Showing posts with label digital banking. Show all posts
Showing posts with label digital banking. Show all posts

Saturday, October 12, 2013

Customer Experience Innovation in Financial Services

INNOVATION


Expectations from today's consumer are outpacing the ability for banks and credit unions to keep up. The digital consumer is hyper-connected, highly informed and demands a highly personalized approach with regards to communication, product development and customer service.


On January 13, 2014, I was the featured guest for a global Twitter chat hosted by @IBMbigdata entitled, "Customer Experience Innovation in Banking". During the hour, there were 158 participants, 1,095 posts and over 6M impressions!


Below is a sampling of the interchange (including my responses)


Q1: How does today's customer behavior and expectations in a constantly changing technological world impact banks?







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Q2: How can FIs improve the customer experience as customers move from the branch to digital channels?







Q3: How do banks, steeped in traditions, established product lines and culture, innovate?







Q4: What steps should banks take to utilize all information assets for a comprehensive understanding of markets and customers?







Q5: How can banks leverage data from empowered customers to uncover innovative ideas?







Q6: Should banks use tools from other industries such as instant mobile video support?







Q7: What specific innovations can assist with improving the customer experience within banks?






Q8: How can banks master Customer 3.0 and prepare for Customer2020?








Additional Resources


Is Your Bank Ready for Customer 3.0? - Bank Marketing Strategy (Nov 2013)

Banking on the Future - IBM (2013)

Amazon's Mayday Button Could Revolutionize Banking - Bank Marketing Strategy (Jan. 2014)

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It's Time to Reinvent Mobile Banking

MOBILE STRATEGIES


It's time to shut down the mobile banking operations at most banks. I say this after watching the development of mobile banking sites worldwide and realizing that most traditional banks don't understand the needs of the consumers they serve or the competition they face.


Mobile banking should not be a delivery channel for branch-based banking. It should be a contextual experience, with a clean design, simple interface and engaging platform to manage money. Unfortunately, most mobile banking sites look like miniaturized online banking websites. This is a problem as we try to serve Customer 3.0.


Last week, AXA Banque in France launched a new 'mobile-first' offering called Soon (website translated to English). Similar to other pure-play mobile banks worldwide like Moven, Simple, GoBank, Fidor, Hello, etc., Soon was initially introduced using a registration/invite model to allow for orderly scalability. Not a bank as such, Soon is a set of services accessible via a mobile application and backed by AXA Bank.

In an exclusive interview with Raphaël Krivine, head of direct banking for AXA Banque, "We started to engage with users in mid-2013, presenting the concept of the offer and the main functionalities to get feedback and comments (especially via our introduction video). It was very useful for us to validate the overall concept and to finalize developments in the right direction." He continued, "The offer is now available for the people who registered last year as a way to thank them for having been supportive from the very beginning.

Unlike virtually all traditional mobile banking sites, Soon (and the neo-banks mentioned above) rethinks the way mobile banking is done by designing a bank for the smartphone as opposed to simply providing access to banking products through a mobile device. This was done at AXA by creating an entirely different brand and mobile platform within the bank. This allowed for an alternative digital infrastructure, a lean start-up mode, open architecture and the ability to view banking from the customer's (as opposed to the bank's) perspective.

With a significantly lower cost structure, the emergence of pure-play mobile banks feels like a similar trend in the 1990s when direct online banks were in vogue. Some of these banks still exist such as First Direct and ING overseas and Capital One 360 (originally ING Direct US), USAA, Ally and Discover Bank in the U.S.

While many traditional banks have imitated some of the direct bank advantages, deposits at the top four direct banks have grown at three times the industry average according to TNS Global. Interestingly, while once having a pricing advantage compared to traditional banks, consumers also rate these direct organizations as 'more convenient' than traditional bricks and mortar banks.

The question is, will traditional banks ever fully embrace the process of managing money through mobile as opposed to simply providing mobile access to accounts? Will they lose the 'convenience advantage' with the mobile channel also?



