Financial Inclusion, Digital Inclusion and Tech Displacement

In 1999 I worked at a major High Street Bank with the teams who developed Mobile Banking Via SMS  Who would have thought that as a consequence to us thinking, ‘wouldn’t it be cool to get you balance on your mobile phone’ that it would contribute to the decline of the High Street? From getting your balance by text on a Nokia 3310, fast forward 20 years to the Banks opening up more and more services to their customers via the Smart Phone Apps that we all use on a daily basis. This combined with Telephone Banking has led to reduced branch usage and therefore Branch closure. At the end of 2017 in the UK there are about 9500 bank branches a reduction of about 600 on 2016 with about 500 to close in 2019.

Branch closure then has a knock on affect to Small Businesses. A small Business can not afford to close their doors for an hour round trip to their nearest branch. Which means that Businesses may choose another location. In a report for Scottish Government , by mapping bank branch closures against postcode lending data, it found that bank lending to small firms fell by 63 per cent on average in postcodes that lose a bank branch. This figure grows to 104 per cent for postcodes that lose the last bank in town. “On average, postcodes that lose their last bank in town receive almost £1.6 million less lending over the course of a year,” the report concluded.

Where Banks have left the High Street, Communities feel Financially Isolated, It causes major concern for Small Business and people who are Digitally Excluded i.e. those with Little to No Access to Technology and therefore have to travel to a Bank. Within affected communities there is strong feeling that banking should be viewed as a basic part of the local infrastructure and therefore should be available as standard provision.

Add to the Banks shutting down

  • 75% of rural and 10 % of urban areas do not have satisfactory broadband
  • 9 million adults in the UK have never used the internet
  • 1 million adults living in social housing that are offline
  • 27% of disabled adults (3.3 million) had never used the internet

Offline households are missing out on estimated savings of £560 per year from shopping and paying bills online.

Cash: is still the second most popular payment method,(just behind debit cards) accounting for 34% of all payments last year. Around 2.2 million customers mainly used cash for their day-to-day shopping in 2017, although nine out of 10 of them had a debit card they could use, but cash is still an important part of their daily spend preferred by many.

Combine Branch Closure with Cash machines disappearing at a rate of 300 a month, with rural areas hardest hit. As Link ATM Network has lowered the fees it charges to Banks and Building Societies. experts are warning that it could mean closures of free-to-use ATM machines across Britain if they become unprofitable to run, leaving access to cash for millions of people in doubt.  There are 957 areas in the UK with at least 500k customer dependant upon benefits whose cash machine is more than 1km away. The Customers who use “pay for” Cash Machines, regularly incur charges of between £3.70 and £9.25 a week.

Potential closures of Bank Branches and Free Cash Machines risk leaving whole communities without access to cash, harming over two million people who are dependent on cash for their day-to-day shopping.

The Financial Services gap is widening between the Technical Haves and Have Nots – Digital Exclusion. In addition to High Street Closures, the latest Regulations of PSD2 (Payment Services Directive 2) leading to Open Banking in the UK,  allows regulated 3rd parties to access your Bank Account data to deliver a regulated service if you have provided consent to do so. The services currently being provided using Open Banking protocols are for example Comparison Engines, Personal Financial Management apps which can determine trends in your spending habits, or Apps to identify personalised offers. These latest Apps and Services are obviously not available to those who don’t have access to Tech.

As a society we need a way to ensure that advances in Technology and changes to the High Street, do not exclude people from the latest innovation in Financial services.  How do we as an industry ensure the poorest in our society, those that don’t have tech or can’t afford tech, can access the range of comparison engines to get cheaper deals, can take advantage of Digital Payment options to gain discount, and find the best deals, that are readily available to the rest of us? Do the Tech and Financial world have an obligation to provide the tools to ensure accessibility for all and if so how do we work together to ensure Financial Inclusion?

As a footnote, I’m currently Working with a Consultation group in Manchester to define Tech Displacement and how you assess the disruption of your Innovation on People and Places and we are looking to develop  a toolset to evaluate. We are at the start of the this consultation period, so please follow me on Twitter to find out how we progress or maybe to trial our toolset for us. @NJMarham


 

References:

https://www.cdrc.ac.uk/case-study/measuring-the-impact-of-online-shopping-on-high-streets-across-england

http://www.parliament.scot/S5_EconomyJobsFairWork/Inquiries/BC025-SFE.pdf

http://www.parliament.scot/parliamentarybusiness/CurrentCommittees/108241.aspx

Got a great idea? Come and play in the sandbox!

It’s all change in banking!  I’ve worked in Banking IT for more than 20 years and never has the pace of change been so quick.  Now, rather than the traditional ‘Big Names’ always coming up with new ideas and technologies, new start ups and FinTech’s are seriously getting in on the game.  The rapid developments in Coding languages, IAAS (Infrastructure as a Service), the falling cost of IT and new, innovative and highly collaborative ways of working has meant that Innovators can develop new technologies using real user data to design and develop existing, highly desirable services and solution – and get them to market in record time.

A major catalyst is the European Open Banking Directive.  This encourages new, disruptive players to get involved to develop and deliver new Banking functionality which is outside of what would be considered traditional Bank servicing.

What’s more, the UK Open Banking Implementation organisation has developed an agreed set of API’s (Application Programming Interface) that TPP (Third Party Providers) can utilise to access Bank data. This means that both the Banks and FinTechs have the opportunity to exploit and develop new Applications to compare banking Product sets and aggregate Customer and Account data across the Banks.

So how should a FinTech with a great application idea (and a brilliant team) get started?

Today, Industry sandboxes offer a new way forward.  FinTech’s can now develop, test and prove ideas, producing a robust Proof of Concept using an industry sandbox.   A sandbox enables start ups with new product ideas to accelerate development and testing using test bank data so that innovative ideas can get to market quickly and cost effectively.  Many established banks are getting in on the ‘sandbox’ initiative, Danske Lloyds and Nationwide all have a Developer Portal giving access to code examples and other helpful documentation.  Leading banks including Allied Irish, Barclays and Royal Bank of Scotland have all invested in Sandbox technology which FinTech’s can access.  This means that FinTechs can prove API’s work with Industry approved data, using Production like Test Data always throws up Use Cases that you did not consider.

New entrants are also making it easier to get involved. Avaloq and Starling Bank actively encourage innovation with their Developer Platforms.  Both deliver access to their test data and have a wealth of documentation with a  much greater range of functionality.  Starling even let individuals test by accessing personal own account to prove instant value and engagement. Not sure where to start?  Why not take a look at GITHUB. It has code examples, collaboration projects to listen, learn and grow ideas and discussion forums covering every stage of the development lifecycle.

Or why not check out Open Bank Project Berlin?  This Project is the leading Open Source API and App store for Banks. It’s open source APIs and surrounding ecosystem of tools, together with a pro-active Fintech developer community helps banks rapidly engage with the next generation innovators safely and securely.

You know that brilliant idea you had last night? What’s stopping you?