Trust and technology: banks should heed the warning signs

According to a recent article in the Australian Financial Review “Bank dominance under threat from technology, trust”, banks need to start taking notice of how the world has changed around them. The days when the banks dictated how consumers paid for goods and services or borrowed money are gone. And if they don’t pay attention, they could find themselves being left behind by more agile and customer-focused disruptors.

The AFR article warns that many senior bank employees do not believe that their market dominance is under threat. However, every industry is littered with former market leaders who failed to keep up with either new technologies or the changing needs of their customers. Kodak is a good example of a market leader that was slow to embrace digital technology (even though they held the patent!). The print media, retail sector, taxi industry and telecommunications have also seen major technology-driven transformations in recent years.

Two of the biggest danger signs for banks are the loss of trust by their customers and the entry of the large technology companies, like Apple, Amazon, Google and Facebook, into the financial industry.

Trust of banks is low

Last week the Australian Bankers’ Association released research conducted by Edelman Intelligence that found 27 per cent of banking customers had low trust, 43 per cent had neutral trust, and 31 per cent had high trust. And 52 per cent said banks aren’t focused on customer needs and 52 per cent said banks weren’t open and transparent with their banking fees and terms.

Technology in payments is moving quickly

Amazon Lending has made over $US1.5 billion (A$1.88 billion) in small loans to businesses in the US, Britain, Japan and elsewhere. Facebook has set up a payments service in the US and has been granted a European Payment License, which will allow it to offer electronic money transfers across Europe. And Apple, Google and Samsung are aggressively pushing their payment apps in the retail space.

According to the article in the AFR, one-in-three Australians, with a collective wealth of $2 trillion, are now classified as “nomads”—consumers who have no loyalty to banks. Nomads are not just millennials, and they are willing to look at disruptive alternatives:

  • 60 per cent would consider setting up an account with a supermarket or retailer
  • 77 per cent would consider setting up an account with Google or Facebook

So how do the banks protect their markets?

Clearly, banks need a greater focus on meeting customer needs and being transparent, but they also need to attract nomads or “social butterflies”, who will move from offer to offer, are digitally savvy, like to experiment, demand convenience and aren’t sticky.

Bluechain has the technology that can rebuild banking customers’ trust by offering greater security, simplicity and control in every payment situation: in-store, online, billing and peer-to-peer. Instead of reacting to the disruptors, Bluechain enables banks to lead the market with innovative solutions that meet the needs of their customers, bridging the gap between ageing card-based technologies and the latest mobile and digital technologies.

About Bluechain

Bluechain technology is powering solutions for the payments industry around the globe, from request-to-pay (RtP) solutions for acquirers and gateways to domestic payment schemes for central banks and national switches.