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The Soon Difference


As with other pure-play mobile banks, Soon provides an entirely different user experience than traditional mobile banking. You can see it immediately in the simplicity of the design, the ease of interaction and the approach of the application. In fact, you can see it on the mobile banking sign-in page where the interaction is personalized (can even be seen in the French version).

"Soon has got the same mindset as Moven, GoBank or Simple because it aims to totally change the way to do banking, with a strong focus on UX," said Krivine in our interview. "Unlike some of the new mobile banks in the U.S., however, Soon is launched by an existing bank, with the strength of existing business processes and potential access to our wide range of products (i.e loans, mortgage)."

Comparison between sign-in page of Soon and Wells Fargo


Opening an account is as simple as snapping a picture. No more long forms or extended account opening process. With Soon, a new customer simply takes a picture of their identification, proof of residence (a bill sent to their home) and a evidentiary signature and the account is opened. Opening of associated savings account and a credit card is just as easy.

Once an account is opened, the experience leverages many of the unique benefits of a pure-play mobile application. If the customer wants to save for a project or future expenditure, Soon uses a 'nudge' behavioral science approach, which encourages a customer to behave responsibly with encouragement provided along the way. Not only does the application help a customer save, but it looks at future planned expenses and upcoming revenue to determine if a current purchase should be made.

The dynamic vision of providing a projection of purchasing power in real time is similar to the GoBank 'fortune teller' and Simple's Safe-to-Spend features and very unlike a traditional mobile banking application that simply shows balances based on cleared items. An analogy would be the difference between looking out a front window to the future as opposed to the rearview mirror.

As opposed to simply a current balance, Soon provides a Safe-to-Spend value

Each transaction or project can be associated with a document or an image for better record-keeping and security. The simplicity of using the photo capability on a mobile phone adds to the convenience. Moreover, each purchase can also be associated with a comment, geolocation or even a 'mood' (smiley face or frown). Unlike many mobile banking applications, the Soon mobile app allows a customer to find previous expenses using natural language search.

Transactions can be associated with pictures, comments and even emotions

Similar to Bluebird from American Express, Soon provides its customers with both a checkbook and Visa card (debit) with an NFC functionality. P2P transfers between individuals can be done via PayPal automatically within the application for ease of payment (a partnership avoided by almost all U.S. banks).

P2P is made easy with the PayPal integration

Customer support is one area I believe Soon falls a bit short from a mobile app perspective. Soon will provide support via advisors 24/6 by chat and 24/7 by email, but will not support calls or live chat (like Amazon's Mayday).

Mobile-First Target Audience


As with most pure-play mobile banks, Soon is targeting smartphone users, (which is to say nearly everybody as the smartphone market continues to expand rapidly). There may be a challenge for Soon, however, since recent research suggests that the French seem to still be attached to the proximity of their physical bank, even if the general craze for online and mobile seems to increase.

The benefit of being a division of AXA is clear in the Soon offer. "We expect our first customers to be among the digital natives, because they are used to do anything with their smartphone, including banking," stated Krivine. "Nevertheless, we know that especially for the young people, it is very important to receive advice and support (for instance for loans), so Soon customers will benefit from the expertise of AXA branches (our core business model relies on insurance tied agents that choose to diversify their business with banking in order to develop customer loyalty). This is a fall-back option, but customers will have an option to go to a branch (using Soon apps that will integrate geolocalisation to find an agent)."


The Reinvention of Mobile Banking


Customer's behaviors are changing as they become more comfortable with the web and mobile devices. They are looking for simplicity, availability, real-time insight, contextual engagement and the ability to leverage social networks and enjoy gamification. They expect far greater transparency with the type of personalization they receive as they interact with other industries.

Smartphones provide the technology and contextualization never before available. These devices open the door to a completely new way to manage money on the go. Instead of providing mobile access to an array of branch-based banking services, there is the potential to provide advice and real-time financial insight.

