It was only after the ink had dried on the last loan application form from the groaning stack that this realisation hit: such stubborn compliance with the Old Economy and its outdated ways surely spells the start of the end of banking as we know it.
A question. How is it that in this era of Big Data (and where Google, Facebook and Amazon know more about us and our proclivities than our moms) we are still required to fill up a sheaf of forms as heavy as a listing prospectus when we seek financial services?
As unthinkable (and unpalatable) as this might be to the titans of industry who hold on to their bank stocks like so many treasured family heirlooms, the ground under which their edifices are situated are moving, and fast.
Gallup, in its 2016 Malaysia Retail Banking Customer Engagement Report, said that six out of every 10 millennial banking customers are indifferent towards their primary banks — which means that once a particular financial need is satisfied, the possibility of a net return rate on the basis of the bank’s good name is precisely 0%.
Longer term, one can see the difficulties the banks — especially the universal ones — will have with a millennial population that will soon overtake Gen X and Baby Boomers as primary consumers of financial services.
First up, the issue of trust. Are the young fed up with bankers and their crimes?
Cue the various fines paid and apologies made by John Stumpf of Wells Fargo, Jamie Dimon of JPMorgan and Lloyd Blankfein of Goldman Sachs, and the answer is clear. Closer to home, there are the recent fines imposed on AmBank and CIMB.
Are the young increasingly aware that the financial industry has not been treating them fairly in terms of the fees they have been paying?
Cue the investment management (read: unit trust) industry and the fees they charge (cumulatively, as much as 5% in the first year of purchase, not including exit charges and various watermarks), and once again, the more clued-in among the young will realise the folly of their actions, especially when considered against their returns, net of fees.
Contrary to the advertisements, the only ones retiring rich, young and liquid are the unit trust agents.
Can one therefore blame the young for disavowing a financial system that has only gotten rich, fat and complacent off the backs of the people they were created to serve?
A system which outwardly says is keen to “grow together” and repeatedly asks for trust, but in actual fact wants the young and unencumbered to enter a debt cycle for a lifetime of fees and commission.
Trust, that most ephemeral of feelings, is — bar none — the most important in humankind’s vast retinue of emotions. More than love, hate, fear or anger, trust is the most difficult emotion to procure, but the easiest to discard.
And right now, trust in the financial system is as its lowest.
After the years of scandals, lies and debacles, no well-read, well-travelled millennial will have the same extent of trust in a bank.
Certainly, not the kind of trust our parents had in the banks and the people who worked in them during the Seventies and perhaps part of the Eighties.
And even if all these inequities remain a mystery to the average Gen Y or Gen Z, there are always the issues of convenience and engagement — or lack thereof.
How much, really, have banks done to get to know the young? In fact, how much have banks done to get to know their existing customers, old or new, old and older?
What have banks done to really, really “grow with us” and “earn our trust”? Other than to make us fill up interminable forms (by hand) while imposing charges at every turn, oftentimes without our ken?
Laser-quick to raise borrowing rates but tortoise-slow to drop them, banks have hardly been paragons of good intention, and certainly not of performing deeds that encourage trust.
Cue, too, the notices of demand that arrive like clockwork when payments are missed and, once more, one gets a clear picture of the banking system’s true intentions: to wit, pay up or go to jail, be shamed and adjudged a bankrupt.
But like some white knight coming to save the Great Unwashed, technology’s disruptive ways are here, and they will most certainly upheave financial services as irrevocably as they did bookstores, music, public transport, automotives and, yes, pornography.
The rise of alternative currencies like PayPal and bitcoin, peer-to-peer lending and equity crowdsourcing are merely early salvos, exploratory pokes in the eye.
The more extensive and non-vertical second waves are already washing onto our shores: payment systems, historically the domain of the banking/credit card complex, are being upended by Google with its Wallet service, and AliPay and Apple Pay are fast growing. Meanwhile Amazon, Facebook and AliBaba are also executing their own meaningful and considered strategies in financial services.
And those are just the big boys.
What’s to stop, say, IMoney saying to BlackRock, “Hey guys, let’s collaborate on a low-cost ETF for an Asean market. We’ll offer our databases in exchange for your expertise and let’s split commissions. We won’t make fat margins like the banks, but, hey, the volumes will make it worthwhile.”
The banking system, like the aforementioned disrupted sectors formerly populated by the likes of Barnes & Noble, Ford and Penthouse, will be an entirely different animal in five to ten years, much like the auto sector.
Digital technologies are so good and so pervasive that even Bank Negara Malaysia has intervened, but in the only way it knows best: by corralling resources and business into a space it ironically terms as “a sandbox”, playful connotations aside.
But business, like life, happens. With or without the regulatory confines imposed by one central bank in a pokey little Southeast Asian country, the financial services industry is next on the agenda.
The change, when (and not if) it happens, will be fast and savage.
Best to strap on the seat belts, then.
Khoo Hsu Chuang is contributing editor at The Edge Malaysia
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