I was fascinated by the current UK parliamentary debate over the closing of high street banks in the United Kingdom reported on by Britain’s Daily Express.
According to their article, “Dying high streets could be revitalised by creating "1970s-style banking hubs", MPs argued yesterday. Housing several banks together in the same building would be cost-effective, aid customers and help local business communities, they said.A similar approach has been adopted in other countries and was more common in the UK 40 years ago. MPs warned that drastic action needs to be done to prevent bank branch closures which are turning high streets into "ghost towns". The Daily Express Save The High Street crusade has highlighted the way in which bank closures are speeding up the death of Britain's shopping streets.
Santander revealed last month that it is to close 140 branches in the UK putting more than 1,200 jobs at risk.
Tory MP Neil Parish said Santander needs to consider its older customers when deciding on branch closures.
"Older people don't necessarily trust online banking, they actually physically like to be able to bank," he said.” End quotes
This phenomenon is not exclusive to the UK as banks across the world, including in South Africa, are grappling with trying to balance the need to extend their reach to both their existing customers as well as the ‘unbanked’ and the ever-spiralling costs of bricks and mortar infrastructure.
If, as it would appear, that the universally adopted strategy is to promote digital currency and electronic banking as the universal solution to the banks’ dilemma, I would respectfully suggest that it is doomed to failure because it very simply ignores the wishes, desires and fears of the consumer. And it’s not only the ‘older people’ but the consumer public across the board.
In almost every major economy in the world, cash remains the dominant medium of payment and central bank graphs continue to show the year on year growth in cash in circulation. These are the indicators of consumer preference and I would suggest that there is a disconnect between financial institutional digitisation and consumer’s trust in cash.
We’ve been intimately involved in the process of converting retailers from traditional counting and reconciling cash deposits to fully automated cash management solutions for the past thirteen years.
Despite the business case for automation delivering lower overheads, improved efficiencies and improved cashflow, not more than 30% of South African retailers have thus far taken the giant leap of faith from what they know and understand into the relatively unknown world of automation and electronic deposit services, despite the slam dunk obvious benefits.
The question one must ask is why? And the answer lies in the inherent faith that the average consumer places in hard cash.
For exactly the same reasons, removing access to the trusted high street bank teller and trying to force an accelerated migration to electronic banking, will not work in the short to medium term.
I don’t realistically believe that digitisation will never happen, but I would submit that it will take a lot longer than its protagonists would like to believe. Certainly not within my children’s’ lifetime and maybe not in theirs!
In fact, I am convinced that until we can remove the risk of internet banking fraud and related electronic theft from the consumer, the future of electronic financial transactions involving the average consumer will be materially restrained.
The solution, in fact, lies in applying the principle of ‘one step at a time’.
Consider the establishment of banking hubs in which automation offers the customer the most sought after of traditional banking services. ATMs from which withdrawals can be made, automated bulk deposit ATMs into which deposits can be made quickly and reliably and an information terminal from which account inquiries can be processed. The overall footprint of the hub will be a lot less than that of a traditional bank branch and depending of the volume of customer attendance, a small team of multi-skilled staff would be able to provide the personal touch.
In this manner, the commercial banks will begin the process of transitioning consumers away from cash to digitisation, wallets and electronic transfers in a manner which is far less intimidating and much more acceptable.
Richard Phillips
Joint CEO, Cash Connect Management Solutions