Business Unusual

A bank that is always open but has no doors

Back in 2001, before Facebook was even a dorm room experiment, there was a bank called 20Twenty. It was an online bank that worked via Saambou Bank.

In just 6 months it had 40 000 people signed up promising great customer service and no need to visit a bank branch to manage their accounts.

Websites were basic back then and phones were nothing like they are today. So a direct bank was certainly a major innovation. Unfortunately Saambou collapsed in 2002 which threatened to end 20Twenty. It remained in limbo until 2004 when it was bought by Standard & Chartered. However, it turned out they did not really want the direct bank and by the end of 2005 it was gone.

Direct banking as it is known is the process of creating banking services that exclude a branch network. The first in the US in 1995 used a call centre to take instructions and carry out bank transactions.

It was only in 2014 that mobile banking became more popular that banking via a branch in the US.

App based banking will use new ways to verify who you are making fraud more difficult.

The first digital only banks appeared on Germany in 2009. They were stand alone and not backed by a traditional bank. Fidor goes even further by making the banking process a social one offering bank clients the opportunity to interact, compare or even offer or get loans from other clients

Many regular banks have seen the shift and have created online direct banking services aimed at younger more web and mobile savvy savers.

Despite being a finance hub the UK will see their first digital only bank open for business this month. Atom has no branches and is not backed by an existing bank. It operates only via mobile and web services. You can message and call them, but you can’t visit. Hot on its heels is Tandem the second digital only bank to be given a licence in the UK.

In Canada, EQ Bank is hoping to reach a more mobile-focused customer.

The shift is a significant one. Historically the more impressive the bank branch the greater the customer's faith in the security of the business. Now that same sense is more likely to be determined by the customer service responsiveness and the quality of the app or website.

The challenge to financial services is also no longer only from other banks. Technology companies like Google, Apple and Samsung have all built options to make transactions easier for those using their products and social networks like Facebook and WeChat have also offered their users the opportunity to do payment transactions via their platforms.

There are also physical payment options like Square which allows you to swipe a payment card via a phone and services like SnapScan which turns your phone camera into a credit card. One of the original online payment options was PayPal which provided the most convenient way to pay securely online using credit or debit cards.

There are also platforms for helping you manage your accounts and funds, by running analytics to help you save or invest or simply let you see how much you are spending on a particular item like eating out or fuel. 22Seven is one such option to try although some might still hesitate as you are required to enter your banking passwords.

Users are now able to access and transact without needing to worry about banking hours or needing to visit a bank.

For the banking industry it offers both a massive potential disruption with new online only businesses offering services at lower costs and with more convenience. However, as the demand for actual branches drops, traditional banks can drive significant savings to their operations.

The shift to more electronic and mobile banking also allows businesses to offer payment services and potentially more. So there will continue to be a blurring of banking channels offering retail options and non-traditional retail and technology channels offering payment and banking services.

A final element that will grow from the massive data collection and processing online will be smarter use of purchasing behaviour to both assist consumers avoid bad spending as well as to assist marketers better tailor their sales pitches. It will also allow institutions to better understand economic shifts happening sooner and more accurately.

It may even lead to improvements for tax revenue management and close loopholes that have allowed tax havens to be abused.

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