The iPad 2 pushes customer expectations further

The Apple iPad 2 was launched by the so-called “rockstar CEO” Steve Jobs today in San Francisco to a broad reception of live blogging, tweeting and “cloud” participation online. It will give shareholders a brief moment of comfort to see that Steve is still fit and well despite his medical leave.

While there has been a lot of online coverage of events and conferences in recent time, the live blogging and tweeting around the iPad 2 launch shows that we really are living in a real-time ‘news’ consumption age. The concept that you can have a press-release to ‘spin’ an announcement anymore is just ridiculous. You are dealing with real-time assessment of your brand, your products and capability now. It is engagement 2.0. Anyway…back to the iPad 2.

The new iPad 2 will retail at the same base price ($499) as the old iPad, and will retain the 10-hour battery life. But the new iPad is 1/3rd thinner, 10% lighter and is more than twice as fast as the old iPad. The video processor, often criticized when it came to gaming and video playback, has been upgrade to 9x the speed of the old video chip.

The iPad 2 also comes with two cameras, a front and rear-facing camera enabling the FaceTime live video chat capability. The iPad 2 has simple HDMI integration also so you can play your iTunes video downloads straight to your HD TV, infact, the Airplay feature even allows you to stream video and pictures to your TV and other devices. You can sync wirelessly too with the new iPad 2.

Apple has come up with an innovative ‘case’ they call a smart cover. The case is actually a screen protector with magnets that integrates with the iPad2. When you remove the screen cover, the iPad2 automatically senses it and powers up automagically.

Apple’s recent success

Apple has sold more than 15m iPads since their launch last April, and they’ve just sold their 100 millionth iPhone globally. Impressive! But the really interesting stat is that they’ve remmitted more than $2 Billion to App Developers globally (350,000 Apps plus), and have more than 200 million account holders who’ve supplied their credit card details to the iTunes store. With 200m customers, they would be a major competitor to any FI if they decided to build banking/payments into the iTunes store…

Worth thinking about!

What the iPad 2 means for banks

The iPad 2 continues to shift expectations for consumers. Consumers now have very high interaction and user experience expectations, but most banks and financial institutions are still stuck in the 80s and 90s when it comes to ‘functionally’ led solutions for customers. User Interface design needs to be a core competency of any financial services institution these days, or you need to have a great supporting team in place.

Apple showed off Apps like iMovie ($4.99), GarageBand ($4.99) and the FaceTime (free) App as examples of how interaction is changing as a result of the iPad. But more than that, Apple showed how the iPad is changing interactions in schools, at the workplace, for doctors treating patients, for pilots doing flight planning and many other examples. The iPad user interface along with multi-touch is reinventing these types of journeys through smart redesign of the interaction.

To expect that customers will be forgiving in the face of poor operating procedures, poor interaction design and outdated screen design and flow is a huge mistake. Using regulation or internal bank policy as an excuse, just won’t cut it anymore. Customers will be measuring the effectiveness of their service providers based on these types of ‘interaction’ metrics now, not on how many branches you have or what your interest rates are.

Start thinking about redesign your customer journeys and interactions. This is a core capability for any customer facing business these days.

Steve Jobs back on stage at the iPad 2 launch today in SFO

The iPad 2 launches in the US on March the 11th, and in the UK, Australia, Canada, and a bunch of other countries on the 25th of March. You can check it out on the Apple.com site right now!

Mobile Crunch did a great live coverage on their blog of the iPad2 launch event if you’d lke more details.


BANK 2.0: Mobile AdServing or Mobile Offer Management?

With the massive activity in the mobile Ad space arena at the moment, I’m amazed that there is so little focus on this by Bank marketing teams.  It shows a level of ignorance that is staggering.

Citi Shopper - Is this what we really want from our bank?

There is some light at the end of the tunnel. This week Citi announced a new App-based mobile marketing platform, mainly built around the loyalty program for their cards division. But as BankInnovation’s JJ Hornblass points out, this retail shopping App doesn’t really give customers of Citi any real advantage over using an existing e-tailer like Amazon, BestBuy, or similar. Why? Mainly because it just isn’t different enough.

