Security, branches and new technology – the top FS developments of 2014

2014 has been a significant year for the retail banking sector, with many pivotal events and advances.

From the Heartbleed security scare to the introduction of payments using only a mobile phone number, these developments have undoubtedly transformed the financial services ecosystem.

So what do some of the most significant trends mean for digital banking customers? 

Heartbleed – a security wakeup call

In March this year, the malicious Heartbleed bug affected thousands of websites, including digital financial services platforms holding extremely sensitive information. Renowned security expert Bruce Schenier described the attack as “catastrophic”. This was a strong reminder for financial services providers of the ongoing need to help their customers safeguard their finances.

While increased security is vital in this era of online hacks and breaches, it can come at the price of customers’ user experience.

However, technology is becoming increasingly sophisticated and it has been an exciting year for authentication developments. Earlier this year, Barclays announced its move to voice recognition technology, allowing customers to log into telephone banking using the power of their voice alone.

Our research shows over a quarter (27%) of consumers would be more likely to use mobile banking apps if they incorporated voice verification security. This comes as no surprise, as it eliminates the need to remember long passwords, while minimising the risk of log in details being stolen.

The birth of mobile payments – Paym

In April, The Payments Council made mobile payments a reality with the launch of Paym. Consumers are now able to pay friends and family from their mobile phones, by simply using the recipient’s mobile phone number, without the need to enter a sort code or account number.

The service has proved popular with retail banking customers, with £15 million transferred since its launch. It’s clear that consumers continue to embrace any technology that makes managing their finances easier. By providing services such as Paym and offering integrated solutions which fit into their lifestyles, financial services providers now have another weapon in their arsenal to retain customers.

However, this is not just for the benefit of personal current account holders. Last month, HSBC announced it was rolling Paym out to its business customers. According to the retail bank, this enables a variety of firms to initiate near real-time transactions, cutting down on admin costs and time.

Branch closures in the digital era

Customers’ relationships with their banks have continued to change, and the pace is accelerating. This has been highlighted with the increase in branch closures this year, with several providers such as Lloyds Banking Group announcing plans to close branches.

Providers have had to evolve and adapt to meet customer needs, as more people than ever choose to manage their money digitally.

It therefore comes as no surprise that a new wave of challenger banks, known as digital-only banks are appearing on the horizon. These entirely branch-free banks focus purely on digital services and are set to launch in the UK as early next year.

For example, former COO of Allied Irish Bank has announced she will launch digital-only bank Starling in the UK next year. She explained this new bank, which will be more “like a Facebook or a Google, than a traditional high street bank”, will cater to “empowered, tech-savvy consumers who are demanding intelligent banking”. There is no doubt that there are increasing and profitable niches of customers who would be comfortable in a digital only banking environment.   

However, this shift doesn’t spell the end for incumbent banks branch services. In fact, various studies have shown that branches still remain an important part of the banking relationship for many customers. Rather, it is an indication of how branch banking needs to evolve to merge with the digital experience, whilst also servicing the customers dependent on branch services for face-to-face interactions. Digital technology can complement and enhance the high street banking experience, and many UK banks have already experimented with bringing digital services into branches.

Looking ahead

These are just a few of the important changes for the financial industry over the past year. They demonstrate huge progress in terms of improving the digital banking experience. I see that there is vast scope for financial services providers and their partners to capitalise on these and other trends in 2015.