Consumer attitudes to information technology in banking

International

Journal of Information

Management

(1991),

1 I (220-237)

Consumer Attitudes to Information Technology in Banking L.W. BEBBINGTON, E. DAVENPORT

B. CRONIN

AND

This study reports the results of a survey into consumer attitudes to the use of information technology in retail banking, conducted jointly by the Bank of Scotland and the Department of Information Science, Strathclyde University. The Bank of Scotland’s involvement in the IEE’s Faraday Lectures was used as the vehicle for the study. Results suggest that while technology and other factors have fundamentally altered the market for financial services, consumer understanding of the ways in which technology can transform the means by which services can be offered has not kept pace with the rate of technological change. Traditional patterns of payment will continue to dominate, unless consumers can be convinced that new systems offer substantial advantages over more familiar forms of payment.

Laurence Davenport Information

Behbington and Elizabeth are with the Department of Science, University of StrathClyde, Glasgow Gl IXH, UK. Blaise Cronin is with the School of Library & In-

formation Bloomington,

Science, Indiana.

Indiana 47405,

University, USA.

Introduction Almost everything about a retail bank will change in the next decade. The business it does will no longer be banking (accepting deposits and making loans) but financial services (selling savings, products, insurance and credit). This will not be done passively, from solid, often imperial buildings. Instead of waiting for customers to come to them, banks, like other retailers, will have to entice them inside.’

The financial services market has undergone a profound transformation in the last decade. New forces and players have entered the arena, posing new problems and challenges for traditional retail banks. Significant developments have been the deregulation of the financial services sector in the United Kingdom, the impact of new technology on banking, and changes in the market environment. The effects of these changes have been increased competition for the banks, and increased customer sophistication and choice: Before the mid-1%0s

bankers had little understanding or regard for marketing. Banks were supplying needed services. Bankers did not have to make a case for checking accounts, savings loans or safe-deposit boxes. The bank building was created in the image of a Greek temple, calculated to impress the public with the bank’s importance and solidity.’

‘ANONYMOUS

Playing the percen25 March, p.40 -);OTLEK, P. (1988). Murkeiing munagemew: Analysis, planning implementation and control, 6th edn. Englewood Cliffs, tages.

(1989). The Economist,

NJ: Prentice-Hall.

220

Much has changed since the 1950s. Attitudes to customers have undergone a transformation: both the interior and exterior appearance of banks have changed; back-of-house operations and front-of-house services have been transformed by the introduction of new technologies; above all, new products and services have been made available through a process of continuous innovation and tracking of evolving customer needs. In the United States, Citibank offers more than 350 products and services to their customers.

0268-4012/91/03

0220-l

8 0

1991 Butterworth-Heinemann

Ltd

LW.

‘DE MOUBRAY, ci. (1986). Can ‘marketing’ be made to work?’ The Banker, May, pp. 32-36. MANNING, c‘.N. (1990). The end of lock-step marketing. T&c ~cKi~sey Qunrterly, Winter, pp. 9&106.

BEBBINGT~N

et

al.

