—not tied to a desk, not bogged down by bureaucracy and paperwork. Whatever you call them—neo / challenger-banks, disruptors, payment apps—they are chipping away at the hold banks have traditionally had on the customer. They offer highly targeted, flexible, mobile systems that meet consumers right where they are. They’re accessible and affordable and doing everything they can to fracture the ties we have with our banks. Unless banks take lessons from these disruptors and build agility into their products and customer service, they risk being left in the dust. They need to build in flexible systems that can adapt as quickly as their mobile consumers. Either way our relationship to banks will never be the same