CitiShopper, as far as I can tell, doesn’t offer me extraordinary discounts with the retailers I’ve shopped with before, it doesn’t prioritize product based on my previous credit card usage, and while it gives me ‘rewards’ I get those anytime I use my card! If it told me where I could get ‘exclusive’ deals as a Citi customer, that would be a start. If it recommended the best retailers for products that I frequently purchase (evidenced by my past card usage) along with some loyalty bonus – that I could understand.

Apple and Google invest big time in m-Ad

iAd is Apple’s embedded platform within OS4 for driving mobile advertising from within Apps. They’ve taken a very cooperative approach with developers, offering developers back 60% of the Ad revenue taken from mobile click-thru. This seems to be paying off as, according to Steve Jobs during the iPhone4 launch, Apple has iAd commitments for 2010 totaling over $60 million already and they’re effectively in pre-launch mode. Apple tout iAd as a marriage between the emotion of TVCs and the interactivity of the internet, all on the mobile handset.

Google has taken a slightly different approach with its acquisition of Ad Mob. They are first and foremost focused on mobile search, with new techniques such as voice queries, photo product matching services and search (like Google Googles) and new search Ad formats like “Click-to-call”. It cost Google $750m to acquire AdMob, so you can be sure they believe in mobile marketing in a very big way.

FourSquare is becoming an interesting conceptual player in the retail space too. Already there are heaps of deals out there for 4sq mayors who get free Starbuck coffees, half-price deals and so forth at participating retailers and locations. Geo-location is an important part of the mobile advertising puzzle.

There’s an immediate opportunity here for banks with Blackberry, Android or iPhone Apps already deployed, and some fantastic future opportunities – but if you are a bank marketer proceed with extreme caution. As a bank you can choose to SPAM your customers with the offer of the month through your App – and you’ll ruin your chances for any productive mobile engagement with your customers from this point on, OR… you can engage them with targeted, relevant offers that turn a sales message into ‘service’.

Where to start?

Acquisition is the most difficult to be driven from an analytics perspective, but there is a way. For example, we may have customers who have taken a credit card, with us but have no savings or current/checking account. By looking at card history, purchases, payment history, etc. we can get a picture of potential needs. Maybe at certain times of the year they make certain big purchases that might be better funded by a lower-interest-rate credit facility, etc.

For cross-sell and up-sell, we already have all the information we need in the bank’s various systems, but we rarely use this information effectively. The issue is very much about learning from the data we have on customers to ensure we pitch the right offer to the right client at the right time.

The analytics should be looking for opportunities around the following categories of offer:

  1. Products that the customer has purchased before but currently does not have.
  2. Bundled product offerings
  3. Point-of-Impact solutions, that could help a customer right now based on an event or location trigger.
  4. Products that improve a customer’s life or aspirational products such as an ‘upgrade’.
  5. Alternative products that give the customer a better deal than your current solution.
  6. Pre-cognative offers, anticipating customers future needs.

As customers we rarely receive such well thought out offers. I have a spread of products with various financial institutions that could easily be consolidated with one or two institutions, but the fact is that often I make the choice on a product because of expediency and because my primary institution relationship is not anticipating my needs.

The three core competencies:

Mobile, Geo-Location Services, Social Media and Customer Analytics give me the ability to do so much more in respect to targeted offers for existing and potential customers. I see three forms of mobile marketing emerging in the near future as core competencies:

  1. Location-based ‘deals’ offered to customers particularly card-based usage deals
  2. Event or location triggered deals offered based on a specific event tied potentially to a location also, such as an arrival at an airport cross-correlated with a credit card purchas of an airline ticket for travel insurance. Think 4sq mayoral offers…
  3. Viral Mobile Social Media messages targeting individuals in social networks through access to key influencers who can on-send offers that benefit the groups as a whole

Whatever the case – mobile, targeted offer management is a core skill for banks today – one that is generally completely absent from bank marketing departments. How do you know if as a bank you are ready for mobile? If you are asking your agency to run a campaign from their own list or database or you are trying to retrofit your currently monthly campaign onto SMS, that’s a bad sign.

Start building an offer management capability today. Think point-of-impact and really start capitalizing on what you already should know from the Terrabytes of customer data you have on hand. Turn sales offers into great service!