The major problem for the retail banks has been the ease with which innovations in financial services can be copied by competitors. The last 20 years have witnessed banks struggling to develop and sustain a strategic advantage over rivals, which has resulted in a switch from advertising and sales promotions to product or service innovation and in greater emphasis on market positioning strategies. Most recently attention has been focused on the way in which services can be provided to clients. Despite considerable investment in both technology and marketing programmes, there is little evidence that such initiatives have brought significant gains in productivity or profitability:’ levels of customer satisfaction and attitudes to banking service have not been greatly improved. The immediate prospects for the traditional retail bank look even more uncertain with increased competition in the financial services market following deregulation. The liberalization of the Stock Market, the Big Bang, and both the 1986 Banking Act and Building Societies Act have intensified c(?mpetition in the financial services domain and broadened the base of the market. The traditional stranglehold of the banks on the provision of retail financial services has been broken: not only do building societies offer competitive alternative services to the banks, but other players have thrown their hats into a potentially lucrative ring, with many high street retailers offering extensive credit facilities. Marks and Spencer, for example, have implemented a wide-ranging programme of customer services including facilities for credit, loans and pension plans. Smart card technology is increasingly being applied to financial services, but footdragging by the banks and the potential applications of the n~ulti-application smart card threaten the obvious natural role of the retail bank in this sphere. Nissan Motor Cars and Nippon Telegraph and Telephone have formed a company which will provide smart card-based service and petrol station credit to two million Nissan car purchasers in 1990. Additionally the smart credit card will be offered to Nissan customers in all EEC countries by 1992. Others are rushing in where the banks have been reluctant to tread: it is a trend which will continue in the 1990s. Yet the traffic has not ail been one-way, and the banks have begun to offer services previously the province of building societies and other institutions, such as insurance, mortgages and travellers’ services. Technological advances have not only been applied to many of the routine traIlsaction processing activities in the traditional retail bank, but also to front-end service delivery in the form of automated teller machines (ATMs). One of the challenges for banks, however, has been determining an effective strategy which will push consumers towards technologically-based financial services, and away from paper-based transactions: it can cost a bank 68~ to clear a cheque. Services based on online credit transactions, electronic funds transfer at point-of-sale (EFTPOS) and direct debiting, are faster and cheaper, but the uptake has been slow. The image of many banks is now decidedly ‘high-tech’. Technology, in the form of management information systems (MIS). provides management information, which once collated, systematized and interpreted facilitates the identification of local niche markets or target segments. Technology has also promoted structural reorganization freeing some staff for deployment to front-of-house cus-

221

Consumer

attitudes

to IT in banking

tomer services.4 The pace Scottish banks, for example, tion technology? 0 0 0

The Royal Bank of Scotland is investing substantially in new computerized systems. The Bank of Scotland is also investing heavily in new technology, rebuilding its entire system. The Clydesdale Bank has announced its intention to build a new computer installation costing fll.5 million and is spending f.50 million on a branch automation programme to provide the latest technology in branches.”

And on a national 0 0

of technological change has caused most to review their strategic policy for informa-

level, for example:

In 1988 the Midland Bank appointed its first Director with boardlevel responsibility for information technology. The National Westminster Bank is moving aggressively in the direction of unmanned banking facilities by the year 2000 as part of a five-year X1.2 billion technology investment programme.

While the banks seek opportunities to cut costs in other areas, the demand for processing power has shown no signs of abating. Almost 1 per cent of turnover in the financial services industry is spent on IT and the figure is growing by 14-25 per cent each year. By 1994 it is estimated that banks will be spending $14 billion on computers worldwide. In 1988, Standard Chartered Bank’s spending on IT accounted for 11 per cent of total operating costs. In effect the banks are caught in a technology trap: the installation of computerized systems inevitably involves on-going replacement and the incorporation of new technological developments. Balanced against the costs of not investing in IT are the potential losses incurred by failure to keep up with the competition. Crucial strategic questions for retail banks revolve around a number of difficult issues:

l l l l

‘SMITH,

S.

AND

WIELD,

D.

(1987).

New

technology and bank work: banking on IT as an ‘organizational technology’. In: Informurion technology: Sociul issues (R. Finnegan, G. Salaman and K. Thompson, cds.) London: Hodder and Stoughton. 5~~~;~;o~, M. (1988). Scottish banks continue their love affair with IT. The ScottOh Banker, August, pp. X-9. %I~ZFEKALI~, N. (1990). Clydebank site for Clydesdale computers. The Scoismun, 5 September, p. 1.5. ‘STEINER,

T.W.

AN”

TkIXEIKA,

Ll. (1988).

Technology is more than just a strategy. The McKinsey Quarterly, Winter, pp. 3% 51.

222

Should the smaller regional or specialist banks climb aboard the IT roller-coaster and try to compete with the market leaders? Is niche-positioning more feasible and realistic for smaller banks? What guarantee is there of an adequate pay-back on IT investment? How will the consumer react to new technology-based service delivery mechanisms, and is the market mature enough for fullyautomated banking?

