The banking industry is making great strides in the development of digital services, having taken some time getting started. But the more solutions banks have on offer, the more they face the stark reality that clients aren’t as keen as expected.
Digitization has finally arrived, even in remote areas: three out of four regional banks in Switzerland have a digitization strategy, according to a study published recently. The big players already have been in the process of implementing their strategies for quite some time.
The news about new services and products has turned from a trickle to a steady stream – ranging from the integration of payment application Twint to digital onboarding for Swiss clients at Credit Suisse (CS).
Still, there are also reports that don’t fit with the feeling of a new dawn – they warn about clients, who refuse to become enthusiastic about digital tools provided for by their banks. And what’s worse, clients who openly refuse taking on board the benefits of technology.
1. Infrastructure Matters
Basellandschaftliche Kantonalbank (BLKB), one of the many cantonal banks of Switzerland, was successfully pushed into keeping open its branch in Reigoldswil. The commune fought the decision to shutter the branch and BLKB had agree to a pilote in compensation for the closure.
Yesterday, Hypothekarbank Lenzburg offered another smaller Swiss community, Fahrwangen in the canton of Aargau, to open a cash machine after rival Aargauer Kantonalbank had left the place without any banking infrastructure by shutting its presence more than three years ago.
Perhaps two anecdotes too small to really matter – but nonetheless signs that the banking industry’s plan to replace real banking infrastructure with digital services hasn’t yet caught on.
2. A Nation of Cash-Lovers
After a drawn-out development phase, Swiss banks currently are implementing the electronic payment system Twint. It is yet to be seen how successful the Swiss rival to Apple Pay and others will be. Thierry Kneissler, the CEO behind the app, famously said that his biggest enemy was cash.
And no doubt, the Swiss love their francs in good old paper and coin – unlike their Swedish counterparts. Some 60 percent of all goods in Swiss shops are being paid for in cash, studies have shown. The staggering statistic prompted a fintech to base its business on cash.
The Swiss central bank, the gatekeeper of the Swiss payment system, recently added its full might behind the continued use of cash by introducing new notes. The government and the bank agreed to declare the old notes fully valid legal tender for ever. So, despite the attraction of Apple Pay and Twint, Switzerland won’t quickly forego its cherished cash.
Onboarding for Young Customers
The Swiss regulator not long ago allowed banks to offer the so-called digital onboarding, account openings online. The first months of using the system hasn’t yielded much business though, according to an evaluation of the UBS solution by the Institute for Financial Services in Zug (IFZ).
The service has neither attracted more business over time nor has it collapsed again, IFZ said. Comparing the digital account opening with the number of traditional account opening showed that customers in the age range of 18 to 29 were the most likely to use digital onboarding. There were hardly any takers over the age of 65 though. IFZ also noticed a clear difference between countryside and cities.
Mobile Banking on a Bus
Banks are caught up between two worlds. Digitization won’t go away again. But banks need to understand that technology on the one hand is a great enabler, but on the other can have the unfortunate effect of social exclusion. In an industry where private customers above 50 years of age make up some 60 percent of all clients, the conclusion makes for tough reading for banking.
The financial services companies face being caught between analog and digital for a long time to come. By the way, BLKB has opted to send a banking bus to Reigoldswil from now on. Mobile banking, not digital banking, that is.