Banks – get your website right before worrying about your iPad App

There’s a lot of excitement about Apple’s new iPad. This week it was reported in various news sources that two banks in Australia were releasing an iPad app to capitalize on the iPad fever. Now… you’d normally find one of the first to jump in and hail such an announcement as an indication of real progress in the fight to innovate the retail banking space. But on this occasion, well I’m not jumping…

The two banks in question in this instance are NAB (The bank formerly known as National Australia Bank) and St George (now part of the Westpac group). The problem I have with this whole announcement is not that it isn’t a positive move, because it is, the problem I have is that they still don’t have the fundamentals right on their existing websites and they’re fooling around with the iPad! Get real people!!!

NAB's Dedicated iPad App looks cool! But they've got bigger problems...

If you go to NAB, St George, Wells Fargo, Citibank, Bank of America – well just about any banking website today – the customer experience is pretty poor. When you get behind the login, which is where 70-90% of the traffic goes when it hits the homepage, things get even worse.

For over 10 years most of the banks that I work with have been collecting information about me. They know my spending habits through my credit card usage. They know the mobile phone operators I work with in the countries where I live and work. They know my average spend on things like my Apple iPhone, iPad, Laptop, Flat Screen TV, etc. They know which business accounts I transfer my salary from. They know the relationships I have with various investment partners where I make regular contributions to savings plans or lump sum payments to my managed funds. They know which stocks I favor and hold in my portfolio. The also know the name of children, how long I’ve been married and the last three residences I’ve had. The reason I know they know all this is that either it is something they’ve asked me as part of their KYC (Know Your Customer) procedures, or something that appears on the statements they send me for my credit card or various accounts. They have the potential to know me and my financial savings and consumption habits, probably better than I know myself. But…you wouldn’t know it.

The thing is…when I visit their website or login to internet banking – they appear to have absolutely no idea of who I am.

In the late 90s I remember that there was a huge push for ‘personalization’ and CMS’. But what have we really learned about forming the appropriate message and content on our homepages in that time? Pretty much nothing. Let’s look at an organization that has learned about the value of the homepage:

“Yahoo is a company that is very strong in content. It’s moving towards the web of one. We have 32,000 variations on our front page module. We serve a million of those a day. It’s all customized. Our click-through rate went up twice since we started customizing this.”
Carol Bartz, CEO of Yahoo, TechCrunch Disrupt, May 24, 2010

So why is it that banks have no idea how to engage me? Here’s a simple test. Take two products that are fairly popular when you review search engine keywords related to banks – mortgages and student loans. When I go to any of the sites mentioned above, finding information on these two products is generally not that difficult. However, when I’m doing research on these products, studies show that I will probably come back a few times to my bank’s website before I decide to apply (if I can apply online at all that is). It is the easiest thing in the world when I return to the bank’s homepage for me to be presented with an offer for a mortgage or a student loan up front, based on what I looked at on my last visit. By prioritizing this content up front, simply through the use of cookies, I dramatically improve the likelihood I’ll get where I need to. The bank already knows I’m interested in this product, so why bother slamming me with the offer of the month or telling me about the bank’s social corporate responsibility program. Give me something relevant!

The fact is, pretty much every bank you visit online these days forgets you as soon as you close the tab or window on the browser. That’s why, with many bank websites, were still presented with commercial banking information, investor news and even the dreaded press releases when 99% of the traffic is focused on retail banking related services and products.

With the amount of data bank’s have on their customers and the amount of data they have on traffic, product enquiries, applications and transaction history – building a platform to allow customization of the homepage should be a snap. There is no offer management, no active sales engagement either through the homepage or the secure internet banking portal – it’s just like walking into my branch and feeling like nobody knows me.

A word to the wise – you should know me well enough to serve me better through these basic platforms. Get those right before you start worrying about your iPad app!


Radio 938 Live – Singapore Radio interview launch of BANK 2.0

Michelle Martin
Radio 93.8 Singapore938 website
Segment: – Passion People

Radio segment that aired on Radio 93.8 Singapore 30th of April, 2010 (Recorded Friday 23rd of April). Michelle Martin and Radio 938 were so kind as to give me a very decent opportunity to explain more about the premise behind BANK 2.0 as a book and talk about the real challenges facing banks in creating or adopting innovations around customer experience.

