The psychology of online banking

03 February, 2021Jay Elwes

Bank staff provide a psychological safe space that helps people manage their money, make payments and avoid fraud. So how will the move to digital banking change the way people manage their personal finances?

Mobile-bankingWithin a generation, almost everyone will do all routine banking online. And money itself is becoming increasingly detached from cash – from coins and notes.

Dave Birch is an author and analyst who specialises in the technology of payments systems.

“The research on this is pretty clear,” he says. “People do indeed spend more money on contactless cards than they would using cash. But electronic payments, mobile phones and nudging apps make it easier to track and cap your spending.” says Birch.

“In time, people will have more control over their money and financial health will improve.”

However, with more online banking comes an increased threat of online fraud. New regulation on secure customer authentication aims to protect bank customers and in particular, should make life harder for ‘push payment’ scammers.

Digital banking and vulnerable customers

However, for some users, jumping through authentication hoops is hard. Old people, for example, can struggle as can those with mental health problems.

According to a 2019 report from the Money and Mental Health Policy Institute, of those who’ve experienced a mental health problem in the UK

  • 43% have let someone else use their credit or debit card, and
  • 20% have let someone log in to their online banking.

For people who suffer from bouts of impulsive behaviour, there are advantages in having another person involved in their banking arrangements. People can assign responsibility to another individual for their financial affairs, for example by granting them the power of attorney.

However, the report found that people with mental health problems tend not to do this. They are much more likely to simply hand over their PIN number or password. That was less of a problem when they could still go to a local bank.

Could voice enabled digital assistants replace human customer services?

What if people who struggle online could just talk directly to a digital assistant? Would that replicate the human interaction of a bank?

BNP Paribas Asset Management recently started providing market commentary through Alexa, Amazon’s voice-enabled platform. The bank expects that service to become increasingly important. Could retail customers in future seek advice from Alexa, or from a ‘bot’?

“It’s not a case of one or the other,” says Karl Meekings, Lead Banking Analyst at EY.

“There will always be a need for face-to-face advice no matter how virtual a world we live in.”

That, he says, will include not only the big life decisions, like getting a mortgage, but also day-to-day concerns of the most vulnerable customers.

“Rather than thinking about specific advice bots,” says Meekings, “banks should be looking at how embedded technology is in shaping behaviour, and how this can relate to banking and financial decisions.”

Jay Elwes

Jay Elwes is commissioning editor of and an associate editor at Prospect. He writes for the Spectator and his last Radio 4 series was on perception.

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