Financial Technology

Which way to the bank?

For some, a trip to the bank is the only time they get the chance to exercise their legs. But soon, they may even lose that opportunity to engage in a physical activity to help strengthen the body, because the banks are now providing more digital and mobile solutions, thanks to technology.

Across the UK, about 430 branches of banks and building societies have closed or are in the process of formalising closure this year as the shift to a cashless society accelerates.

And to ensure that those who need to perform in-person banking activities are not left out completely in the cold, plans are afoot for more shared “banking hubs” to be rolled out across the UK.

This development is interesting for various reasons, as in the past week, column inches of newspapers and also online news portals have had various twists to the closure of bank branches and ATMs.

Whereas some felt that the move could adversely affect the unbanked and those with little exposure to financial services, others were of the view that the move could actually speed up the inclusive growth agenda. Meanwhile, those who still need some counter services can use the hub concept, which is introduced to help communities hit by the closures.

The banking hub, according to literature shared on the concept, is a shared service that operates in a similar way to a standard branch, “with a counter service run by post office staff where customers of almost any bank can withdraw and deposit cash, make bill payments and carry out regular transactions”.

The hubs are aimed at “providing vital cash and banking services where they are needed most”, said the Cash Action Group based in the UK, which includes banking industry representatives and others, and ATM network Link.

My interest was drawn to this story for various reasons. First, l was attracted to this development because it mimics other technology-enabled services that I reported on in the past in this column.

In the November 27, 2021 edition of this column for example, l wrote on how Amazon Go, Aldi and Tesco were working on trials that could lead to the full launch of checkout-free stores, which would use advanced technology to process payments via facial recognition or tracking body movements.

The approach taken by the three high street stores – Amazon Go, Aldi and Tesco – mimics similar initiatives by some retail outlets in Denmark and Sweden also. Even though cash is still in demand, there is evidence that increasingly, payments are shifting to digital instruments.

For instance, cash use declined by almost three percentage points of GDP in China in 2019, compared to 2012, and in Sweden (a model of “cash-lite” society), over the same period, there was a cash-to-GDP ratio of one per cent. In fact, technology-driven innovation is a game-changer in the fight against poverty.

I always remember how about two decades ago, we never talked about Google, Alibaba, Amazon, Ebay and Apple; to mention a few of the great inventions of this century. But today, these are companies contributing significantly to global economic activity, affecting our lives to great effects.

Again, in the April 13, 2019 edition of this column, l explained how the Chinese market had taken payments, and for that matter the monetary system, a notch higher by introducing facial recognition software that authenticated transactions by validating facial marks.

The “Smile to Pay” technology is very popular among restaurant operators in China, and many other financial technology companies are testing a number of cashless systems.

 

Most high street shops, especially those situated in the City of London, are offering services online, with the once very busy and vibrant City of London, home to some of the leading investment banks in the world, not as busy as it used to be because of the introduction of online shopping channels to patrons.

In all, over the years, researchers have found that biometric features, referred to as a method of “identifying the holder of a device by measuring a unique physical characteristic of the holder, for example by fingerprint matching, voice recognition or retinal scan”, are far more personal and advanced within the payments ecosystem and, therefore, important to the growth of the banking industry.

What is more, technology developers are never short of ideas, which means that the “age of disruption” will continue for a long time.

On November 15, 2021 for example, IBM revealed a new computer chip (quantum chip), its newest quantum-computing chip then, which analysts described as “a milestone of sorts”, because it “packs in 127 quantum bits (qubits), making it the first such device to reach three digits”.

There is a paradigm shift in development theory, thanks to technology. Today, least-developed and low-middle-income countries do not need to go through the same processes or follow the development pattern that the advanced countries had to endure.

No, these countries can leapfrog these processes through the right technology adoption and diffusion strategies.

One key lesson from the pandemic is that technological advances are key to improving an economy’s potential to grow – but can also leave people behind.

Technology innovation, digitalisation and automation helped some strong companies and businesses to stay fit during the imposition of restrictions at the peak of the pandemic and helped greatly in the recovery efforts too, especially in the advanced economies.

According to available records, technological advancement has raised living standards in G7 countries and across the globe and has helped lift more than one billion people around the world out of extreme poverty since the Second World War.

The downside, however, is that there is also compelling evidence that innovation is also a reason behind rising income inequality in advanced economies in recent decades.

Quite a huge dilemma, right? The global economy certainly needs strong efforts to build inclusive growth because we cannot stay on the same road and repeat the past; we must apply fresh thinking and choose a new road where innovation delivers even stronger and more inclusive growth.

Available literature points to a scale-up in the adoption of technology in most industries, in some part as a spontaneous response to the drag on economic life due to the lingering effects of the pandemic.

The pandemic has thrust us headfirst into the digital transformation agenda globally. Take the case of how churches and schools, as examples, had to adopt virtual means to engage during the lockdown.

Market observers and commentators have also written extensively about how e-banking channels and e-commerce activities increased significantly during the lockdown.

In effect, a lesson learnt from the adoption of technology, which obviously increased during the peak of the pandemic, is that technology is driving up the cashless agenda in most economies today.

The UK’s bold step is a testament to the long-held views of economists, market observers and analysts that branch-less banking and financial services delivery is the future of finance.

And, therefore, to the question: Which way to the bank?; the simple answer is that the direction is on your phone—and you may not even need to travel there!

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