The interview is approximately 10 minutes in length (uploaded in 2 parts due to file size). Hope you find the insights useful.

Radio 938 Interview – Part 1
Listen to Radio938Bank2.0-Part1

Radio 938 Interview – Part 2
Listen to Radio938Bank2.0-Part2


The only real iPad application for banking (Huff Post)

See the post as it appears on Huffington

Many would argue that the iPad is a revolutionary device in user experience, but the key innovation in the iPhone and the iPad has been in improving or morphing the way we interface with our computers. Multi-touch is the key element of this innovation…

So is there a role for multi-touch iPad applications to improve customer experience in banking? Well most of our banking these days can be done in the complete absence of a banker. We do cash withdrawals and deposits via ATMs, we do bill payments and transfers via the internet and mobile, and we even apply for products like mortgages, credit cards and personal loans online these days – all without the need for a face-to-face interaction with a banker. Increasingly low involvement applications are moving out of branches because the branch doesn’t provide a value differentiation when it comes to the experience of applying for that type of product.

If you walk into a branch what sort of thing might you still do these days? Well we used to walk into a branch to deposit or cash a check, but statistics show check usage in the western world is in rapid decline due to Internet banking adoption and electronic transaction capability. You might need to request a reprint of a statement, sign an important document related to your bank accounts or want to discuss an apparent statement discrepancy. You might wish to seek advice on a specific investment. There is still a role for the branch for certain types of human interactions that add value for a sales engagement or service opportunity. Which of those interactions might be improved by the use of the iPad? I’m not talking about Internet banking. The plethora of iPhone applications for mobile internet banking have already shown that the iPad has suitability as a tool for accessing your accounts, etc when you are on the move. But what about when you are in the bank? Is there a role for the iPad to improve the human element, to improve the interaction between banker and client?

Well there is really only one interaction that is massively suited to the iPad – that is the High Net Worth financial or portfolio review meetings that occur within preferred banking or private banking engagements by a financial advisor or relationship manager. There are plenty of specialist software houses and banks alike that have had a shot at improving the standard of client engagement for this vital demographic, but at the end of the day the best financial advisors often just use a pen and paper to lead a client discussion. Putting a laptop in between a financial advisor and a client at this point of engagement is often counter productive – it can disrupt the flow of the conversation and can act as a barrier to the client getting real advice on his needs. Too often software tools that are used assume a one size fits all approach to clients and are ultimately a simple product recommendation tool.

When clients come to their advisor to meet, they don’t want he or she jumping on a laptop to find out which product is right for them. They really want the advisor first and foremost to listen to their needs before making any recommendations. The problem with software interfaces designed to make those assessments is that the advisor has to ask so many questions to get a suitable recommendation that in the end the client feels like the review or interview is an interrogation, not an interaction to help facilitate a solution to their vital issue facing their family.

Simple review meeting take away for client

The best tool for the financial advisor to-date has been pen and paper

The application interface if designed right, in partnership with the iPad as a device, could be a godsend for this interaction. It is a tool that could enhance the discussion with the client, and allow both the client and the relationship manager or advisor to take away key outcomes from the meeting. This could quickly and easily be integrated into the client’s internet banking account so that he sees exactly what was agreed, along with the suggested portfolio allowing him to do the execution online at home. Giving him key control over the most important element of the engagement which is the decision to commit to a specific investment in a particular asset class. KYC is taken care of as he’s an existing client and we just have to ensure that he ticks the correct boxes on the risk side when he clicks on ‘yes’ within the secure environment.

It could even be that the review meeting ends and the advisor goes back to the office to select the most appropriate products in each of the specific asset classes targeted, so the client can do further research online later.

Using the iPad in this way could improve the client engagement dramatically, but still make it feel like an honest to goodness advisory session rather than a product pushing process. The interface still needs to be super simple, but if it does everything the pen and paper can do, but in a structure, simple, usable fashion – it would be a huge improvement in client/RM facilitation.


Evolutionary marketing – Tribal, viral and mobile (Huff Post)

See the original Huffpost entry here…

There is a lot of discussion about how social media will play out from a mobile perspective, and how marketers in particular can monetize and leverage social media for real revenues and brand influence in the future. There are those, such as Umair Haque from Harvard Business Review Blog, that believe social media in its current form is a bubble with very little in the way of real income – in effect creating relationships that are not as robust as others would have you believe.