Technology has certainly made its presence felt, and IT costs represent the fastest growing expenditure element in the retail banking sector. Banks have invested heavily in IT over the last 20 years, yet doubts have been raised as to whether or not this investment in IT systems has produced adequate returns. In retail banking in the United States, for instance, ‘each bank has rushed to install its own ATMs, but banks collectively have no way to demonstrate a penny of profit from these installations.” The levelling of the field and the application of new technology has effectively changed the rules of the financial services game. Strategy has become more market-focused than technology-driven, and banks have had to work harder to sell their services. Technology is now merely one variable in the equation of competitive success and survival: it is not the total solution. Banks have had to take a more proactive role in

L-W. BEBSPJGT~N

et al.

diagnosing and deveIoping possible market needs, and targeting specific segments with niche products, or special ‘bundled-up’ banking packages. Increasing custrrmer sophistication has been accompanied by an upswing in detailed consumerist assessment of the financial services on offer. The consumer has much more information at his disposal, with a corresponding increase in choice concerning with whom, and in what, money should be invested. Some banks have responded with a marketfocused approach, finally addressing some of the issues which have frustrated consumers: the Trustee Savings Bank, for example, has introduced late opening hours one day per week in response to public dissatisfaction with restricted banking hours. Others continue to rely on a traditi~~nal acceptance of the role of the retail bank. Old habits die hard: use of the building society for savings and mortgages persists, while it remains difficult, but not impossible, for building societies to break the stranglehold of banks over current accounts and credit facilities. In the face of competition on various flanks, and heightened levels of consumer expectation, this reliance on residual goodwill may prove to be short-sighted. Gfients are increasingly shopping around for the best deals. Customer loyalty, or inertia, can no longer be taken for granted. In a recent American study, Finkelman and Goland found that 36 per cent of Americans changed banks because of poor service.8 Today, the consumer can select financial services from a variety of sources. Slowly but surely banks have come to realize that not only must they now fight to attract clients, but they have to fight just as

hard to retain them. In attempting to create a market-focused orientation banks are using innovative technologies to deliver financial services. The Bank of Scotland, for example, was the first UK bank to introduce a home and office banking service in 1985. Most financial services see TT as offering crucial competitive Ieverage against competitors, provided the exploitation of IT is directly linked to customer orientation. The customer lies at the heart of Royal Life Insurance’s IT strategy: Client service is seen as the key to increasing ow market share.’

a philosophy is predicated on IT, since it is the computing infrastructure which supports market activity. At present there is a ‘cut-throat war in the UK credit card industry as the card issuers - the clearing banks - fight ruthlessly for profits and market share’.“’ The fight for market share is very much the name of the game in the current financial services market. The competition is heavily based on IT with, for example, significant reliance on online authorization systems where flexibility and rapid response are essential. Survival requires an acceptance of the reality that technology and increased competition for market share have together fundamentally altered the character of retail banking. A strategy which harnesses technology directly to the provision of customer services must take account of public attitudes to technology, to the types of services which consumers value and to consumers’ expectations of banking staff and the quality of personal service. Such

%INKELMANN,

1). P.

AND

GOLANI),

A.R.

(1990). How not to satisfy your customers. The Mck’iruey Quurterly, Winter, pp. I-

12. J. (1990). it‘s a new life for insurance. Cunzpurer lVedif_~, 25 October, p. 26. %OWI.FK, J. (19%). Bar&3ys plays its card. Computw Weekly, 25 October. p, 30. “VOWLER,

~~ck~r~und to the study A Bmzkirzg Technology Research survey was conducted

jointly by the

223

Consumer

attitudes

to IT in banking

Bank of Scotland and the Department of Information Science at the University of Strathclyde to investigate consumer attitudes to, and perceptions of, the use of enabling technologies in banking. The vehicle for the study was the 1989-90 Institution of Electrical Engineers’ (IEE) Faraday Lecture. The lecture series was founded in 1924 to interest the general public in electricity, to promote the Institution itself and to honour the memory of Michael Faraday. The Bank of Scotland had been invited by the Institution to give the 1989-90 lectures, the title of which was ‘Electric currency’. The intention was not merely to address developments in banking technology, but to demonstrate the profound impact that these advances exert on society in general.

