Retail banks and benefits of embracing technology

09Mar 2017
The Guardian
Retail banks and benefits of embracing technology

RETAIL banking has come a long way since it began in the 16th Century, when cashiers in trading and shipping cities began charging customers for depositing their wealth for safekeeping.

The practice later spread to the UK where it was dubbed ‘high street banking’, indicating its presence as one of significant importance to major commercial districts.

Despite heavily investing in digital technology have not reaped the expected returns on the retail end of things, with only 23 per cent of their customers choosing to use internet banking. Legacy IT systems are the bane of any large bank attempting to meet the new demands of customers and regulators.

As banking services developed, core systems had to be compatible with new facilities, such as ATMs and call centres. When internet banking was finally introduced, the rate of customers accessing the system has outgrown the decades-old core processor and was too cumbersome to support further extensive functions.

Changing their systems should have been the go-to step for banks. However, replacing the technology foundation has proven to impact banks’ performance levels for months. Therefore most opted out by adding ‘middleware’ and front-end systems to patch up any errors.

Banks who rely on obsolete legacy IT have become victims to recent scandals. Such IT catastrophes have woken regulators up to the problem, which will hopefully lead to real change. Without an adequate setup, the digitisation of banking and customer services is not only putting huge pressure on legacy systems but could potentially expose every possible failure in near real-time.

People’s cultures have shifted and been present in the age of digital efficiency. They expect services to be personalised and accessible – banks included. However, as people’s everyday lives integrate tightly with their financial lives, banks gain significant leverage over how to monetise their business, and has since neglected customer experience in favour of profitability.

Nowadays, especially since the financial crash, there has been an emphasis on looking after our financial health. However, the perception of retail banks as relatively hard-nosed and unfriendly has tarnished their public image.

Compared to the modern pace of life, banks are lagging behind. And even with the internet or mobile banking, payments or money transfers can take days to register on one’s personal account.

To worsen the situation, misplacing a debit card can result in long periods waiting in phone queues and for postal services to deliver the replacement. Banks lack newer systems to give consumers the impression that their systems are fit for purpose in our internet and smartphone world.

The two problems explored above are somewhat blanket statements in terms of attempting to identify the difficulties that established retail banks currently face. There are many complexities yet to be resolved.

With backings from regulators and governments, the playing field is finally level for startups in the FinTech space to play a more important role in banking. Banks appear to be in survival mode as their flaws have opened up ways for rising-star startups to penetrate banking products via technology, thus eroding the market shares of big banks.

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