Soon is not the first, but it is the latest in a string of mobile banking offerings where the design, functionality and customer experience is central to the offering. The question is whether traditional banks globally will embrace the potential of the mobile device to deliver much more than just balances and a narrow span of capabilities.

Best selling author, speaker and founder of Moven, Brett King wonders if traditional banks can meet this challenge. "US Banks are avoiding the digital trend worryingly. We have the BIG banks who are too big and too fragmented to come up with a pure-play digital brand that might cannibalize their main brands. We have regional players who are too traditional in their approach. And we have smaller players who might be too small to think they can do this." "The U.S. right now is really slipping behind the Asia Pacific region and much of the rest of the world in terms of industry-wide innovation."

With regard to the introduction of another mobile-first offering, King adds, "It is great to see that organizations like AXA are embracing digital engagement of customers. I think Soon is another great example of why simple, easy to use user experience is still a strong differentiator in retail banking today. While some might think that Soon.fr is a competitor to Moven, the reality is that we are part of an exclusive new club of disruptors creating an entirely new category of banking experience. We stick together, because it is the other banks who still insist on account opening in a branch, or think that mobile is about putting internet banking on a smaller screen who are the guys we're trying to unseat."


Marketing Opportunity


Marketing needs a seat at the mobile banking design table. You need to have input as to whether your organization is going to continue to deliver mobile banking as an access tool or a money management tool. 

In the meantime, it is marketing's responsibility to promote mobile banking sign-up and usage whenever (and wherever) possible. Mobile banking customers are more engaged, own more services and are more loyal than customers without mobile banking.


Additional Resources


Direct Banks and the Future of Consumer Banking - TNS Global (Apr. 2013)

Banking in a Digital World - AT Kearney (Aug 2013)


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Friday, October 11, 2013

Bank Innovation Through Collaboration

INNOVATION 


Established by two former bankers, the Bank Innovators Council was developed to help financial institutions that may lack internal resources come together to brainstorm and test new ideas that could eventually be shared. Partnerships with Finovate, NextBank, BankersHub and Innovation Agency will hopefully provide additional momentum. 



By JP Nicols®, founder and CEO of the research and innovation firm Clientific, a partner at Bank Solutions Group and co-founder of the Bank Innovators Council.


Bankers and credit union executives have long sought a competitive advantage in a vast sea of largely undifferentiated competitors. For most players, and for most of the industry’s long history, the chief weapons in this war have been scale and localization. Either growing large enough to create economies of scale and/or scope, or trying to corner one or more local markets by being more, well, “local”. A few have even tried to accomplish both strategies simultaneously.


But how will those strategies play out in this new era of financial services? Regulators will not let the very biggest banks get a whole lot bigger any time soon. The top 100 banks in the U.S.— less than 1.5% of the 7,000 or so still around— already control 81% of the loans and 75% of the deposits. Well-capitalized and well-run small and midsize banks and credit unions will certainly swallow up weaker competitors as this quickening consolidation phase that we have all been predicting inevitably becomes a reality sooner or later. But will this truly create any new competitive advantages beyond survival of the (relatively) fittest?



How about the localization strategy of being 'the bank or credit union of '? Let’s set aside the fact that most organizations that proclaimed to be the bank of XYZ were probably not really the bank or credit union of anything outside of their own imagination. In this hyper-connected, hyper-globalized world, being merely local is meaningful to only a steadily dwindled segment of consumers. 

Sure, there are kernels of truth to each of these strategies. Having the scale to spread out increasing infrastructure costs is important, up to a point. And I chose the words 'merely local' for a reason. I think the real word the localists are looking for is 'relevant'. Being headquartered in my hometown is fine, I guess. More jobs for the local economy. But as a customer, what I really want is for you to be relevant to me — and many of the behaviors of the banking behemoths did little to make me feel that way.