Methodology Data for the study were collected by means of a questionnaire distributed at the 20 towns and cities in which the Faraday Lecture was given. More than 120 000 people attended the lectures and a total of 6837 usable responses were returned by post. Sixty-six per cent of respondents were male, and 34 per cent female. The age distribution of the sample is given in Figure 1. Just over 70 per cent of the respondents held a current account with cheque book, 75 per cent of males and 66 per cent of females. Ninety-eight per cent of those aged 41 and above possessed a current account and cheque book; 40 per cent of those aged 16-20 did not. Types of accounts owned by respondents are shown in Figure 2. Significant differences emerged when correlating this type of account with broad academic subject backgrounds (see Figure 3), which may reflect the gender composition of these disciplines.

E

15ond under

u

21-25

gg

26-40

0

41-55

m

56-65

N

Over 65

16-20

Figure 1. Age dish .ibution

224

L.W.

BEBBINGTON ef

a/.

83

26 II 6

5 I

I Cheque AC

Deposit

Home mortgoge

Figure 2. Types of account

with

Personal loon

I

1 Budget

bank or building

I

1 Other

society

Eighty per cent held a deposit account, or other types of savings or investment accounts but disciplinary background was not significant. Possession of a current account and cheque book was strongly correlated with social class (77.5 per cent of higher managerial and 35 per cent of semi-skilled respondents). This was further reflected among those holding home mortgage accounts with their banks; 35 per cent of the higher managerial respondents compared with only 3 per cent of semi-skilled workers.

Past usage of services Respondents were questioned as to their use of services within the last week, month, three months, six months and year (see Figure 4). Usage levels for cash dispenser cards, cheque accounts and credit cards were high. Over 60 per cent had used their cash dispenser card within the last week; 80 per cent within the last month. Overall, credit cards were held by 62.4 per cent of respondents: 63 per

80-

1

76 71

57

60-

53

40-

20-

-

oScience

Figure 3. Users of cheque

Business account

I Social sciences

by subject

Other

background

225

Consumer

attitudes to IT in banking

100 c 93.8

80 62.4 60

40

34.1 25. I

20

0 I Cash card

3edit card

Figure 4. Possession

n Store card

d Cheque card

HOBS phone

HOES screen

Euro. card

of types of service

cent of males, compared with only 42 per cent of females. As with current accounts and cheque books, there is a suggestion of a generational phenomenon in the uptake and use of these facilities. The strong propensity among younger people to adopt these services at about age 21 suggests that individual banks do not need to create base level consumer awareness of these services, but need to promote their own products over those of competitors. On the other hand, if a bank wishes to influence the consumer’s choice of service and promote electronic funds transfer services, then this is perhaps the age group with which to begin aggressive marketing. Figures 5 and 6 show how the possession of current accounts, with cheque book and credit cards, is positively correlated with age. Only 15 per cent of the 16-20 age group, for example, possess credit cards, but this figure leaps to 76 per cent in the 21-25 age group, peaking at almost 90 per cent among 41-55 year olds. Forty per cent of those aged 1620 had a current account with cheque book, while in the 56-t age band the average was 98 per cent. For both of these services 20/21 appears to be the ‘age of ownership threshold’. Possession of current accounts and credit cards also positively correlated with social class: almost 68 per cent of the higher managerial class hold credit cards, compared with just under 20 per cent in the semi- or unskilled category. The use of insurance services revealed similar characteristics to the pattern established for credit cards and current accounts, with 84 per cent of those under the age of 20 never having made use of such services. By age 25 this had dropped to 40 per cent. Here there is a strong correlation with occupational classification: 56.5% per cent of managerial workers had used them compared with only 19 per cent in the semi- or unskilled categories. In particular, life assurance provision seems strongly linked to occupational class, with four-and-a-half times as many in the higher managerial category taking out policies as those in the semi- and unskilled categories. Almost twice as many males as females had availed themselves of these services. More than two-thirds of respondents did not have store or charge cards, although a marginally higher number of males than females used

226

L.W. BEBBINGTON eta/.

97. 4

98.2

97.7

98.9

94.3

80-

60-

39.4 40

20-

0

16-20

Figure

21-25

5. Distribution

26- 40

of current

account

56-65

her

65

by age

such. Ownership was highest across the 26-65 age bands, but a significant percentage (16.2 per cent) of the under 20s also had cards. In light of recent concern over teenage debt and the long-standing concern over the ease with which credit can be readily obtained this is not an insignificant finding if the data can be believed. Credit card holders were much more likely to have used their cards more frequently than store or charge card holders. Access to home and office banking facilities (HOBS), whether telephone or screen-based, ran at about 10 per cent for each age group. At the extremes, 16 per cent of under 15s (presumably a manifestation 1

I

IOO87.4

89.6

87.4 82.2

76. I

80-

60-

40-

20-

15.1

0 16 -20 Figure

2l-

6. Possession

25

26-40

41-55

56-65

Over 65

of credit cards by age

227

Consumer

attitudes

to IT in banking 3( >

r i5 2 -

21.

