Banking customers will soon be paying more for these services
Consumers may soon face higher costs for certain face-to-face banking services as banks increasingly shift to digital platforms and reduce their physical branches.
While this brings convenience and lower fees in some areas, services that involve direct human interaction may become premium offerings, Bronwyn Williams, a futurist, economist, and trends researcher, said during an interview with SABC.
“Banks are reducing their physical footprint, which is very expensive to maintain, particularly in our market where, of course, our economy hasn’t exactly been growing at a rapid rate over the last few years,” Williams explained.
“We’ve also seen an increase in bank partnerships, particularly with retailers.”
Banks and retailers are finding ways to share physical spaces. For example, some banks have kiosks or ATMs in grocery stores.
Retailers boost their profits through these partnerships, while banks save costs on maintaining standalone branches.
By reducing their physical presence, banks can reduce their operating costs, increase their margins, and appeal to investors.
Banks are also able to appeal to younger consumers, who prefer digital banking and the convenience it offers.
“It’s important to note that in the South African context, we have more under 35-year-olds than over 35-year-olds.”
“We have a youth bulge, and that means that forward-looking, forward-thinking banks and businesses are going to be adapting their strategies and their service models to service the youth rather than service the elder side of the market.”
However, that does not mean that the youth are the only people who get enjoyment from banks becoming more digital.
Other consumers, including elderly consumers, who have accessibility and mobility issues and find it difficult to go to a physical bank, also benefit from this shift.
However, the widespread use of digital platforms raises concerns about accessibility, particularly in South Africa, where many people have limited technological and financial resources.
Williams addressed these concerns, highlighting that digital banking has the potential to serve more people at a lower cost than maintaining physical branches.
“Firstly, I think it’s important to point out that digital access does allow more people to get serviced at a lower cost than having a physical service would cost to deliver to the market.”
“The other side of the point is, of course, you can’t access digital financial services unless you have access to something like a smartphone.”
While some may worry about access to digital services, South Africa has more smartphones than people. According to GSMA Intelligence, there were 108.6 million mobile connections in the country at the start of 2022, equivalent to 179.8% of the population.
As of 2022, 92.1% of South African households owned a smartphone in working condition.
“So in theory, if we are able to overcome hurdles like expensive access to data and Wi-Fi availability digitisation of banking services can enhance digital inclusion,” she said.
However, Williams pointed out that digital financial inclusion is not just about access to banking services but also about having the financial means to use them effectively.
“Digital inclusion is about a lot more than having access to a bank account and a credit card, it is, of course, also having access to the economy that that credit card and that bank account operate within, and I think there we’ve got a lot more work to do too.”
The “human touch”
An important part of this digital switch is the increasing rates at which advanced artificial intelligence (AI) systems, which can handle many tasks that used to require human assistance, are being used.
However, this shift means speaking to a human is now reserved for more complex or premium services.
“Having access to an actual human being in-branch or even on the other side of the phone is becoming more and more of a luxury, especially as we see the rise of things like very, very smart artificial intelligence,” Williams explained.
With AI-driven services becoming more widespread and cost-effective, customers might have to pay more for the privilege of speaking to a real person.
“In other words, services like financial advisors or like private bankers or even just talking to an actual human banker who can override the chatbot normally is going to cost us more and more.”
“So those services will become premium services rather than a base-case service that previous generations would have expected from their banks.”
“This actually unlocks new revenue streams for banks as well as reducing their costs whether that this these sort of benefits are going to be passed on to consumers is, of course, up for debate.”
However, she said that given how competitive South Africa’s banking sector is and how many new entrants have entered the market in recent years – particularly in the digital space – automation could lead to lower costs for consumers.
“I think that competitive pressure might actually translate into lower fees, at least if you are prepared to give up your human touch.”
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