It can seem that everywhere and every time you look, long-established processes are being converted from analogue to digital and the financial-services industry is very clearly at the forefront of this development. For better or for worse, what used to be standard “over-the-counter” transactions such as making deposits or withdrawals are now routinely carried out either via enhanced ATMs or online, with a resulting reduction of in-branch staff and some bank branches closing completely. Is this simply the way of the future as millennials (and presumably those even younger) not only accept but want to live in a digital world and prefer self-directed transactions and online chat (even with AI-powered advisers) to slowing down and spending time taking advice from an actual human? Alternatively, is it more a case of the financial-services industry misunderstanding millennials and thus pushing forward with short-term cost savings at the expense of long-term sustainability?
The case for the move to digital
Providing financial services essentially involves finding the sweet spot between convenience, accessibility and cost. The ease with which this sweet spot can be found depends greatly on the situation and can change over time. For example, in the early days of the move to digital, giving people the ability to make money transfers themselves online was clearly “low-hanging fruit” as it was convenient, accessible and cost-effective. There was, however, still a need to provide secure locations in which people could safely deposit and withdraw actual physical cash, hence if a bank wishes to close a branch (or was an internet-only bank), then they either need to find a partner company who could step in for them (such as the Post Office) or accept the fact that they’re going to risk inconveniencing their customer base. While this is still, technically, the case, the fact that there is currently a clear trend away from the use of cash and towards the use of digital payments creates more of an argument for reducing the number of locations used for cash transactions (which also has security benefits). Moving services like advice onto a digital platform is a natural continuation of this trend and can make it much simpler for people to access advice conveniently and in a way which is cost-effective for the provider.
The case against the move to digital
First of all, it should be noted that even in 2019, not everyone has reliable, secure, broadband internet at home, not even affluent millennials. Young adults are often renters and may well find themselves in rented accommodation where the landlord takes care of the WiFi. The problem is that the landlord may not understand how to secure the WiFi, in fact even the young adults themselves may not really understand how to secure their internet access. Just because someone is comfortable using technology does not mean that they necessarily really understand how it works “behind the scenes”. Secondly, there is a big difference between moving basic transactions online and dealing with more complex matters in a purely online environment. For example, while it may be perfectly reasonable to create digital content which gives general advice on money-management, preferably in layperson-friendly terms (such as The Money Advice Service), explaining complex issues is, by definition, rather more difficult and giving detailed, customized advice relating to a customer’s unique situation is harder still. That being so, there may well be a case for financial-services companies to move to a hybrid model of service. One way in which this could be implemented would be for them to retain a physical presence in urban centres so that they can provide face-to-face advice and supplement this with webcam-enabled remote advisors so that customers could have the benefit of human interaction even if they don’t want (or are unable) to go to a physical location.