I

2( I-

19.1 -

13.2

I( >7.7

CI_

-

A

B

Figure 7. Use of HOBS occupational classification

Cl

(telephone)

c2

service

D

within

E the

last month

by

of the TAF syndrome - technologically advanced family) and 8.7 per cent of ‘retireds’ had HOBS facilities. Interestingly, 10 per cent of those classified as unemployed claimed to be HOBS users. Significantly, three times as many males than females were likely to have used the service within the last week, month or three months: usage was highest among the 21-40 age bands. A quarter of males had used the service within the last week, compared with 8 per cent of females. HOBS usage (telephone or screen) is shown in Figures 7 and 8. Those in the higher or intermediate managerial classifications were more likely to have used the telephone-based service, but 69.0 per cent and 74.4 per cent in each group never used the system. Similar levels of non-use were recorded for the screen-based facility. Such figures must be disconcerting for the banks, and it is revealing that a number of banks who offer this technology have declined to reveal the size of their subscriber base. Home banking systems were designed with the intention of attracting the accounts of well-paid professionals who are generally too busy to queue in banks and who incur substantial interest and bank charges on their accounts. Perhaps even these segments are more price sensitive than the banks have imagined since the home banking revolution has

228

L.W.

BEEBINGTON et al.

EL5

L c2

Figure

8. Use

of HOBS (screen) within last month by occupational

classification failed to penetrate substantially that segment of the population at which the service was originally targeted.

Future use

uf services

Respondents were questioned as to whether or not they were likely to use certain key services within the next ten years (Table 1). This was regarded as a particularly important question. The respondents had, after all, attended a lecture on ‘Electric currency’ and their attitudes to. and potential use of, new technologies in banking over the next decade constituted a significant area of interest, Strikingly evident is a lack of support or appreciation for home banking or EFTPOS services. These are precisely the type of services which banks are promoting heavily. Those currently in employment and those in managerial occupations see themselves using credit cards either ‘a lot’ or ‘a little’ in the next ten years, white those in C2, D and E classifications could not see the reIevance of this type of service. The use of EPTPOS was seen by the 21-N age bands as being potentially 229

Consumer

attitudes to IT in banking

Table

1. Usage of services

Service Payments by cash Payments by cheque Cash dispensers Credit cards Store/charge cards EFTPOS Home banking Tele shopping

over

next

ten years

A lot or a little (%I

Not at all (%I

93.4 94.5 90.7 77.9 40.6 50.8 30.3 17.9

5.8 2.4 6.2 12.7 43.0 18.6 33.6 46.9

significant, while a quarter of the 56-6.5 age group and 43 per cent of the over 65s did not expect to use it at all. The figure of 50.8 per cent using EFTPOS ‘a lot or a little over the next ten years’ is superficially reassuring for those promoting cashless payments systems of this type. Less reassuring is the fact that under a third (29 per cent) actually saw themselves using EFTPOS systems ‘a lot’. Just over 30 per cent (and it must be re-emphasized that these respondents had just attended a presentation on ‘Electric currency’) were ‘Don’t knows’. Men had higher expectations of using HOBS than women. Almost 47 per cent predicted they would not be using teleshopping facilities at all over the next decade. There is clearly a great need to educate the consumer about the precise nature and delivery mechanisms of the potential of service delivery mechanisms on offer: banks need to get their message across more powerfully. In the welter of speculation about cashless shopping, electronic data interchange, unmanned banks, etc., it is questionable whether people truly appreciate the nature and potential of the technologies which could come on stream in the 1990s.

