P2.2 BANKING GOES MOBILE
The fact that shaping the banking habits of customers has been expensive in the past has raised the barrier to adaptation of new technology by small players. In the U.S., it still costs banks about $1,700 per month to run one ATM on someone else’s property and slightly less if the ATM is located at the bank’s own branch.
These high costs are a reason established banks have begun to scale back on their ATM and branch networks.3 Computing power, networking, data storage, and software programming also come with hefty price tags that have made entry into financial services relatively unattractive for startups. In the last decade, however, barriers to enter the financial sector as a service provider have come down significantly. Ubiquitous smartphones give their owners secure access to sophisticated computing technology at a low cost, which has given people around the globe access to their finances on the go. A generational shift has further leveled the playing field, where the demands of emerging consumers have slowly displaced established banking habits. A study by Visa on the financial habits of millennials in Asia finds that 80 percent of those aged between 18 and 28 believe that they will soon be able to do all their shopping and bill payments online. Additionally, 73 percent believe this will be possible with a mobile phone, whilst 99 percent of millennials in Korea shop online. They use a mix of cards and cash for their financial transactions, presenting an opportunity for financial institutions to introduce more people to the convenience of using electronic payments. However, the cashless society is still a stretch: only half of the payments by millennials that they make on a monthly basis are done in cash.4 Yet a future where electronic payments will displace physical currency is beginning to take form. Once customers have embraced using personal devices for payments and banking on a large scale, the last mile of established banks in their access to customers will have disappeared. Today's FinTech startups challenge mainly the banks' front office, which is experiencing slow attrition with fewer branches and ATMs.
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