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There is no revolution in banking

I think I had one of my unusual spouts of cynicism yesterday when, after realising that mobile and contactless and social is all the rage in banking, none of it is really hitting the mark yet.

And, for all the talk about revolutions in banking, new models of banking, new ways of banking, new players in banking, new technology in banking … guess what?

Nothing’s changed.

Take contactless payments.

Contactless terminals in London are few and far between and, when you do see one, retailers don’t seem to realise they have them.

The number of times I use a terminal and, after entering my PIN, see the contactless sign on the terminal amazes me … but it’s the fact that retailers don’t show they have these things that is the reason why.

And, no matter how much Barclaycard advertises their existence with rollercoasters and waterslides, if merchants don’t advertise the fact that they can take contactless payments, then nothing will change.

Same with mobile.

Sure, we are all into the idea of a mobile payment and banking revolution but, when it comes down to it, this stuff has been out there for a while too now and where is that revolution?

Not here yet.

This is best illustrated by someone like me.

I’m on the leading edge of technology adoption and innovation, I think.

I love my iPhone, iPad, WiFi, Tivo, Wii, PS3 …

So I’ve downloaded my bank’s mobile app, which has won lots of plaudits, and … never used it.


Because the bank has made the sign-on process so darned difficult, with passwords and access codes that are yet another level above the ones I have to remember for internet sign-on.

The security overhead on mobile makes their apps unusable.

Every time I load the app, I go: “what were those access codes again?” and then I just close it down.

After six months, the app was deleted as I thought: “if it needs to be so darned secure, then I don’t feel secure using it”.

Roll on the biometric access.

It is the same with new players in banking, which is a theme I’ve explored many times before.

Competition in banking is virtually non-existent because the banks know that: (a) there is a choice of only five mainstream banks, (b) they all behave similarly with slight variation, (c) their products, offers and services are all virtually the same and (d) most important of all, once you’ve captured a deposit account, you’ll have it for life unless you screw up.

This last point is because consumers don’t see the point of changing accounts.

A point I’ve explored many times before, again, but take the launch of new banks like Metro Bank.

After the initial “hurrah”, how many consumers are actually flocking to their doors and switching accounts?

A few hundred.

A few thousand maybe.

That’s good, as it shows there is competition but for all the cost, investment, marketing, effort, hurdles and barriers it took Metro Bank to get through, the returns are not near-term and will take years or even decades to return on that investment.

That’s why there is not much competition in banking: it just isn’t viable for new entrants.

It’s the reason why retailers like Tesco and Virgin have spent decades flirting with banking, but still don’t offer full current accounts, because it’s not viable.

It’s too much effort.

It requires a banking license and, even if you get one, the effort to manage deposit accounts is so great for so little return that it doesn’t make economic sense for the retailer.

It’s far easier to skim over the top and take the easy but profitable stuff, like credit cards and loans, than getting into the hard stuff, like transaction banking.

For all the reasons above, banking is a market that is slow to change, challenged by risk, avoidant of innovation and strangled by regulation.

And, for all the reasons above, it is the reason why banking is unlikely to dramatically change for the coming decades, regardless of all the sabre rattling of new entrants.

Evolution yes.


Let them eat cake …


About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Agreed. Revolution no. Evolution yes.
    The move away from tired old branch banking to online, mobile, app or other modern forms of banking is good for the consumer (better deals, better rates, lower fees) and better for the environment (responsible lending, less paper, less branches, lower emissions).
    Sure the progress is more incremental than a rocket shot to the moon, but it is positive progress.
    Clark Schultz
    Contributer at http://greenbankreport.com and http://www.money-rates.com

  • I absolutely agree that security gets in the way of take up of mobile internet banking. Take Barclays, because I have to have a calculator sized device to get the access code to get onto the internet banking, the service is anything but mobile as I’m not going to carry the device around all the time. Until these sorts of issues are addressed the momentum will not build up.
    Contactless is wonderful and far faster when you know it’s there. EAT has it very visible at every till position, however Caffe Nero seem to stuff it away behind the coffee bean adverts, so you have to get the staff member to move it to use it, which defeats the object of saving time and convenience.
    Undifferentiated offerings between the big FIVE (Santander can’t be excluded from the establishment anymore with them owning Abbey, Bradford & Bingley branches and Alliance & Leicester) – absolutely! So why when Lloyds are forced to sell off the 600+ branches will anyone flock to move their account? And why would anyone want to take on those branches when they would need £15-20bn bridging finance on top of the capital to purchase the branches in the first place?
    Nothing much is going to change in retail banking, certainly not in the short term.

  • I definitely agree that there has been a lot of hype without much real change in user behavior, but I think the real experts on user behavior have been pretty hands off until now, and that is about to change.
    With banks, carriers, and payment companies like PayPal being the ones to push technology adoption, not much has happened. But what if Apple gets into the game with NFC in the iPhone? There already is NFC in many phones that have android, and both Apple and Google are clearly moving towards mobile payments, perhaps they’ll even go so far as the Amex virtual wallet deal?
    What do you think Chris? Will companies like Apple and Google, who do have the ability to execute and change the game, make an impact if they get into payments, as that looks like it will happen?