eCash: an unmissable opportunity for neobanks to edge out the high street
It used to be clear that the differences between neobanks and high street banks were very identifiable. Neobanks were modern service providers built for the 21st century: digital-first companies with fast onboarding and superior user experiences, but no physical presence by design.
It used to be clear that the differences between neobanks and high street banks were very identifiable.
Neobanks were modern service providers built for the 21st century: digital-first companies with fast onboarding and superior user experiences, but no physical presence by design.
By contrast, most high street banks relied on personalized experience rooted in human interaction. You could always go to a branch and speak to a friendly face. The trade-off is that they had clunky digital experiences that, for 72% of consumers, fell short of expectations.
Rapid digitalisation, supercharged by the COVID-19 pandemic, is making neobanks and high street banks look increasingly alike.
In 2020, high street banks made 5 years' worth of digital progress in a matter of months, and the bulk of their customer interactions now happens online. Meanwhile, neobanks' growth has stalled — a testament to how far high street banks have come to bridging the technology gap.
But if being digital-first is no longer a unique value proposition, it's not all bad news for neobanks.
High street banks' digital transformation is failing to address the needs of those who, either by choice or necessity, require access to physical cash and face-to-face services.
And eCash — an innovative, digital-first way to plug this gap — could help neobanks reclaim their edge.
The dark side of digital
Digitalisation is often touted as a win-win for banks and customers. But while there's no denying the benefits — greater speed and convenience and lower overhead, just to name a few — the reality is that they don't apply equally to everyone.
Rural areas are disproportionately affected by bank branch closures, forcing vulnerable people to travel several miles to access basic services and withdraw cash.
But reduced access to branches and ATMs is equally problematic in urban areas. In a world where banking can only be done online and physical cash is no longer available or accepted, it may become impossible for seniors, the un(der)banked, those who are not digitally savvy, and people who are paid predominantly in cash to participate in the economy.
The risk of exclusion is sufficiently serious that regulators have intervened.
For example, the UK's Financial Conduct Authority has said that 'Although closures or conversions [of bank branches] are decisions for firms to take, it is important they implement these decisions in ways that are fair to their customers.'
The FCA is also considering issuing regulations that could empower it to block banks from closing further branches.
Similarly, in the U.S., several cities and states have passed legislation requiring businesses to accept cash. And even in Sweden, a country on the verge of going completely cashless, the government has had to write banks' obligation to keep offering cash services into law.
Customers want choice
While the biggest danger of digitalisation is that it could exclude a significant number of people from the economy, there are also two other key issues.
Firstly, while the trend towards digital is largely customer-driven, research suggests people still want the option of going to a branch or paying in cash if they so wish. If anything, customers in countries where cash-free payments are commonplace are more likely to be in favour of retaining physical cash.
Similarly, while the average customer expects banks' digital offerings to be at least as good as those offered by tech giants, they still seek out face-to-face interactions when dealing with important or complex financial decisions. And when they do so, a poor experience undermines trust and makes them more likely to switch to a competitor.
Secondly, people care about privacy and security as much as they do about convenience. And while cashless payments are increasingly secure, they leave a data trail that raises privacy and ethical questions.
Bridging the access gap with eCash
Despite its risks, digitalisation is proceeding apace. Globally, people are paying in cash less than ever before. And bank branches could become extinct in 13 years' time if they continue to disappear at the current rate.
But while digitalisation may seem unstoppable, it doesn't follow that cash and face-to-face services have to disappear completely and deprive customers of choice, their right to privacy, or their ability to participate in the economy. On the contrary, by offering eCash, neobanks could bring their benefits into the 21st century and get in front of a much wider audience as a result.
eCash allows customers to make cash-based digital payments without the need for a bank account or credit card.
But the most significant advantage of eCash is that it has the potential to become a springboard for wider services.
While neobanks are unlikely to open their own physical branches any time soon, eCash payment locations can double as virtual bank branches where customers could deposit or withdraw cash from their digital account. Neobanks could build customer loyalty by using these spots to offer value-added services like financial health and education, taking over high street banks' role as trusted advisors.
Choice and inclusion shouldn't pay the price for digitalisation
Rory Sutherland, a consumer behaviour expert and vice chairman of Ogilvy has argued that:
'The real value of technology should be in automating what can be automated and making more personal what needs to be personal.
'If you install an automatic door at a hotel, you do not fire the doorman — you use him to make a fuss of customers in other, more valuable ways. Likewise, I don’t want to talk to a human to learn my bank balance, but I would like a human to help me open a business banking account.'
In the rush towards digitalisation, high street banks are losing sight of this. Yes, being digital-first is more efficient and cost-effective, and can help deliver better service. But not if it reduces choice and excludes a chunk of the market in the process.
With eCash solution like Paysafecash or viacash, neobanks have an opportunity to fill the vacuum and create a valuable point of difference that helps them regain their edge.