People have strong views on the impact of digital technology on their lives, from the excitement of getting a new gadget to the satisfaction of doing in minutes what used to require a trip or a long phone call. Contrary perspectives include the fear of being left behind or even what technology will do to their employment prospects over time.
One thing we can all agree on is that digital progress is inevitable. The implications of the use of technology by society are immensely profound, with terms such as “The Second Machine Age” or the “Fourth Industrial Revolution” being used to give this evolution a name.
In 2016 FNB South Africa customers had over 10 billion interactions with the bank, of which only 120 million (just over 1%) was on a face-to-face basis. Roughly 8.5 billion (85%) was purely on digital channels and the rest via point-of-sale (card swipes or online purchases) and ATM transactions.
The number of FNB customer interactions has tripled since 2010, growing at more than 20% per annum every year, based on the growth in digital channels. Meanwhile at branches, customers are making significant use of in-branch digital zones.
The reasons for the growth and migration of volumes to digital are obvious as almost every customer knows they can do basically any payment transaction, account or card service function and get most products, including loans, overdrafts, credit card upgrades, savings products and insurance on a 24/7/365 basis via the FNB app, online or cellphone banking.
What Does This Mean For Branches?
Branches and branch personnel are no less critical than before, but their role has changed from performing transactions to re-focussing on sales and advising customers on how to bank.
In spite of the powerful digital technology, today the bulk of banking consumers still want to talk to someone when opening a new account and even for most product categories.
Additionally, consumers often need help with the new technology, even just to get going and start using it. In my view this leads to much richer and meaningful client interactions, in most cases, branches can be much smaller, but with more room for digital zones and self-service devices such as ATMs and ADTs (deposit taking machines). This journey is not unique to banking – virtually every sales or service business is or will be going through some elements of digital transformation.
The important effect of such changes is the opportunity to continuously upskill a workforce. At branch level, it’s important for consumers to interact with consultants who understand how the technology works. On this end, we now have e-Bankers who help customers get to grips with banking digitally.
Broadly, banking is also seeing a large contingent of specialised roles – IT specialists, analysts, actuaries, engineers, who play a significant role in “re-inventing” solutions all the time.
Automating Credit Decision Making And Fraud Prevention
Today, only a very small percentage of credit decisions are made by people – rather statistical models are used to make fully automated decisions instantly at low cost and with accuracy not achievable by a person.
For consumers, this means your risk profile and behaviour determines your loans size and pricing. Importantly, technology has helped reduce fraud loss rates for card and digital transactions,
Move From Product-centric To A Customer-centric Model
Interactions through all channels need to be considerate of making the customer’s experience the best possible by providing a consistent experience across all products and services.
The Future For Financial Services
Often, the question is which banks will “win” the race, or will Apple/Amazon/Facebook/Google or other ‘fintech’ players win?
There are two simple thoughts in this regard. Firstly, due to the massive (data analytical, channel & customer experience) advantages a customer centric approach offers, I believe an integrated player like FNB with a compelling offering across transactional, lending, save/invest, insurance (and in our case telco also) has a major competitive advantage over any player with a limited offering. Secondly, financial services players that embrace technology and data analytical capabilities in a customer centric manner can and should be the beneficiary of the digital revolution.
However, at the end of it all, it comes down to a philosophical decision around business strategy - rather than falling prey to fintech disruptors, banks can unlock the incredible power of innovation for their customers to fulfil the ever changing needs of bank customers.