The use of automated

teller machines (ATMs)

Six out of every ten cash withdrawals in the UK are made through cash dispenser machines rather than via a teller over the counter. As a technology in retail banking, the ATM network has lost its edge: competition has given way to cooperation through reciprocal access networks such as MINT, LINK and the Four Banks Network. However, ATMs are the public face of banking technology. Respondents were asked about factors which influenced their attitudes to ATMs (Figure 9). Ease-of-use was slightly more important for females than males. It declined in importance with increasing age: 67 per cent of over 65s regarded ease-of-use as important, compared with 87 per cent of the under 20s. Modernity or progressive image was rated important by those in the 15-26 and over 55 age bands. Somewhat surprisingly the importance of security as a factor encouraging use declined with age: it might have been expected that the older age groups would have placed more importance on security. However, it is likely that elderly bank clients use ATMs at busier times during the day. Young people’s habit of making cash withdrawals in the evenings, or at night, or at weekends, could account for the greater importance attached to security by this group. To inject a degree of competitive edge into automated services, a

230

L.W. BEBEINGTONet al.

87. I

8067. I 60. I 60-

40-

20-

OConvenient

-1

Simple

Fast

Figure 9. Factors strongly

Reliable

encouraging

Secure

Modern Impersonal

use of ATMs

number of banks are beginning to locate shopping malls or railway stations.

ATMs

in busy areas such as

Staff qualities Numerous writers have drawn attention to the important role that company staff play in the service organization. Schneider has demonstrated that many who work in for-profit, service organizations have a desire to give good service and to work face-to-face with people.” They also have a propensity to identify with organizational goals. In the present survey respondents were asked which personal qualities they considered important in bank employees (Table 2). Female respondents placed rather more emphasis on such skills as numeracy, computer literacy, team spirit and ambition than males. The concern with numeracy probably reflects an erroneous perception that banking is essentially a profession in which numeracy is essential. Those in the higher managerial class placed less emphasis on ambition, numeracy and computer literacy, but rated creativity and initiative quite highly. Table 2. Ranking of personal ities of bank staff 1. 2. 3. 4. 5. 6. 7. 8.

“SCHNEIDEK, B. (1980). The service organisation: Climate is crucial. Organization Dynamics, Autumn, pp. 51-64.

qual-

Honesty Intelligence Numeracy Computer skills Team spirit Sociability Creativity and initiative Ambition

Important factors in choosing a bank The questionnaire

also asked individuals

to indicate

which factors

were

231

Consumer attitudes to IT in banking Advertismgquality

14.8

Promotions 1 Family 1

7 8.1

Technic01 image

117

Loan/mortgage

129.1

I 50.5

Openmg hours Location

_

I 51 156.3

Range Staff quality

156.6

Interest rate

171.5

Charges

I 0

Figure 10. Factors

rated

I 20 as ‘very

I

important’

I 40

I

in choosing

I 60

,

j 76 80

a bank

important in choosing a bank (Figure 10): 97 per cent regarded the levels of bank charges as ‘very or quite important’. Even those of school age recorded price sensitivity; 95.5 per cent of the 15s and under indicated that the level of bank charges would be ‘very or quite important’ to them. Female respondents placed slightly more importance on both opening hours and interest rates than did males. All age groups, other than the over 65s, placed more or less equal importance on opening hours. The perceived importance of the range of services on offer declines with age: two-thirds of those aged 20 or under regarded product range as important, in comparison with less than a third of the over 65s. The quality of bank staff becomes more important to consumers as they grow older. Loan and mortgage facilities were significantly more important to females than males, 76.4 per cent as compared with 65 per cent rating Not surprisingly, the perceived them as ‘very or quite important’. importance of these services declines dramatically with age (Figure 11). Those at school, students and those aged up to 40 regard loan and mortgage facilities as significant factors in choosing a bank, and therefore, these constitute an obvious battleground for competitive targeting. It is also significant that such a high proportion of the school-age population shows such an awareness of these facilities. There is also a clear battleground for specially developed loan facilities for the less well-off categories (Figure 12): the C2s and Ds place a high degree of importance on the availability of such services, and banks might give some consideration to the development of special packages for such clients. Individuals in these lower income categories are clearly highly price-sensitive and already accustomed to having to shop around for the most favourable terms and facilities. Price-sensitivity to services is likely and the fight for custom is very to spread to other social groupings, much on. The generally high level of importance attached to loans and mortgage facilities is an obvious reflection of the policy of the Conservative government to increase home ownership and the corresponding competition among banks and building societies for custom. Yet it raises the issue of whether or not banks and building societies encourage some individuals to borrow beyond their means, with occasionally devastating personal consequences. Branch locations were regarded as important by over 88 per cent of

232

L.W.