As we start to see huge adoption of smart or App phone handsets, the promise of potential migration of social media onto these platforms are hailed as the real future of 2.0 with endless possibilities. As we throw Augmented Reality and Geo-Tagging into the mix, those who are pro social media envisage a interconnected semi-virtual reality where purchase decisions, social grouping, even political movements and public lobbying are all enabled by mobile 2.0 implementation. Neither Haque’s lukewarm perception of ‘thin-connections’ or more upbeat assessments of the impact of AR-enabled social media are on the mark because a key ingredient is missing in the assessment of the viability of mobile social networking.

The real question businesses ask is how do you make money out of social media? We have seen social media give a voice to customers, empowering them to either individually or collectively influence policy, pricing or strategy.

The flawed logic by Haque and others is that you need to define your social ‘network’ through a social media platform like Facebook or Twitter and that the voluntary nature of participation in these networks does not always guarantee quality relationship that can be leveraged commercially. The fact is that there are social tribes that exist that are a great deal more powerful than defined networks established on social networking sites (SNS).

Everyday when we use our mobile phone we are participating in social behavior that is a great deal more natural and powerful than those established via SNS. Every time I call a friend or business contact, SMS or MMS my friends, check my email, or use mobile internet based communication tools, I’m forming social connections that look just like those you’d see on Facebook or Twitter, but are made up of extremely strong connections with my most intimate and trusted contacts and colleagues. These are extremely powerful natural, social networks that transcend programming and platforms – they are the networks formed by our day-to-day interactions in real terms.

CDRs or Call Detail Records are the day-to-day transaction data recorded by mobile network operators to enable accurate billing on your mobile bill. These CDRs contain all of the information required to map social interactions within tribes with substantially more accuracy than an online social network.

By data mining CDRs and seeing the natural connections between mobile users, strong network activity can be observed. Within these networks exist natural influencers of the tribe, key influencers or as Gladwell calls them connectors. By targeting these key influencers with targeted messages that are group sensitive, marketers could reach the entire group via the viral network effect.

None of this is really happening effectively today because we are either still broadcast advertising, relying on sketchy CRM databases not informed by analytics or are using demographic, tag or keyword association in weaker social networks online.

Viral social networks

Key influencers are high value targets for initiating viral campaigns

As an illustration a small start-up in Australia, QMani Analytics, has recently demonstrated a platform they call tribefinder which can identifying the tribes contained within a mobile network operators CDR pool. But the key to success on the revenue side is matching other profile information from an enterprise CRM system, or from customer behavioral analytics (like credit card usage data) and filtering CDRs to create better tribal models. Then we need intelligent marketers who can create compelling viral offers that we can roll out via MMS to a key influencer so he or she can send it on to their valuable network. The best key influencers, of course, should also be great advocates. So once we identify these guys we should service the pants off them so they feel inclined to support our viral efforts (although they won’t recognize them as viral campaigns hopefully.)

For network operators converting pre-paid to post-paid and preventing churn will be a handy by-product of tribe marketing. For retailers, banks, and other service organizations, however, we are talking highly targeted mini-segment offers that will have a massive acceptance rate. Cheaper than pretty much every current media platform, and magnitudes more effective at conversion, tribal marketing via natural mobile social networks is nothing short of a revolution in customer connectivity.

The real challenge is not the technology. Tribefinder’s analytics engine is not rocket science. The real challenge is for companies to understand the shift in marketing dynamics. For almost a decade now traditional broadcast media has been in decline. Marketing to tribes requires a completely different skill set than is on offer in most organizations today, but it is a key part of our future in reaching and retaining customers.

Tribal, viral, mobile – they are your future if you are trying to reach customers.


If you're my bank – you better get moving…

Mobility in banking and payments is not a fad. This week I gave a keynote address at the 3rd Mobile Commerce Summit Asia (Manila) and meet with global players in the mobile payments and commerce space. Apart from the fact that half-way through the second day we experienced a 6.1 magnitude earthquake, the entire conference confirmed my view that banks are under massive pressure on mobile innovation – and the majority of them are not moving anywhere near fast enough.

