The digitalisation of finance

When Ulster Bank and KBC began preparing to exit the Irish market last year, Age Action called out the need for a transparent process to allow customers the opportunity to switch accounts in a timely manner, with appropriate levels of support.

The advocacy agency had more interest in banking accessibility than most, given that it supports a cohort of the population already grappling with the move from traditional branch banking to online banking and mobile apps.

The closure of bank branches would leave some older people with very limited access to banks, due to lack of access to transport, it pointed out. “For those who are digitally excluded the situation is particularly difficult,” it said.

It estimated that more than half, 56 per cent, of over 75-year-olds don’t use the internet at all.

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“A lack of access to financial services, including cash and credit, puts people at risk of financial abuse, fraud and ultimately undermines people’s independence and autonomy,” warned its policy brief, Digital Inclusion and an Ageing Population: Ensuring Equality and Rights.

It’s a concern of which Daniel Peng, assistant professor at the School of Business, University College Dublin, has direct experience. Early in his academic career, the Hong Kong native worked as a volunteer, helping older people get to grips with digital banking.

Even assuming the older person had a smartphone, they could “be slow to learn and forget what you tell them”, he recalls.

Digitalisation is, he feels, “unfair to older people”. Unfortunately, it is also inexorable.

“The reason banking is becoming increasingly digitised is because banks want to save money. They no longer want to spend money on rent for branches, or employees. It’s about increasing profitability. At the same time, fintechs are expanding their market share, and banks are fighting back, in order to have more exposure to younger people and to high-net-worth individuals,” he explains.

They could do more for older people, he points out. After all, high net-worth individuals are routinely provided private banking services and relationship managers, he points out. These actively call, asking such customers if they need anything.

Most older customers’ experience is very different. Even when they get to a branch, it has changed radically in recent years, with the level of support available reduced. “Previously you might have had eight to 10 tellers in a typical branch, now there might be just one or two windows open,” says Peng.

Instead, customers are faced with an array of ATMs. Those with queries are often directed to phone booths, to call online banking services.

There are upsides to digitisation, he points out. In large countries where people have to travel great distances from rural areas to get to a bank branch, the ability to bank online is a boon.

Unfortunately, however, “it is also making some elderly people feel not so comfortable,” he says. Too many are left to figure out banking apps by themselves or rely on family members — which isn’t ideal.

Yet with a little imagination, there may be some innovative alternatives. For example, In China, Peng recently visited a local authority building which had rented out space to local banks. A teller sat at a window, ready to help out people with their banking queries and transactions. “It’s basically online banking, but someone is doing that for you,” he explains.

Credit unions could also play a greater role. These have taken on traditional bank functions — and have great online options — but are also fully knit into local communities, and so much more likely to maintain a high street presence.

There may be a role for the charitable sector to assist older people with online banking. “On the other hand, banking relationships are sensitive, and safety and security concerns could potentially arise in such a situation,” he says.

Greater emphasis on telephone banking could help.

But arguably the best hope is that the move towards ESG (environmental, social and governance) reporting will encourage sociably responsible initiatives such as increased support for older bank customers. Banks might even appoint a person to travel the old person’s home, to help with their banking. “It would be of very little cost to banks but would improve their reputation,” says Peng.