Why It’s Different Now


Those basic strategies worked well enough for the last few hundred years, but until recently, the industry was basically undefeated because it won all of its games by default. Sure, we had large banks and small banks, and credit unions, and for a time, S&Ls and Savings Banks; but these were all just slightly different flavors of the same basic model.

Banking as a product and as a service had no real threat of substitution. But during just the last 5 to 10 years, the proliferation of smartphones, tablets, broadband connectivity and connected networks of all kinds have changed the nature of the game. Forever. Just as radio and movie theaters were disrupted by television, which was disrupted by videotapes, which were disrupted by DVDs, which were disrupted by streaming video, the disruption in banking has only just begun.


You can now live your entire financial life off the grid of traditional financial institutions — at least in your direct interactions. They still play a role behind the scenes, but the nameless, faceless utility that merely holds your insured deposits and ensures an efficient transfer of your funds from Point A to Point B is the very definition of a commodity trap.

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The Commodity Trap


The concept of “The Commodity Trap” was created by Richard D’Aveni in his 2010 book Beating the Commodity Trap, and explored further in Henry Chesbrough’s 2011 book Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era. The fundamental characteristics of the Commodity Trap according to Chesbrough are that:


  • Business process knowledge and insights are widely distributed
  • Manufacturing of products is moving producers with very low costs
  • The shrinking amount of time a product lasts in the market before a new and improved one takes its place
Check, check and check for the financial services industry, and scale or localization alone are not sufficient weapons in this battle.


The Collaborative Advantage


Winners in this new era have to collaborate with customers, vendors, and even other banks to find new ways to be relevant to their customers and avoid becoming victims of the commodity trap. There is always a bias for established firms to protect existing revenue streams and manage for past results rather than future outcomes, and this is exacerbated in the banking industry.

Think about the behaviors that are sought, encouraged and rewarded in banking. They’re all about avoiding risk. You’re praised and eventually promoted if you’re the person who always thinks up new ways ideas could fail. The regulators certainly reinforce those behaviors, and they are more than appropriate for things like capital management and credit underwriting.

But bankers make hundreds of decisions every day, both large and small, that will never run the risk of putting the shareholders in harm’s way. Those decisions should include innovating new products, services, and experiences, if they are managed properly. Yes, innovation is about taking risks, but they should be small, calculated risks that lead to real learning and real improvement.


It’s Better Together


Innovation has to be expanded beyond a single product group or business line, and even more importantly, innovation has to be more than brainstorming new ideas inside the bank. Today, an increasing number of bankers have “innovation” somewhere in their job description, and they get to spend time at cool events put on by the likes of Finovate, Innotribe, Bank Innovation, Money2020 and NextBank, seeing new ideas from all over the globe.

I’ve attended plenty of these events myself, and I love seeing the perspective of startups with no legacy business model to protect and defend, and more research and development spending is coming from smaller firms now. According to the National Science Foundation’s Business Research and Development Survey, firms with greater than 25,000 employees accounted for only 40% of R&D spending in 2008, down from 70% in 1981.

Bank innovators are always energized to meet each other at these events, too. It gets pretty lonely being surrounded by the “business prevention department” back at the office.

We started the Bank Innovators Council based on the idea that the “FinTech” entrepreneurs had incubators, accelerators and venture capitalists to support their innovation, but bankers were on their own. We believed that even banks that can’t afford their own dedicated innovation teams can’t afford not to innovate.

If you want to go quickly, you walk fast and you walk alone. But if you want to go far, walk with others.                  - African proverb
Researchers Eoin Whelan, Salvatore Parise, Jasper de Valk and Rick Aalbers published a paper in the MIT Sloan Management Review called Creating Employee Networks that Deliver Open Innovation in 2011, and they cite the importance of so-called “network brokers” in bring new ideas to fruition in organizations. These roles have become important today because of the explosion of data dissemination from online forums, blogs, search engines and wikis, and these “in-house connectors are needed to complete the circuit.”