The core proposition of mobile banking is two fold. Firstly, the device is already ubiquitous with 80% of the world’s population already owning a mobile phone. With only 20% of the world’s population having access to a bank account, it is patently obvious why mobile is the enabler for mobile wallet, payments and bank facsimile. WIth PayPal, Facebook, Square, Verifone and others launching themselves into the mobile payments arena, there is a great deal of interest in this space. Secondly, convenience has always been the core driver for the success of Internet Banking, so with mobile internet the convenience factor is even higher because you carry your “internets” with you.

“If I leave my wallet at home, I may not notice it for the whole day. But if I lose my cellphone, my life will start stumbling right there in the subway.”-21 year-old Kim Hee-young, Sookmyung Women’s University
NYTimes Article May 2009[1]

The fact is that once people start getting used to receiving and making payments from their mobile phone, whether it is via SMS initially, or via contactless (NFC) applications in the near future, the convenience element will drive adoption rapidly. With natural social media (tribes) implemented into mobile devices too, adoption would accelerate even quicker as social media creates a member-get-member effect for mobile wallets. If a few banks were to enable cash-in and cash-out via ATMs from your mobile wallet, this would add to the viability and push competitive innovation. The point is – you already have a mobile phone, if someone sends you some mobile money – you are converted into a customer right there and then. No need for fancy marketing, advertising or infrastructure. Then the more merchants that accept payments from mobile money whether online or in-store, the faster again that average spend/utilization will climb and non-participating merchants will hop on board.


Using Ping.Ping viral mobile wallet for payments via SMS/NFC

So if you’re a bank have you really got anything to worry about, or is it, much ado about nothing as some learned colleagues have posited in the past? (Although to be fair to The Finanser he did soften his stance the next day)

Banks like to think they’ve got a lock on payments because everyone needs cash, and to trade cash you need some form of a banking license. Well that doesn’t explain the unmitigated success of M-PESA, G-CASH and other mobile money implementations in developing economies where the unbanked have embraced such with both thumbs. In fact, developing economies with huge populations of unbanked are absolutely prime targets for fast adoption of mobile money transfers.

Bank’s might also argue that they’re not really interested in the unbanked, and ‘real’ customers are probably not going to adopt mobile money transfers as quickly as the unbanked because they’ve got a perfectly good credit card and/or debit card they can use. Well they may have a point, but only if those same banks can accelerate the integration of credit cards and mobile phones. Why? Because the name of the game here is mobility.

The reason mobile money is going to take off so quickly is that I already have to carry my mobile phone everywhere I go, and with mobile money I don’t have to go to an ATM, branch or physical location to get cash – because I can spend my moBucks at any participating retailer.

A great example of ubiquitous adoption of cashless technology is the Octopus case study in Hong Kong. Octopus is a contactless (NFC) smart-card that was introduced as a replacement to paper ticketing on Hong Kong’s transport system back in 1997. Within 3 months more than 3,000,000 (that’s 3 million) cards had been issued. Once ubiquitous merchants from McDonalds, Starbucks, 7-Eleven, Bookstores to Cinemas and Swimming Pools. Why? Because carrying around a card and paying by a contactless ‘swipe’ is still less hassle than going down to the ATM and using cash at the POS (point-of-sale).

Customer behavior is what will drive mobile wallets – the search for convenience. The same imperative is why customers are looking to check their account balance, transfer funds and pay bills through mobile internet banking.

As Chris Dadd from the UK Mobile Data Association and RBS said today at the Mobile Commerce Summit in Manila:

“If mobile-based banking or payments are easy to use, fast, cheap, social and in the cloud the growth will be unstoppable…”

I’m sorry to say, but most of the banks I talk to are only now just considering mobile enablement. So realistically by the time they develop their iPhone App or get their act into gear we are at least 6-9 months away from workable solutions. That’s too slow. End of story?

Banks can accelerate their involvement in the mobile, social boom by being open and collaborative. By partnering with every telco, app developer and retailer they can think of, by encouraging (or forcing) card issuers to upgrade POS technologies, and by helping customer awareness of mobile solutions, banks can play a vital role as integrators of mobile into commerce and payments. In fact, banks should work on publish a channel SDK and put a partner program on their websites right now for this stuff – building it on the go.

