Historically, when we talk of banking, we have always depended on household names such as Natwest, Barclays, HSBC, Lloyds and HSBC to provide all the facilities we require to support our needs.
But as more and more people become disheartened by the services we are receiving from these so called ‘major players’ and find more innovative ways to carry out our banking requirements, We look at why we soon think we won’t need these big banks at all.
1 – The Branch Becomes a Thing of the Past
Gone are the days when us savvy customers want to go and sit in wood clad offices to talk to our Bank Manager about our finances.
Today, we want more choice when it comes to our credit cards, investment products and our mortgage options, and big banks that only supply their own tied products are not the place to find it we’re afraid.
And with the limited time we all now have in our busy daily schedules, the last thing we want to do is spend it going to high street locations to talk about finances. The rents are far too expensive to warrant large banking premises and, with the rise in popularity of online and telephone banking, customers are showing their distaste for such lavish costs with their feet.
RBS alone have seen the number of transactions carried out in branches fall by a massive 30%, while the number of Internet transactions continues to rise at an incredible rate, showing that the only time us customers really want to step foot into traditional banking branches these days is when they have been converted into pubs.
2 – Do Your Banking While You Shop
Banking services are now available from an incredible range of sources, including our local supermarkets. Loans, Credit Cards and even insurance products are now all available from most supermarket chains, with an increasing number also offering standard current accounts with added extras that just aren’t available from big banks.
Opt to bank with Tesco and you can find that, not only is it possible to get better rates than with a traditional bank, but you may also qualify for extra Tesco points every time you shop. A great attraction for us budget conscious individuals who want to make the most of our cash.
But do beware, the likes of Marks and Spencer and the Post Office, Tesco and Virgin, all claim to offer an alternative to the big banks. But even though it looks like we are opting for something out of the norm on the surface, in reality many of these products are actually supported by the big banks. M&S money is actually provided by HSBC and Sainsbury’s bank started life as joint venture between Sainsbury’s and Lloyds bank.
3 – Peers Can Offer Much Better Rates
In the majority of situations, using a peer to peer service can, in fact, be much more financially beneficial for both the borrower and the lender than using a traditional bank.
Within this process, those with spare cash will use online Peer to Peer facilities to find the appropriate borrower and strike up a lending agreement.
Thanks to the low overheads in this type of financial transaction, if you have money you want to invest, then offering it up for a peer loan can provide a much greater level of return than a standard bank account. While borrowers will find that they can pay significantly less for the money they need.
Historically, this concept has been relatively underused in the UK. The inability to find an appropriate borrower and the risk associated with direct lending has put many people off.
But with peer to peer borrowing soon to become eligible for entry into ISA’s and the agreements themselves now falling under the governance of the Financial Conduct Authority, such types of borrowing and lending are becoming much more popular.
The number of online peer to peer sites is drastically increasing, providing a greater range of opportunities to both borrowers and lenders. And with such immediate and simple transactions, the rates they can offer us are something that traditional big banks with huge levels overheads simply cannot compete with.
4 – The End the Cheque As We Know It
Historically, one of the main reasons that we needed traditional bank accounts was for the checking facility that was provided. Cheques were the only safe way to send money whilst providing a visible paper trail that customers could easily monitor.
But the time of the cheque is now coming to an end.
Whilst almost one third of account holders of pensionable age still do like to use a cheque, research carried out by Thinkmoney suggests that less than 3% of all 18-24 year olds now consider having a cheque book important. Yet, of those people questioned, 80% would not choose a new account that did not provide an online banking facility.
As a payment system, the cheque process has become both arduous and time consuming.
Cumbersome cheque books must be taken with you whenever you want to make payment, with many also requiring a supporting cheque guarantee card.
And even after a cheque has been written, it still has to be physically banked in the appropriate branch, only then starting a clearing process which can take up to 5 working days.
At the same time, the level of cheque fraud in this country has risen to such a level that many commercial enterprises now refuse to accept cheques as a form of payment. Furthermore, the costs associated with receiving and banking such payments can be unsupportable for those operating in a modern business structure.
Alternatively, use an online payment system and all that is required is a few codes at best. It is cheap, it is easy and it can be incredibly quick. In fact, most online payments will reach their intended recipient almost instantaneously, wherever they are in the world with many banks charging very little to receive such form of imbursement.
Electronic facilities have revolutionised the payment system and the way we want to manage our money. It is fast, it is efficient and it gives us total control over when and where our money is paid, and it makes the need to supply cheque facilities to its customers, another nail in the traditional bank’s coffin.
5 – Who Needs Cash
Much like the good old chequebook, the number of cash transactions carried out in the UK every year is continuing to fall. And as the demand for cash declines, so does the need for the ATM’s that supply it, and the need for the traditional banks that supply the ATM’s.
In 2012 alone, the British Retail Consortium has calculated that there were nearly 10% less cash transactions carried out than the year before (source: http://www.brc.org.uk/brc_news_detail.asp?id=2636), illustrating the ongoing decline in the need to carry cash or withdraw it from traditional bank machines.
The rise in ATM fraud, cash counterfeiting and general theft has meant that we are now wising up to the dangers of both withdrawing and holding cash and are therefore moving away from using such antiquated facilities, preferring safer, more up to date methods of payment.
When cash in your wallet is either lost or stolen, it is gone forever with no opportunity for recourse. Yet, get into the same situation with your credit card or contactless payment system and most of us would be fully protected.
And as the old adage goes, when it comes to money you don’t know where it has been. One survey by the American Medical Association showed that bacteria that is considered medically ‘harmful’ existed on 13% of all the coins tested and 42% of notes, showing that ‘dirty money’ is a phrase we should actually be using more often.
6 – The Mobile Phone Strikes Again
As if mobile phones didn’t do enough already as our email networks, our text message facilities, our game centres and, just incase you haven’t realised, it can even actually make phone calls as well, our phone is also set to eradicate the need for traditional banks completely.
Simple apps from your financial providers not only remove the need for physical branches, they can even take away the need for debit and credit cards and even the good old pound coin.
The word on the street is ‘Contactless Payment‘, and it could be the end of the banking structure as we know it.
For account holders at Barclays, a simple sticker on your phone that has been linked to your account, means that can already swipe your mobile wherever you go, providing an instant facility for payment of any value.
From buying a morning paper at the local newsagent through to paying for our monthly shop, the payment process is quick, easy and requires no handling of dirty, cumbersome cash that could so easily be counterfeited or stolen. Instead, we have a smooth and simple process from a gadget that now never leaves our side.
And soon, even the sticker that is currently used will become obsolete as mobile phone manufacturers, such as Samsung, start to incorporate this type of payment facility into the basic infrastructure of their new models.
For those of you that are fans of the PayPal system, even this online giant has found ways to get on board the demand for safe and immediate contactless payment.
Today, PayPal customers can simply link their online account to their mobile phone and immediately start to pay for anything they want online or in person, just by entering a simple few details. Slide the pin down on the pre installed app to complete the final step (and avoid accidental payment), and all your goods and services can be purchased without ever having to touch any cash or go near a traditional banking mechanism.
By the end of the month you will even be able to pay other individuals thanks to the new Payments Council system which was set for full launch on 29th April 2014.
Using their specially designed app, all you will need is a mobile phone linked to your bank account and customers from Halifax, HSBC, Lloyds, TSB, Bank of Scotland, Santander and Cumberland Building Society can all start using an immediate and secure personal payment system.
Gone are the days of fishing around at the bottom of our bags / pockets for a few spare pence to buy a treat. Our money is at our fingertips, and the need to make regular trips to the bank to get our money are well and truly over.