One of the barriers to digitisation of banks and other financial institutions is their obsession with paper-based applications, mandates, correspondence and statements. You would have thought that in the age of online and mobile applications, front-to-back electronic processing, account management and archiving, the need for paper-based customer communication and account handling would become less of a feature. Developments in the US, Scandinavia and South-East Asia suggest that digitisation in retail banking is accelerating.
Not in the UK and in some of the bigger European countries. With few exceptions, British retail banks continue their love affair with paper-based banking as if there wasn't an alternative. When I recently opened a new bank account, I was sent 12 pages of application forms. When, due to a clerical error, I was given an outdated form (for the record: only a week out of date), the only option I had was to reapply and fill in 99% of the same information on the slightly modified form before the application could be processed. Subsequently I have been sent at least 8 letters in the post and one of those cardboard welcome packs with at least 40 pages of marketing dribble.
One of the reasons I was given for this avalanche of paperwork, was that many clients (young and old) prefer to keep a solid record of their financial affairs. Digging a bit deeper, I found that the operational departments of these banks have many risk and security policies that are served by paper records in case the regulator, legal enforcement agencies or auditors demand evidence of compliance, something that can be hard to get out of systems due to rapidly ageing legacy IT platforms and insufficient reporting capabilities. Another argument I have heard is the need for a record of a client mandate with original signature which can be referenced when (significant) transactions are made.
This bank - and I won't mention the name - happens to be part of a banking group in the UK that prides itself for its innovative use of technology and omni-channel capabilities. Did they leave this brand operation in the last century in case their digital strategy would backfire?
Whatever motivates these banks, there is growing evidence that:
I am going to watch with keen interest how these legacy banks will compete in the digital era and if they manage to survive the odds.
Not in the UK and in some of the bigger European countries. With few exceptions, British retail banks continue their love affair with paper-based banking as if there wasn't an alternative. When I recently opened a new bank account, I was sent 12 pages of application forms. When, due to a clerical error, I was given an outdated form (for the record: only a week out of date), the only option I had was to reapply and fill in 99% of the same information on the slightly modified form before the application could be processed. Subsequently I have been sent at least 8 letters in the post and one of those cardboard welcome packs with at least 40 pages of marketing dribble.
One of the reasons I was given for this avalanche of paperwork, was that many clients (young and old) prefer to keep a solid record of their financial affairs. Digging a bit deeper, I found that the operational departments of these banks have many risk and security policies that are served by paper records in case the regulator, legal enforcement agencies or auditors demand evidence of compliance, something that can be hard to get out of systems due to rapidly ageing legacy IT platforms and insufficient reporting capabilities. Another argument I have heard is the need for a record of a client mandate with original signature which can be referenced when (significant) transactions are made.
This bank - and I won't mention the name - happens to be part of a banking group in the UK that prides itself for its innovative use of technology and omni-channel capabilities. Did they leave this brand operation in the last century in case their digital strategy would backfire?
Whatever motivates these banks, there is growing evidence that:
- Customers less and less appreciate paper based engagements with their financial institutions; and this is not a generational issue
- Regulators, law enforcement agencies and auditors are looking for better ways to review compliance than having to rely on paper-based systems
- Despite known security issues, such as cyber attacks and fraud, the commercial and compliance risks do not outweigh the benefits of digitising retail bank operations with a modern omni-channel customer delivery capability
I am going to watch with keen interest how these legacy banks will compete in the digital era and if they manage to survive the odds.
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