Scandal-plagued Banks bank on being your value-added financial advisor. Really?
The Economist Intelligence Unit’s study “In Tech We Trust” is the latest in a series examining the future of banking and in particular retail banking. Reading this summary by @Which50 I was struck by the closing paragraph.
The Banks are hoping they can transition branches from cash-handling (which is rapidly becoming redundant) to that of providing value-added financial advice.
Australia has a banking oligopoly where 4 banks dominate every aspect of the sector. That’s why the fintech revolution is particularly interesting to me because the scale of disruption could potentially be much bigger here — across every distribution channel and every single product line.
If #FinTech is really going to disrupt the banks, as the EIU report reflects, and providing value-added financial advice is the answer, then Australian banks are not only going to have to reinvent themselves from top to bottom but also totally reposition public perception.
That’s a wee challenge given the repeated scandals, parliamentary enquiries, and fines for unconscionable, unethical and illegal conduct in relation to their current financial advisory services. Not only that, but in the main the oligopoly banks’ financial advisory services — wealth management — have all failed. The ANZ Bank all but closed down its wealth management activities, in the last month (according to an assessment in the Australian Financial Review).
People go to the big banks for home loans, credit cards and to move money (make payments) because in the main they don’t know where else to go. They also hope — in the back of their mind — that “being with a bank” may make getting a home loan easier as everyone in Australia has always wanted to own a home.
The point is that people have bank accounts with the oligopoly banks because they have to, just like they need water and electricity suppliers. Nobody loves their energy supplier, and the oligopoly banks are never going to be able to muster a significant proportion of people who feel other than that they are in a “hostage relationship” no matter what they read into their Net Promoter Scores.
On the other hand most young people would be very willing to advocate and to buy financial services from brands from the digital age. Will Google become an insurance company — of course (auto). Will Facebook offer financial services — anytime it chooses and it will be successful. Could UberEats successfully become UberFinance — of course, at the drop of a hat.
How about value-added financial advice? I think it is quite plain to see that very few (like, a dying race) are going to use the traditional banks for this service. Instead, people are going to go with brands that they trust, brands which represent their lifestyle, services which are instant, services which are highly data-driven and personalised, and services which don’t lock them in. They will go with brands of the digital and social age. Isn’t it that simple?
(Or, for value-added financial advice they’ll go with the single person they trust and respect as a human being who works locally and is aided by a robo-advisor.)
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Postscript: Thursday 7 April — Even our right-wing ex-banker Australian Prime Minister, potentially facing an election later this year, thought it politically wise to distance himself from the banks, those same banks who want to be your trusted advisor. He said:
Malcolm Turnbull has told Australia’s scandal-plagued banks to clean up their acts, as yet another outrage in the sector has damaged the government’s case over the need to crack down on corruption in the construction industry and led to renewed internal calls for a royal commission into the finance industry.