Some of you may remember or know of the industrial age. This was a time where the bigger the organisation was the more control they had over the markets. Thanks to technological advancements that allow transparency and promote competition nowadays the consumer controls the market. This applies across all industries including banking. The way people do their banking has come a long way especially in the last 20 years. Thankfully due to technological advancements we have also seen a huge transformation of banking in that last 10 years alone.
Traditional banking methods; Personal Banking
Pass book; Most people will know this method of banking especially those of you born in the 1980s or earlier. This process involved physically going into a bank to make withdrawal and deposit transactions. The passbook was a paper based statement that allowed customers to keep track and account for their money.
Cheques; This method can be deemed as a paper based “credit card”. It is a transaction process that allows an account holder to make payments by transferring cash from their account instead of carrying cash around. This transaction was guaranteed by the bank, by law, as the bank is the one that actually authorises the payments.
Technological advancements: Electronic Banking
Bank ATM/credit cards; Electronic “cheques” issued as cards that are guaranteed by the bank. A bank card allows the account holder to make transactions via electronic access at Point of Sale (PoS) systems and ATM machines. This reduces the amount of time spent in bank queues and makes money more accessible as ATMs are available round the clock (24-7). Bank cards can also be used as a means of identification of an account holder when in-house for face-to-face transactions.
ATM; automated teller machines; Also known as an electronic teller, this machine allows account holders to perform transactions without the need for a human cashier. Access to accounts is done by inserting the ATM card into the machine which contains some identification of the account holder and this information is usually verified by a entering a PIN (personal identification number).
Point of Sale; This is a combination of hardware and software that allows for account holders with ATM cards to make transactions for purchases electronically. By simply swiping the card an individual does not need to carry cash to make transactions as long as there is a Point of Sale device available.
Current banking trends: self service
Self deposit ATMs; A while back ATMs could only allow you to access your bank account and make cash withdrawals. Nowadays the new ATMs allow you to also deposit cash directly into your bank account saving you from queuing in the bank.
Online banking (mobile/pc) and Phone banking; Most banks now allow users to access their bank accounts online via the internet or by phone. A bank account holder can access bank statements, transfer money between banks or bank accounts and even pay bills for utilities.
E-wallets: Pay pass/tap-n-go; The use of Radio Frequency Identification (RFID) technology has allowed for bank cards to become contact-less. This means that you no longer need to swipe and or enter a PIN to make a transaction at a point of Sale station. Just present the card within proximity or in contact with the Point of Sale device and your payments are authorised “wirelessly” hence the term “tap-n-go”.
Future banking trends
Mobile wallets (M-wallets); With most people now being able to afford smart phones mobile devices are the biggest contributor to technological advancements in numerous industries. In the banking industry we have seen new apps and “stickers” that allow your mobile device to process payments in the same manner as the “tap-n-go” cards.
In Africa there are a few mobile service providers, such as Ecocash in Zimbabwe, and M-Pesa in Kenya. These companies have developed cash transfer and payment systems that utilise mobile phones making money more accessible to more people across the country.
The square; This is a new technology that allows for individuals and or businesses to become instant merchants through their smart phones. This technology does not require a merchant account like you do for Point of Sale systems as it uses an application that can be downloaded straight to a smart phone. It allows the mobile phone to become a cheap affordable Point of Sale system for small retailers.
What does all this mean for you as a consumer?
Vulnerability; Due to so many applications and devices being made for your mobile device, and an increase in data sharing, be sure to choose your desired application wisely. It would be safer to choose one that is preferably linked to a big institution like a bank as these applications will be more secure and robust. Some smaller business applications may be just as good but most will be set up on poor infrastructure and will not comply with standard payment security policies.
Fraud; There will be an increase in fraud as some of the systems are still new and will have numerous security vulnerabilities, mainly because of how complacent the industry still is. The fact that there will be so many technologies and service providers for these technologies, such as start ups, it would be advisable to research on most small providers before taking on their services.
Confidentiality breach; Just remember regardless of what technology or banking method you use, always be conscious of your security. With technology such as the square, anyone can easily disguise themselves as a small business like a mobile food shop and easily skim through people’s card and steal their bank details. So be carefull where you swipe your card and who you give your card to.
- Check your statements regularly
- Don’t share or leave your account details and PIN lying around
- If your bank details are compromised, stolen or lost remember to always contact the police and your bank as soon as possible.
Personal self service banking is the way forward, but it will never replace actual banks. Cash-less payments methods will help in reducing bank affiliated costs and increase customer engagement as people will now be able to access banking services 24 hours a day. There will, however, always be a need for actual cash and actual Face-to-Face banking services. Although technological advancements may change the process of doing things it will only strengthen the customer focus and relationships not only in the banking sector but across all industries.