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?
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.
Let them eat cake …