Banks are closing ATMs and branches in an attempt to ‘nudge’ users towards digital services – and it’s all for their own benefit
By Brett Scott and cross-posted from The Guardian
All over the western world banks are shutting down cash machines and branches. They are trying to push you into using their digital payments and digital banking infrastructure. Just like Google wants everyone to access and navigate the broader internet via its privately controlled search portal, so financial institutions want everyone to access and navigate the broader economy through their systems.
Another aim is to cut costs in order to boost profits. Branches require staff. Replacing them with standardised self-service apps allows the senior managers of financial institutions to directly control and monitor interactions with customers.
Banks, of course, tell us a different story about why they do this. I recently got a letter from my bank telling me that they are shutting down local branches because “customers are turning to digital”, and they are thus “responding to changing customer preferences”. I am one of the customers they are referring to, but I never asked them to shut down the branches.
There is a feedback loop going on here. In closing down their branches, or withdrawing their cash machines, they make it harder for me to use those services. I am much more likely to “choose” a digital option if the banks deliberately make it harder for me to choose a non-digital option.
In behavioural economics this is referred to as “nudging”. If a powerful institution wants to make people choose a certain thing, the best strategy is to make it difficult to choose the alternative.
We can illustrate this with the example of self-checkout tills at supermarkets. The underlying agenda is to replace checkout staff with self-service machines to cut costs. But supermarkets have to convince their customers. They thus initially present self-checkout as a convenient alternative. When some people then use that alternative, the supermarket can cite that as evidence of a change in customer behaviour, which they then use to justify a reduction in checkout employees. This in turn makes it more inconvenient to use the checkout staff, which in turn makes customers more likely to use the machines. They slowly wean you off staff, and “nudge” you towards self-service.
Financial institutions, likewise, are trying to nudge us towards a cashless society and digital banking. The true motive is corporate profit. Payments companies such as Visa and Mastercard want to increase the volume of digital payments services they sell, while banks want to cut costs. The nudge requires two parts. First, they must increase the inconvenience of cash, ATMs and branches. Second, they must vigorously promote the alternative. They seek to make people “learn” that they want digital, and then “choose” it…