20th July 2016

As digital innovation in banking rises, what does it mean for us – the customer?

Written by Ariane Poulain, Policy Adviser, Strategy and Research

For the past few months, working on the BBA’s annual Way We Bank Now (WWBN) report, has been at the top of my to-do list. The WWBN, supported by EY, looks at growth and trends in digital banking technology and the third report in the series will be published this Friday 22nd July.

Whilst I was busy gathering insights and data from our members, it was quickly noticeable that digital innovation in banking is continuing to develop at a rapid pace due to customer-led demand. It was also clear how digital banking technology is no longer just about providing customers with more ways to access their money but about the potential of these channels, offering people more ways than ever to manage their money.

I couldn’t help but think about my own approach to managing my finances and was curious to see for myself how digital innovation in banking could help me more. Next thing I knew, I had downloaded Mondo – a smartphone app-only bank. Mondo isn’t technically a bank yet because it is still in testing mode but you receive a bright coral pink prepaid debit card. The card is linked to the app where you can use various features to manage your account and you can top up your funds with a few taps on the app, using either a debit card or bank transfer.

So, what happened when I took off my policy advisor hat and put on my retail banking customer hat instead?

There were a range of features which helped me track my spending better and save money. The Mondo app operates in real-time and instantly updates with transactions, sending you a notification and immediately revising your account balance. Your transactions are categorised so, for example, you can track how much you’ve spent today in a particular grocery store, your average spend in that store and your total spend. If you lose your card, you can immediately freeze your card temporarily on the app. If you travel abroad or make a foreign currency purchase, you can use your Mondo card which – based on the MasterCard wholesale rate – provides a low exchange rate and updates your account with all the details (see pic).  Using my Mondo card last weekend in Berlin, the exchange rate I received was £1/€1.21, while my friends used local ATMs and received £1/€1.08.

I was happy in my customer hat because, in short, Mondo saved me money and enabled me to have a real-time understanding of where I stood financially; all in the palm of my hand, paper-free and with minimal hassle. Of course, this is just one snapshot of how digital innovation in banking is transforming the customer experience. The Way We Bank Now 3 report comprehensively looks at the pace of consumer adoption in digital banking and showcases the wide range of innovations being offered to customers by banks in the UK.

Now, putting my policy advisor hat back on, there are two important reflections on the rise of digital banking technology.

Firstly, digital innovation in banking can be exciting and encourage people to talk about their money. This is important because a key focus for the UK’s Financial Capability Strategy is to develop people’s financial skills and knowledge, and improve their attitudes and motivation.   I’ve previously blogged about the importance of improving financial capability and in particular, breaking the British taboo that talking about money is vulgar. Mondo’s bright pink bank card is very noticeable and even glows under UV light.  I’ve lost track of the amount of times both friends and strangers have asked about my card which has, in turn, opened up a conversation about how the Mondo app functions, which current accounts we use, foreign exchange rates and how much we all spend on coffee habits!  We all have our own priorities when it comes to managing our finances and our own preferences when it comes to which channels we use to interact with our bank but opening up a conversation about how we make, save and spend our cash can only help improve financial capability.

Secondly, the rapid rise of digital banking technology helping customers is not exclusive to start-ups such as Mondo. Right across the UK banking industry from new entrants to large banks, innovation is taking place to deliver faster and more convenient banking services to customers. This year HSBC began a pilot of ‘Nudge’, an app to help customers keep their spending on track, Lloyds and Halifax extended their home video mortgage advice service after a successful trial in 2015 and Barclays became the first UK bank to announce contactless payments for both debit and credit cards via Android phones. And these are just a few examples of technology enabling banks to help customers in ways that have never been possible before.

Lloyds Banking Group research showed 86% of people who manage their money online worry less because they find it easier to keep track of their finances. This is a good example of what all this digital innovation in banking means for us the customer – this is not innovation for innovation’s sake. This is helpful innovation designed to make managing our finances easier and make our money go further.

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