If not, my guess is they’ll simply become spectators in the next big thing.


[1] “In South Korea, All of Life is Mobile”, NYTimes May 2009
http://www.nytimes.com/2009/05/25/technology/25iht-mobile.html?pagewanted=all


Open Source Banking – the solution to lagging innovation (Huff Post)

See the original entry on Huffington Post

Since writing BANK 2.0 I’ve been meeting constantly with banks who either have such huge organizational barriers to rapid innovation or conceptually still don’t appreciate the need for rapid change around customer. In fact, this is a global problem. Banks know how to run banks, but as they are pushed more to be something more akin to software houses, design houses, and integrators, their organizations are just not built for new priorities.

Think of it this way, when Amazon first launched on the scene, other booksellers like Barnes and Noble were extremely resistant to the concept of online book sales because they were so heavily invested in a physical distribution model. So much so that B&N attempted to acquire the biggest wholesaler of books that Amazon used to put a halt to their success. The FTC and pressure from other independent booksellers scuttled that deal, and thus B&N were somewhat forced to attempt to mimic Amazon’s approach online to prevent further loss of market share. Having said that, today only 13% of B&N’s revenue comes from the online arena.

In many ways the physical distribution model is even more embedded within most banks, dominating not only the organization structure, but even the way the manufacturer and positioning of product is carried out. With time to market for new products measured in months or years, and with a dominance of metrics still based around channel silos and their revenue performance, it’s going to be even tougher for most banks to adapt to a psyche of continuous customer experience innovation around the internet, mobile phones, new media, branch automation, and P2P payments. Thus, despite the shroud of regulatory protection that is afforded by a banking license, we see third-parties whose innovation threatens to disintermediate banks quicker than ever.

Take PayPal’s success. PayPal’s commercial launch in late 1999/early 2000 went largely unnoticed by banks. Bank’s believed that customers were unlikely to put in their credit card details for a non-bank online company due to the risk of fraud and abuse, but today PayPal accounts for between 27 per cent and 50 per cent of online payments. No bank would attempt to argue today that PayPal is not a competitor in the payments space, but card issuers and banks failed to garner the sort of momentum in innovating the payments

The need for innovation is rapidly speeding up, and to be fair some banks are scrambling to respond to interest in mobile banking and social networking, but most are finding the reality of innovation difficult to master. The key stumbling blocks to innovation in the customer experience remain the long-held metrics for business unit performance being based around channel silos and revenue gains within those silos, along with organizational structures that still favor ‘retail distribution’ over ‘alternative channels’. Are banks doomed to fail?

For banks, the key must be to utilize their unique platform for transactional capability, and to extend their products to be as pervasive as possible. However, banks just don’t have the bandwidth to be everywhere they need to be as quickly as they need to be. Is there a way banks can extend their reach, but not be solely reliant on their own organization.

Let’s talk about Apple. Apple iPhone launched in 2007, but already it has over 180,000 applications available, they’ve sold over 36 million units in the last 2 years and have more than 1 billion downloads annually from their iTunes platform. Yet Apple develops just a very small fraction of the Apps available for the iPhone – the developer community does by far the majority of app development.

In respect to channel innovation, why can’t banks take the same approach? If banks created APIs (Application Program Interfaces) to hook into their transaction and product sales platforms, as long as their APIs looked after the security and compliance requirements, then third-parties could actually create the new interfaces, applications, bundled product and cross-sell opportunities that banks need to create for their customers.

As so much of the interaction between customers and the bank these days is done through electronic interfaces, let’s open up the development of these interfaces to innovative developers and the community. Let’s build collaborative social networking sites that allow customers to define product parameters and benefits, but where the bank executes the actual product application through their back-office. Let retailers of big ticket items integrate personal loans directly into their sale experience, airlines integrate travel insurance into their booking engine, and real estate companies integrate mortgage product into their property search engines.

Developing point-of-impact opportunities where bank product or services are integrated into customer experience is going to take more than an innovative bank. It’s going to take an open capability, a library of APIs, automated credit risk assessment and straight through processing. Once in place, however, these tools will enable almost unlimited innovation of the customer experience without the constraints of a bank organization chart, channel silos or outdated financial metrics.


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