BEBEINGTON et al.

82.4 8C

0.2 -

il.7 6(

42. I 41

26.2

2(

C

16-20

Figure 11. Importance

21-25

-

26-40 -

of loan/mortgage

- 41-55

- 56-65

-

65+

facilities by age

respondents: importance w-as lowest across the 21-55 age bands, presumably because they are likely to be the most mobile. The high importance placed on branch locations occurs at a time when many banks are announcing staff cuts and branch closures. Generally, the quality of advertising, and promotional activities were not significant factors in choosing a bank. Predictably, students and those of school age regarded promotional giveaways as relatively more important than other age groups. The bank’s IT image was more important among the young. This is not surprising. Consumer perceptions have been influenced by television advertising and slogans: ‘The Bank that likes to say “Yes” ’ (TSB), or a ‘Friend for Life’ (the Bank of Scotland), or ‘Get the Abbey habit’ (the Abbey National Building Society), etc. However, if consumers are becoming more selective and

233

Consumer attitudes to IT in banking

84

83.2

376.1 75

64.7

6( I-

40.4 4c )-

2c I-

-

-

A

Figure 12. Importance

c2

of loan/mortgage

facilities

by broad

social

classi-

fication

are shopping around for a mix of services, then marketing and promotional literature will assume greater importance as a stimulant to awareness of services.

Banking services and advertising awareness The survey sought to establish the relative importance of various advertising media in creating consumer awareness (Figure 13). Overall, television advertising was rated the most stimulating. Females were most likely to rate TV advertising as effective: 65 per cent versus 53 per cent. Predictably, the highest approval ratings were

234

L.W. BEBEIINGTON et al.

m

Direct mail

0

Family/friends

m

Other

Figure 13. Importance bank services

of advertising

media in stimulating

awareness

of

obtained from the younger age groups, with 77 per cent of those under 20 grading it as very effective. The importance of television declined as a function of age and employment status: only 25 per cent of those over 65 and 28 per cent of ‘retireds’ said that TV advertising was most effective in stimulating awareness. Over 75 per cent in the C2 category and over 81 per cent in occupational classification D said they were made very much aware of services by television advertising, compared with 52 per cent among the higher-managerial A category. Among the casual unemployed the figure was 40 per cent. The importance of television advertising is confirmed by Marketing Week’s 1989 survey of the Top Ten brands in advertising, in which four of the top ten advertisers were financial services players. In an analysis of the major advertisers who used radio, three of those featuring in the top ten were financial services institutions, reflecting the power of the medium to reach a predominantly young audience. While corporate image-building remains an essential plank in bank marketing, advertising competition has moved firmly towards the promotion of specific products or packages of services. Student and young people’s banking packages, or services targeted at small businesses or start-up ventures are obvious examples. There were no significant differences between males and females in assessing the effectiveness of newspapers and magazines, which were rated effective by all age groups. In-bank marketing materials, such as leaflets etc., were marginally more important to females; it was also regarded as important in creating awareness of services by those aged 21 and over. Only 14 per cent of respondents regarded direct mail as effective, 36.5

235

Consumer attitudes to IT in banking

per cent of males compared to 29 per cent of females. It was significantly more important to the over 21s. The ‘Other’ approaches included schools presentations, talks and exhibitions and personal approaches: presentations and exhibitions directed at those of school age were comparatively ineffective, with 12 per cent of those aged IS and under and less than 6 per cent in the 16-20 age band regarding these as being particularly effective in raising awareness. The effectiveness of personal approaches was related to age, rising from 7.4 per cent in the 15 and under group to 36 per cent in the over 65s. Females and those under 20 in particular rated friends and relations as important in making them aware of banking services.