The paper suggested that internal “Idea Connectors” should be encouraged to have more "networking activities through involvement in cross-functional projects and job rotations”, and that their counterpart 'Idea Scouts' should be given “priority to attend external networking events such as conferences or trade shows. This is not only a way to create alternative channels for ideation; it also allows management to demonstrate its commitment to the front-runner role that these employees play in sparking innovation.”


From the “I” Word to the “R” Word


Ultimately, this coalition of the willing has to expand to include people who don’t currently have the word “innovation” in their job description. For those of us at these industry events, we embrace the word, thrill at the very sound of it. But it’s actually a scary word for entrenched bankers. It sounds too much like “risk”. Phil Swisher, Head of Innovation at Brown Brothers Harriman, and a charter member of the Bank Innovators Council talks about shifting the conversation with these people from the “I” word (innovation) to the “R” word (revenue).

"That’s why we help members focus on why they want to come up with new ideas—what problem are they trying to solve, and for whom?—and what happens after they come up with them. After all, if those new ideas don’t eventually lead to new revenue, how valuable are they?", says Swisher.

Maybe innovation is a scary word for you too, but I’ll bet you’re looking for new ways to generate revenue and better ways to interact with your customers. It’s hard to innovate in banks. It’s even harder doing it alone. Banks can walk farther if they walk together. Which is why the Bank Innovators Council was created.


Besides, we are a whole lot more fun than the business prevention department.


About the Author


JP Nicols, CFP®is a former bank executive and the cofounder of the Bank Innovators Council, a membership organization that helps support, promote, and facilitate innovation within and amongst its member banks. His work has been featured in leading industry publications and on his blog at jpnicols.com



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Tuesday, October 8, 2013

How to Become Your Customers' Everyday Bank

Banks have a unique opportunity to capitalize on the vast amounts of customer insight they hold to go beyond simply facilitating payments. They can reinvent themselves as an Everyday Bank, helping customers reach decisions about what to buy, when and where to purchase, and even helping to negotiate the best deals in a ubiquitous format.


Non-banks are capturing more and more of the banking value chain, providing services such as payments, checking and even savings accounts that could erode as much as one-third of traditional bank revenues by 2020 according to Accenture. These new entrants pose a threat to banks by raising service expectations and coming between banks and their customers.

According to a new report from Accenture, entitled "The Everyday Bank," the response is not just about closing branches, improving online and mobile banking offerings or making current products and services "more digital." Instead, banks need to move further into the daily lives of customers, providing assistance before, during and after the financial transaction.

Customer behaviors and expectations are quickly adjusting to a world where products and services are recommended based on past behaviors and where location-based offers are provided instantaneously on their mobile device. Customers want information to be fingertip-ready. 

The Everyday Bank


Subscribe TodayAccording to Accenture, an Everyday Bank leverages the vast amount of insight it possesses to become central to a customer's financial and non-financial digital ecosystem. The Everyday Bank reinvents itself as a value aggregator, advice provider and access facilitator, acting proactively on the customer's behalf, improving reputation and trust. 

An Everyday Bank drives continuous daily interaction by building partnerships and connections with provider partners who offer goods and services in every area of area of consumption, including retail, home services, health and security, travel and leisure, communication and transportation. By tapping its wealth of transactional data, without ever sharing analytic information outside of its four walls, the bank reaches out to the right third-party providers and other key players to build a digital customer experience combining mobile, big data, analytics, digital marketing coupling, ticketing capabilities (at ATMs?) and more.

The Everyday Bank uses its digital engine to automate front- and back-office processes to optimize for speed, efficiency and scalability. According to Accenture, a highly functioning Everyday Bank can:
  • Slash back-office effort by as much as 80 percent
  • Reduce its managed applications portfolio by 70 percent
  • Cut time to market by 40-50 percent
  • Increase operating income by 25-30 percent
In a real-life example, an Everyday Bank has the rich customer data to know when a customer may want to purchase a car (based on the age of current vehicle, family structure, etc.). After offering the customer assistance if they agree that a car purchase is in order, the bank can recommend vehicle models that might fit their lifestyle, personal preferences and budget. 

