The death of the branch? Or is mobile over-hyped?
Do banks still need branches, or does the smartphone make a physical presence obsolete? Panellists disagreed during a spirited debate hosted by ATM maker Wincor Nixdorf in Istanbul last week.
“We’re not going to start a relationship at a bank branch,” said Brett King, chief executive at Moven. “That’s not how the world works now. We will download the bank to our phone. If you’re still using a paper application form for your customer, you’re in trouble.”
King argued that consumer technology has drastically changed the expectations of a new younger generation of consumers. Mobile apps such as Uber, which allow users to book a taxi from their phone, and cultural trends such as the success of Japanese pop star Miku, who is a software-generated avatar yet sells out concerts to thousands of fans, are all signs pointing to a new era in which the branch-centred model of the past is no longer relevant. King also referenced Pewdiepie, a popular YouTube personality who has become so popular that he has 6.5 billion views to his videos – 25 times more traffic than CNN, despite the fact that CNN has a budget of $900 million a year whereas Pewdiepie is just a guy with a computer.
“Do you really think these kids are going to want to come to the branch and see an advisor? You have to reset your expectations,” said King. “When you say to a young person, ‘you have to come to the branch to sign a piece of paper’, that’s not their world. Young people don’t think like that, and assuming that they want to behave like their parents is a bad assumption. If you took every book and magazine and newspaper ever created, we now produce that amount of content online 200,000 times a second. A branch can’t give the amount of engagement we need today. The most important thing is how to get on their phone. And when we are there, remain relevant every day.”
However, not everyone agreed. Some of the other panellists disputed King’s vision of a branchless form of banking, based on the mobile phone. According to Ismail Douiri, co-chief executive at Morocco’s Attijariwafa Bank, this vision is too simplistic and does not take into account the needs of developing countries, where people may not necessarily have access to mobile internet.
“There’s been a simplistic idea that internet is coming and mobile is coming,” said Douiri. “I was part of this myself, I set up an internet company. But there was never the explosion that everyone was expecting. A lot of people in some areas don’t have access to finance, they are not educated, their mobile is pre-paid for voice but they may not have a mobile data package at all. They may connect to Wi-Fi, but that’s mostly done at home. There are wealth disparities, and people in the countryside live a simple life. What if they don’t have a smartphone? What if they can’t afford data access?”
Attijariwafa operates in 27 countries, including many African markets. The bank has 1,200 branches in Morocco and about the same number abroad. The bank also serves Moroccan migrants to France and other countries, who send remittances home. After the panel session, Douiri talked to Banking Technology about rural migration and some of the other realities in Morocco and other African countries that are working to build a new middle class. He explained that King’s idea of doing away with the branch entirely may be too extreme for emerging countries.
“I still think we need physical relationships,” said Douiri. “Even in Casablanca, a modern city, people still expect to have a personal relationship with the bank manager at their branch – they want that and they expect it. Trust is an issue of the utmost importance in Morocco. They want someone they know. Often they have a specific person on their mobile phone that they will call or meet.”
Douiri added that the general direction was the same everywhere – a move towards mobile and internet services, where coverage was available – but that to expect it to happen overnight was unrealistic. In particular, the penetration of fixed internet is an issue. “The quality of internet matters,” he said. “It can be an issue to connect.”
Attijariwafa Bank has had an SMS information service for years, and has recently brought out a mobile service for iPhone and Android. A recent study the bank carried out found that around 10% of its customers were already using a smartphone and could use it to contact the bank. Most of these were higher-wealth individuals in Morocco. According to Douiri, the question for emerging markets is how to manage the culture and how to manage the technology in a way that matches the reality on the ground.
“It’s a question of timing,” he said. “Fixed internet coverage is not there yet in some places. But the price of smartphones is coming down. In five years or 10 years, people will be able to get a current generation smartphone for $20 or so, and that places it within reach of many more people in emerging markets in sub-Saharan Africa. Morocco has a very competitive banking sector, and we see big opportunities in other parts of Africa where there is untapped need for financial services.”