Discussion and conclusions It is tempting to say that ‘Old habits die hard’. The Banking Technology Research survey highlights the fact that bank customers still perceive financial services in very traditional, or paper-based, terms. This may not suit the banks, but arguably it suits the consumers, and the onus of disproof lies with the banks. The relevance of service delivery mechanisms such as HOBS and EFTPOS is weakly grasped. Public perceptions or, more probably, understanding has not kept pace with technological change. Demographic variables correlate directly with rising or falling uptakes for certain types of accounts or services. If the banks want to discourage the natural tendency of young adults to acquire cheque accounts and credit cards, while furthering their own agendas, they need to educate targeted segments to the convenience and ease-of-use of electronic payment systems. There is evidence from this survey to suggest that younger, professional males are more inclined to adopt or experiment with electronic banking systems: ease-of-use is valued more highly by females. All segments exhibit price sensitivity, particularly in areas where consumer choice is broadening: loans and mortgages, for example. Younger age groups show a keen awareness of the importance of product range; again the key variable is choice. The traditional retail bank no longer has loyal customers: patrons will shop around for the best package. Is across the board technological delivery of services the best way forward? Clearly it is not the only option. National banks such as the Midland and National Westminster, and smaller regionals such as the Bank of Scotland or the Clydesdale, are moving firmly in the direction of providing technologically-based services: home and office banking, EFTPOS, fully automated and unmanned branches by the end of the decade. The prototype of the unmanned branch is already within realization on the Continent in the form of the Belgian ‘Self-Bank’. The Banque Bruxelles Lambert has instituted a pioneering system of self-service banking. Compared to the equivalent of an electronics games arcade BBL has installed two types of machines: one offers the services of the basic ATM such as cash withdrawal, balance enquiries, etc., while a more sophisticated second machine, allows users to customize their own services, Setting up direct debits, or arranging payment of bills on specific dates, for example, can be effected by the consumer sitting at an interactive terminal. Far more sophisticated facilities are also offered by this ‘banquette’ - such as financial simulation or expert advice in filling

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out tax returns and calculating the amount of tax owed. In the UK banks are more likely to adopt a halfway house solution promoting the use of more advanced automated services for the 1990s while retaining an extensive army of specially trained consultants whose role will be based on consultative selling approaches using information displayed to customers on large video-screens at the touch of a button. It will be a high-tech personal touch. And yet a 1988 Which? survey of consumer attitudes in banking noted that the principal reason for lack of interest in using cashless payment systems was contentment with existing payment methods. Consumers are aware of the advantages of cheques taking three or four days to clear, or having until the end of the month to clear their credit card balance. The introduction of an annual fee by some high street banks for credit card accounts (in effect making them charge cards) is a recognition of the need to begin weaning the customer from such methods. This is borne out by the present study. In the consumer’s mind EFTPOS and smart cards are likely to encourage overspending: it is more difficult to keep track of spending and money which is immediately debited from personal funds. Automated teller machines may be the acceptable face of machine banking, but complaints against automated banking facilities were still the largest single cause of complaint to the Banking Ombudsman in 1988, showing an increase of 20 per cent. Before the wholesale implementation of automated banking, banks need to educate potential users more effectively about the available technologies and the associated advantages. The switch to automated banking may require a shift in the perceptions and values of the average British voter: he needs to be reassured that new money-transferring technologies are not merely an operational convenience for the provider, but beneficial to the consumer. There is a danger that in a market shaped or driven by a technological imperative the customer and his needs take second place: When technology drives competition you can’t compete on technology. Nor can you count on technologists to know what customers need and want . However necessary it is to gain a functional mastery of information technology, managers are still primarily responsible for anticipating markets and organizing work. Technological skill is what qualifies a company to play. But no single technological achievement yields a lasting competitive advantage. This was true of steam power; it is also true of computers.‘2

“Editorial (1989). Competing technology. Hurvard Business November-December, p. 93.

beyond Review,

Not all banks are putting all their eggs in the basket of technologicallyfronted services. Barclays has installed intelligent workstations in most of its branches to provide personal service, advice and information to customers, rather than replacing staff with machines. Traditional patterns of use of financial services continue to dominate: in spite of EFTPOS, HOBS, smart cards, direct debit cards, etc., reliance on cash, paper-based cheque transactions and credit cards remains very strong. The ultimate adoption of cashless payment systems based on enabling technologies is still-very much in the future: perhaps the best that banks can hope for in the shorter-term is a less cashdependent society.

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