Digital banking comes of age

Banking has been shifting to virtual and digital formats for a lot longer than we may think. Credit cards are more than 50 years old, telephone banking started in the 1980s, internet banking two decades ago and even smart phone banking is approaching 10 years.

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But 2020 accelerated that trend dramatically. Here at ANZ we saw digital wallet payments increase by 92 per cent in terms of value and 68 per cent in terms of transaction volume, driven by COVID-19 restrictions and lockdowns.

"Of those who still use physical banking, only a small proportion don’t want to shift. Most are quite satisfied moving to digital banking if we make it easy and show them how.”

Australia has often been at the forefront of digital banking trends – the first Visa and MasterCard “digital purses” were piloted in Canberra and the Gold Coast in the 1990s, contactless “tap n go” payments took off faster down under than almost anywhere else.

The latest digital payment data would suggest Australia is better placed than most countries in the world to adopt electronic payments exclusively.

Meanwhile, in-branch transactions decreased a further 25 per cent in 2020, accelerating a multi-year trend. Over the last four years they have halved. And, reflecting people’s desire to avoid cash transactions, there was a 22 per cent reduction in the volume of cash withdrawals last year alone.

These are pervasive, global and irreversible trends which reflect the preferences of hundreds of millions of customers. Yet we are acutely aware that this is not all customers. For some, the digital or virtual experience is still not for them. At least, not yet.

Remarkably though, our data show those people are not necessarily as reluctant as you might expect. Conventionally, those considered to be aversse to using or missing out on digital banking are thought to be the elderly, those in regional and remote locations, the vulnerable and those using cash and cheques.

Yet of those who still use physical banking for cash, transactions or service issues, only a very small proportion don’t want to shift. Most are quite satisfied using digital banking if we make it easy and show them how.

Guy “Ted” Salmond’s story

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“I came to Australia on my own from South Africa in 1947. I’d been at sea in the merchant navy during the war.

“I turn 95 in September of this year and to this day can still speak five different languages – English, Afrikaans, Zulu, Spanish and German.

“I’ve banked with ANZ since the 1980s and the method of banking has changed so much. I’ve always appreciated the frankness and help from the ANZ Bank.

“I use my iPad and iPhone to check my accounts on internet banking regularly. Nearly every week I’ll check on my iPad to see the statement and to see if everything’s gone through.

“The service I’ve received from ANZ has been just wonderful and I’m thankful to Wayne at ANZ who has helped me out.”

- Guy “Ted” Salmond is an ANZ customer 

More use of digital banking means when our customers do come to the branch, we have more time and ability to help them with more complex needs – like home loans – where a relationship and coaching are critical.

From what we saw in the past 12 months, only 8 per cent of our customers now rely solely on branches. That means more than 90 per cent are already using at least one self-service channel.

Meanwhile, there is no doubt self-service banking sits in the context of a broader societal shift – in the way we shop, interact with government, interact with services – even interact with each other. This is positive - in the sense that the help we are offering our customers will enable them not only to bank digitally but also help them embrace a broader digital future that will be key to ongoing access and inclusion.

However, we are acutely aware, when we close branches or remove parts of the assisted service offering, there is an intensification of concern because of that underlying anxiety around some parts of the community being “left behind”.

We often talk about the need for “education” – across not just banking but in diverse parts of our life including privacy, health, relationships – but in our case we accept we should not be “teaching” our customers.

We need to focus on their preferences – the balance is in understanding the difference between familiar habit and what is actually wanted. Our customers want help with more complex needs, they don’t necessarily want to come into a branch for help with the ‘small stuff’.

This much deeper process of education requires a much broader based mobilisation. There are plenty of examples – for example in Northern Europe – where this is being embraced readily by government, the private sector and the community.

We do need to be realistic about how banking is evolving and accept that evolution is not being driven primarily by banks but rather by customer preferences. If banks don’t satisfy a financial service preference, our increasingly digital world means some other institution will – be it Amazon, a supermarket, a “neobank” or even an airline offering credit cards and health insurance in partnership with other institutions.

These competitive offerings are exclusively digital. Moreover, in the interest of a more efficient and lower risk economy, governments and regulators are also fuelling the push to digital and self-service banking and other services.

In Australia for example, where the use of cash and cheques remain a key driver of assisted service in banks, it is likely cheque usage will be more actively discouraged.

As this evolution becomes more rapid, we have an obligation – and a self-interest – in ensuring our customers are not left behind. That’s why we have several programs to help customers and to support them in making the transition to digital banking. But we are heartened by the data showing those we thought might be most affected are far more advanced than we assumed.

Digital inclusion

ANZ has undertaken significant work with community and charitable groups around digital inclusion, including with The Smith Family.

The Smith Family has facilitated digital inclusion for thousands of families over the last ten years, targeting both digital access and literacy.

Kath Bray is Managing Director - Retail Banking at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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