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Future of banking less predictable

Disruptive technologies abound.

CAPE TOWN – Shopping at the hip and happening annual Grahamstown Festival is always fun – taking place at it does in a carnival atmosphere. This year the urge to splurge is being facilitated with the use of SnapScan, a mobile payment application that enables purchases via a mobile phone.

No cash and no bank-cards are required.

The system is dead easy to use. Consumers simply download the free application onto their smartphone and input their credit or debit card details. This information is stored on the phone and protected using an advanced encryption methodology.

When the time comes to pay for an item – even a cup of coffee – the user simply takes out their phone and scans the SnapCode (square barcode) displayed at the shop. This identifies the shop and prompts the user to enter the amount they wish to pay. The entry of a PIN number secures and completes the transaction.

The merchant receives an SMS containing a confirmation of payment from SnapScan.

In a closed environment with hundreds of diverse merchants the system is ideal. But it is also gaining traction outside of these closed environments and over 5 000 merchants around the country, many in Cape Town, offer the facility.

SnapScan is just one example of a new breed of banking services that are easy to use and are growing in popularity, says Arthur Goldstuck, CE of WorldWideWorx, an internet research company. Users do not pay for the service, while businesses registered with SnapScan pay a small fee to accept a payment from a customer.

Goldstuck made the comments during an online discussion on the future of banking with Kim Gibson van der Walt, head of dotFNB.

Mobile technology is driving rapid change in the banking industry, he says. Six years ago mobile banking applications did not exist. Now it is clear that software will play a fundamental role in the future of retail banking.

There are 16 million smart phones in use in South Africa. “This changes the way that people can interact with any organisation,” Goldstuck says. “Conservatively another 2 million users will come on stream this year.”

In an increased effort to attract and retain their customers SA’s big banks have developed apps specifically for clients who log in via mobile devices. They, and others, are under pressure from customers to ensure their apps deliver a first-class service, one that goes above and beyond that of traditional branch banking.

While mobile access hasn’t yet become mainstream, their efforts seem to be paying off, given the thousands of busy account holders migrating to mobile banking.

In addition, new technologies on the horizon, such as mobile payments platforms, digital wallets, virtual currencies and peer-to-peer lending are keeping banks on their toes.

However neither Goldstuck nor Gibson van der Walt see technology diminishing the role of the banks – just changing it.

For one, regulations prevent applications like Google Wallet from disintermediating the banks entirely. “Reserve Bank laws will not allow Google to hold deposits unless they have a banking licence,” says Goldstuck. “Of course there are ways around it, specially if you partner with a bank.”

This is the case with SnapScan, which was incubated in Stellenbosch, and is now owned by Standard Bank. The application is bank agnostic though.

And though there is a significant shift towards digital banking, many customers are not comfortable with banking from a mobile device, and feel a sense of security through face-to-face interaction with a banker in a branch, says Gibson van der Walt.

That’s because mobile banking still has a long way to go in resolving more complex issues for customers. Users would be hard pressed to complete in-depth financial tasks via a mobile phone, and many still prefer more traditional forms of bank account monitoring.

However technology is seeing to it that the traditional bank branch as we know it is changing. “Branches are becoming more technology enabled,” she says. “We are teaching customers how to work on the digital platform and there will be a lot more self service points.”

Other technology tools – from easily understood video conferencing and gaming to robotics and wearables like watches and Google Glass are being piloted. “I never thought we would have gamification and banking in the same space, but it is a great educational tool,” she says.

Goldstuck warns that the technology the customer wants to use is more important than the technology the bank wants to deploy. “Take call centres – these must be the worst form of consumer torture. They need to evolve – the idea of having to phone for information is very archaic and 20th century.”

Both Goldstuck and Gibson van der Walt are well aware that the future of banking – as they see it – extends only as far as the next corner. “A century ago bankers could safely predict that their business model would not change for the next 50 years. Today it is more difficult. One never knows when the next disruptive technology could arrive,” Goldstuck says.

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