Next, because the bank is in a position to negotiate thousands of car deals on behalf of their customers, they can get a price that meets both the customer's and dealers needs. After bundling in insurance and any other after-market products, the bank then recommends a payment plan that is best for the customer.

According to Accenture, the five critical elements of an Everyday Bank include:
  1. Provides services that are digitally optimized across a variety of platforms
  2. An omnichannel approach
  3. Uses big data and predictive analytics to help anticipate customer financial and non-financial needs
  4. Offers a human touch for high value interactions
  5. Is attuned to their customers' moments of truth
The Everyday Bank also brings pricing transparency, trusted advice, social recommendations and transactions - as easy as one click.
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Benefits of Becoming an Everyday Bank


For banks that build the capabilities of an Everyday Bank, the rewards are significant. According to Accenture, banks that exploit their rich customer purchasing data and secure data management capabilities can increase customer interactions by 250 percent.

Most importantly, the bank's customers enjoy the benefits of a financial partner who can anticipate their needs, looks out for them and rewards them for their loyalty by recommending ideal providers. They enjoy an improved experience that saves them time and money with a much more personalized relationship. Merchants and service providers also benefit from the bank's customer insights through improved targeting driven by the bank and increased sales volumes.

By acting as a digital value aggregator, the bank is rewarded with deeper relationships, increased loyalty and improved profitability due to a higher volume of lower-cost transactions and additional service fees.


It is important for banks to act quickly to become the indispensable Everyday Bank, moving customers from doing occasional interactions to being embedded into their digital lives with daily interactions. Banks need to develop the digital partnerships with merchants, suppliers, small and medium size businesses, telcos and other digital companies to deliver new products and enhanced service for the customer.

By collaborating with these partners as opposed to competing, the bank can be repositioned at the center of the customer's everyday life, becoming integral to both financial and non-financial needs. The Everyday Bank has the opportunity to acquire all segments of customers at an efficient cost (including underbanked, unbanked or unhappily-banked populations), using the number of interactions with these customers to offset the lower income per transaction.

Everyday Banking in Action


Below are examples provided by Accenture where banks have leveraged their customer insight and extended beyond traditional banking services to provide value to customers.

The Commonwealth Bank of Australia

Using augmented reality in a mobile application, The Commonwealth Bank of Australia helps its customers looking to buy a new house. The mobile app provides details on 95 percent of the residential properties available for sale throughout the country.

Included is data related to recent sales and prices, information about the neighborhood, and the location of each property in relation to where the customer is at any time. Integrating financial services into the application, the bank offers details about mortgage loans and insurance that can be purchased through the bank's website.

BBVA

BBVA of Spain supports its customers when they purchase a new car by equipping the customer with information on both the list price and selling price of the car. The app also offers loan and insurance information. The bank's goal is to ensure that its customers can negotiate the best deal.

To become an Everyday Bank, BBVA could expand this partnership with the customer by anticipating when the customer may be in the market for a car. This could be achieved by using outside insight into the age of the car owned by the customer and recent purchase cadence (the customer has shown a history of purchases every 3 years), upcoming auto loan final payments, or change in household structure (marriage, birth).

The bank could also build relationships with several dealers, allowing itself to negotiate prices on behalf of the customer and even provide offers related to after sale service, etc.


The Everyday Bank Challenge


To be a profitable industry, banks cannot simply rely on providing accounts and access to funds. Competitors are eating away at significant parts of the banking value chain with the potential of limiting banks to becoming nothing more than utilities.

The future of the industry will depend on its ability to leverage the power of customer insight and digital technology to provide services that help today's tech-savvy customers save and better manage their everyday lives. If banks don't move quickly, however, competitors will insert themselves into the buying process, gaining the valuable purchase insight that is the domain of the banking industry today.

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