Belinda Beresford
Assuming the near-mythical millennium bug doesn’t wipe out your bank account or erase all traces of you in your pension fund, handling money in the year 2000 will have moved on more than a little from the start of this century.
Cheques, notes and even coins are going the way of the gold guinea. The financial world is moving towards a cashless society, where interaction with human beings is unusual.
The concept has its attractions. No more queuing to ask for a statement, arrange an electronic payment, buy fopreign exchange or order a new chequebook.
Rather you can hop on to the Internet to see how healthy your account is, check your transaction history and even talk to your bank manager about a loan.
Financial institutions are fervently in favour of electronic banking. It is cost effective, cutting the risks and expenses involved in cash and cheques. It also reduces the need for expensive brick-and- mortar branches and staff to interact with customers.
In this technologically fuelled world plastic cards will become the keys to financial services. Electronic kiosks will allow access to the Net, and therefore financial services, to anyone walking down a street or even filling up at a petrol station. Mind you, despite what financial institutions say, you’ll probably have to queue to use them.
South African banks, as they frequently tell us, are among the forerunners in electronic banking. You can log on to your bank’s website and operate your account without having to wait for people to come back from lunch or the trainee to remember how to process a transaction.
Most other financial services institutions also have websites. You can buy insurance, life assurance, claim on your medical aid and manage your investment portfolio on the World Wide Web.
But some people find these concepts frightening, and prefer human interaction. Banks are ensuring they can enjoy this preference – at a price. Increasingly bank charges are being altered and increased to manipulate consumers to take the decisions banks want them to take.
Do you use a savings account to access your money frequently? The mounting cost of each withdrawal and the probable arrival of a letter from the bank suggesting you change products is likely to push you into switching to a current account.
Increasingly bank charges are being altered to manipulate consumers to take the decisions banks want them to take. Indeed, some banks are using this method to push customers into switching banks. The Nedcor group, for example, has the People’s Bank designed for lower-income customers, while Nedbank is aimed at the wealthier sector of society.
Access to financial services in the future is likely to polarise. After all, only a small percentage of South Africans have access to the Internet, and many don’t even have a phone.
Wealthy, or “high net worth individuals”, to use the jargon, are being wooed by an increasing number of “private banks”. They boast of premium advice and service – they’ll even bring your chequebook or cash to your office or home. Of course, it comes at a premium price.
At the other end are products, such as Standard Bank’s E-plan, aimed at lower- income groups where only basic services are provided, again mainly electronically based to reduce costs.
A huge proportion of the population is referred to by some in financial services as the “great unbanked” – people too poor or too financially unsophisticated to enter the banking system. This means they operate solely in cash, which increases the risk of theft. Paying bills becomes more time- consuming and expensive. Imagine the the risk and time involved in having to queue every month to pay your rates and telephone bill in cash.
Reaching out to these people, in a cost- effective and profitable way, is one of the challenges facing financial institutions – and the government – in the new millennium.
One method is to use alternative distribution channels, such as membership of trade unions, stokvels or churches to sell products. For example, Kopano ke Matla, the investment arm of the Congress of South African Trade Unions, has bought into financial services institutions with the aim of attracting the congress’s members as customers.
This is one area were smart cards can make a difference. Since they carry all the relevant information, smart cards are not dependent on telephone lines to check transactions or transmit information, making them ideal for use in isolated rural areas.
For businesses smart cards and electronic banking have another advantage: they provide information on the spending habits of customers. This information can be used in tailor marketing. Such data mining is crucial for companies in an increasingly competitive world, and allows for strategic partnerships and link-ups between different kinds of businesses.
The pressures of globalisation and competition are steadily eroding the divisions between different kinds of financial products, and the next century is likely to see more packaged products. For example, Prestasi insurance brokers offer a product linked to a unit trust.
Lest we forget, the future will also bring more potential hazards. With greater customer choice comes more responsibility and people will need a deeper understanding of their financial needs and the different products on offer.
Greater ability to control your financial affairs demands being alert about choices and dangers. Education will be particularly important for those newly pulled into the formal financial world. They may not understand credit risks or the difference between a housing loan and paying rent.
Electronic banking also has its drawbacks. You are susceptible on two fronts: you are hostage to the vagaries of the Net and quality of services provided by your financial institution. Trying to do my electronic banking is often worse than trying to make my way through Sandton at rush hour.
The rise of electronic banking also raises a question: why are customers charged for transactions such as transferring funds between accounts when we are the ones doing the work?