Brett King

What’s your banking instinct?

In Customer Experience, Future of Banking, Strategy on November 18, 2011 at 12:43

Without thinking consciously about it, over time core behaviors change producing different instinctive reactions. When a phone rings today, we go to our pocket or purse, not running to a device on a desk or on the wall. When we are interacting with a mobile phone that is not our own or an ATM machine, we’ll instinctively touch the screen to navigate, even if it is not a touch screen device. When you go from reading on a Kindle or iPad to a real book, the pages are frustratingly manual to turn. When we need to take a photo with friends, increasingly we reach for our phone, even if we have a camera stuck somewhere in our bag.

What was our instinct in banking?

The earliest instincts around banking was a safe place to store your assets, and in many ways that is still the case. However, banking in its infancy didn’t necessarily involve a bank or money at all. The earliest forms of banking involved the deposit of commodities or valuables that were traded, and often they were deposited in temples or palaces, the safest physical locations. It wasn’t until the 16th and 17th centuries that organized banking started to emerge globally, particularly as the wealthy tried to keep their assets safe during the dark ages. Even then, banking was still exclusive. It really wasn’t until the 20th century that banking became more mainstream and people started considering storing their savings in a bank.

Since then banking has been an instinctive part of the lives of most people in the developed world.

It wasn’t long before it became instinctive to pull out our cheque book to pay for a large ticket item. Some would also use lay-away or lay-buy plans, but these largely disappeared over the last decade or so. Over time those instincts changed to use credit cards, and more recently debit cards at the point of sale.

In the past our instinct when we needed cash was to think about where the nearest branch was and figure out when we would need to go to withdraw cash. Over time that instinct changed to using an ATM machine, and we went from planning when we’d withdraw cash, to just picking the nearest ATM machine when the cash in our wallet was getting low.

In the past our instinct when paying a bill was to write a cheque and send it in the mail, or to go down to a post office or office of the utility company and pay the bill in person. Today, that instinct has changed to where we pay online in an instant.

It’s ironic that we think of banking as a slow and steady institution that doesn’t really change, but in reality the utility of our money means that our behavior in respect to banking has always been changing.

The future instincts of banking

So what will your instincts for banking be in the next decade?

Not a place you go, something you do…

Firstly, we won’t instinctively think of banking as a place you go. The concept that a branch is at the centre of our banking relationship has been central to retail banking for over 800 years. This is the primary instinctual shift that will occur in the next few years.

Instead of looking for a place to store your money, we’ll look for a trusted brand that is safe to store our money, but equally important will be a brand that offers strong utility and a seamless connection to the things we do with our money. A safe and trusted banking partner will be a bank that offers me access to my money and access to financial services when and where I need them. A bank that demands or prefers a physical interaction, will increasingly be avoided instinctively as too hard to work with, as irrelevant to my daily life, and as slow and unwieldy.

On rare occasions for the minority of us that have complex asset allocations, trust structures and so forth, we’ll look for a physical place to go where we aspire to get the high-touch service of a personal banker who recognizes our status as a special class of banking customer – but this will not be an overriding instinct day-to-day, it will be incidental to our general banking experience. The majority of the time, even for the high-net worth client, instinct will simply dictate a much more efficient engagement of the ‘bank’.

Move and Pay, Safely and Efficiently

When it comes to day-to-day interactions, the emphasis on the movement of our money will be speed and security. Inevitably in the short-term our instinct will be to pull out our phone at the point-of-sale to pay for goods and services. We’ll do this not only because it is much faster than using cash or a card, but because our money management will be articulated through this personal device – we’ll see our balance, what our monthly expenditure is, what upcoming expenses we have and be able to understand the context of this payment on our financial life in an instant. The same would have taken much more effort with cash, our cheque book or our card.

Your instinct for payments is changing again

Security of our cash will be also a primary reason for the shift to digital money. Increasingly we’ll look to the technology of encryption, geo-location tagging, biometrics and active identity management to secure the flow of our funds. We won’t trust a piece of plastic or a piece of paper that can be easily corrupted or stolen, and the technology of ‘hacking’ our cash from a secure device will require a level of expertise and high-performance computing that make it far less frequent than the compromise of traditional physical ‘payment’ artifacts.

At the point that it is simply no longer safe to do things with cash and plastic, our instincts will quickly change to keep our finances safe once again. Being able to see what has been happening with our money over time, will also drive us to increasing digital management of our money.

Core instincts are at the heart of the change in bank modality

First and foremost our instinct for banking is keeping our money safe, secondly is the need for the utility of our money. Neither of these core instincts will lend us to continue to support the physical elements of banking and payments that we’ve been used to in the last 100 years. We will measure ‘safety’ in the trust of a brand, not in the bricks and mortar of branches. We will measure ‘utility’ in the seamless access to our cash, and the availability of the bank in our life when and where we need it.

Our instincts are rapidly changing. We don’t store grain and gold in Temples or Palaces anymore. Already most of the world doesn’t use cheques anymore. If you’re heavily invested in branches and the physical, you don’t understand the core instinct that banking is.

  1. Can not agree more with you, traditional retail banking as we are used to know is set to die.
    The speed of extintion will depend on how much external, faster ousider such as PayPal, Google, Amazon perhaps some trusted credit cards and retailing brands will push the change. @ferrarifortweet

  2. Interestingly, most discussion around the demise of the branch revolves around how we pay and transact. This is not done in the branch today. Most use of the branch is for opening and closing relationships, expanding customer relationships, customer service and business transactions. In addition, while the use of electronic channels have skyrocketed, the reduction of branch transactions have not shrunk equally.

    It will be interesting to see how much of the high touch interaction (done by the more valuable customers traditionally) gets moved out of the branches. There will definitely be a transformation, but the speed and severity is still an unknown. A segment of the consumer base do not use branches frequently if at all. Will they be comfortable in a 180 degree shift? I guess we’ll see.

    It is going to be a fun and interesting ride for sure.

    • Even closing accounts is done remote now. I recently closed an account at one of the nation’s largest banks. How? Via a secure message inside online banking. I never talked to a person and didn’t provide any ink signature. 19 years of a banking relationship closed and not a single person called or tried to keep my business.

  3. As you wrote in your book, the primary reason anyone visits a branch today is to manage some archaic process, where the bank ‘requires’ a signature in person (e.g., closing an account?). As these old processes are retired, the purpose of the branch MUST evolve, like when consulting/advice/planning, where a face-to-face conversation will be worthwhile.

    Little else seems to require the physical presence of a branch. What will occupy all that real estate? 🙂

  4. I agree that the focus will be finding a brand you trust to keep you money safe and to execute / manage / monitor your transactions while keeping you informed and help you understand the evolution of your funds. Overall, keeping you on top of your finances and helping you make good decisions.

    At the same time, I think that we need to trust the brand to give us good advice regarding how best to invest / manage our savings, the slightly larger pot that we are putting aside and do not plan to ‘touch’ for a few years. How can I trust a brand not to push its own investment / saving products to me and rather give me a fair view of the type of solution that I need? What type of risk level can I take? What type of return can I expect? What time horizon should I consider? And why? Speak to (or write or blog or e-mail or text message) me about the choices and trade-offs I need to make. If my trusted brand offers a product like that, great! Otherwise, help me find it or, at the very least, just tell me that you do not have it.

    Today this is done by an independent (truly independent) financial advisor, quite expensive for a lot of the people out there. Automated risk profiling solutions are being developed. Can we trust the future brands to incorporate these services into their offering?

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