"There are those declaring that in another ten years there won't be banks. I think that those talking in such a fashion are square thinkers," said Mizrahi Tefahot Bank (TASE:MZTF) CEO Eldad Fresher at a conference organized yesterday by Israel's Supervisor of Banks.
In his forthright address, he took issue with Bank Leumi (TASE: LUMI) CEO Rakefet Russak-Aminoach who told a conference in London last week that due to the technological revolution, if banks don't change then they will become extinct.
He said, "We need to be asking ourselves if what we are predicting is what will actually happen. If we would have held this conference yesterday and voted on what we thought the results of the US elections were going to be, we would have had different predictions from what actually happened at b4am this morning."
Mizrahi-Tefahot is stressing a strategy based on human service and Fresher warned of the repercussions if the entire banking world becomes digital. "Is technology the solution for everything? Will we have a future of cold, cruel banking without responsibility in which the customer is his own banker?"
"When a customer goes into a branch and has a complaint about us, there is somebody he can speak to. If we distance the customer from the branch and he becomes his own banker, then he can only blame himself - he made the mistake and clicked on the wrong icon, or bought the wrong thing, and it will be his responsibility. Is that what we want? Is that what the customer wants?"
Fresher added, "The question that nobody is asking about digitalization is whether that is what the customer wants. In my opinion, in retail banking, customers have different cultures and cannot be considered as statistical customers that must all be put into the same model - customers have differing and special needs. It is because there is such an abundance of information and technology is so powerful and huge, which creates so much information that you need a banker even more, not less. The real value is found in a shrewd and smart banker that the customer can rely on rather than relying on algorithms, however good they are."
Yesterday's dinosaur
Fresher points out that although technology has matured but asks, "Has that technology matured enough with consumers? Everybody says that we no longer go to the branches but I visited nine branches in the southern region yesterday and believe it or not I saw people. Some of them were complaining, some of them were satisfied and one even said that the service in HSBC premiere is better."
Fresher said that he is not writing off the importance of the technological revolution in the financial sector but it is actually the banks that are leading it. "All of us here in this room agree that technology is at a turning point. Technology will allow total digitalization in the not so distant future - a situation in which branches and banks are not needed. The customer can do the vast majority of operations using technological systems. It is a very tempting model and I've been thinking about it a lot in recent years. It cancels out advantages of size and obstacles to entering banking. But if that model is correct then the customer will prefer to receive financial services from Apple, Google and Amazon. In my opinion, however much a traditional bank will try to change, it will still be yesterday's dinosaur compared with tomorrow's giants and is doomed to failure."
Fresher presented Mizrahi-Tefahot's policies saying, "We are opening branches, and hiring human resources. We believe that banking is a complex product and we have a huge responsibility to conduct the right dialogue with the customer. There are banking products that do not have an alternative to human service. A technological platform, however good it may be, can't replace that."
He said that the most significant technological development is taking place at Bank Yahav, which is owned by Mizrahi-Tefahot, where technology giant Tata is building new core systems for the bank.
"In that bank the most interesting digital experiment is taking place - it is the first banking platform that is being changed from end to end that will provide a genuine digital revolution. It will take time and there will be disruptions but when it happens, it willo be a real digital revolution."
He was clearly again trying to score points over Bank Leumi, which is branding Pepper Bank as the most significant digital measure being undertaken by Israel's banking system.
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2016
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