Mobile Future | Blind & Dependant Super Tankers.
All too often I shared my outlook on the banking industry as it faces a massive transformation. Today’s legacy banks are under serious threat, as the very core of the their legacy is challenged in the face of shift in consumer behaviour, the digitalisation of products, and the open sharing and value of opinions. These three forces continue to point to something that many still don’t believe… banks are facing the same disintermediation that Borders, Blockbuster & Encyclopaedia Britannica faced, creating a very real possibility that more nimble players, i.e. Amazon, iTunes and Wikipedia, will take control of of the market. So I thought it might be good to revisit the evidence.
Consumers Are Digital and Mobile
Over the past ten years, our lives have aggressively moved into the digital form. Postal Mail replaced by Email, VHS Movies replaced with NetFlix, Film replaced with Digital Cameras, LandLines replaced with SmartPhones, plus our entire life has shifted into digital forms, through Facebook, Twitter, LinkedIn, etc. Creating an entire generation that will never use landlines telephones, read Catalogs or Print Maps, Write Checks, Visit a Book Store, Send A Fax, and the list goes on. We live in a world where digital is not something that’s coming, not the exception, but the norm. The large majority of 10 year olds today are proficient on iPhones and iPads.
Money Is Digital
Money has seen many evolutions over the centuries, from Gold Coin, to Paper Notes, Paper Checks, and more recently Plastic Cards. But the key insight here is Money has become digital. Just likes books, magazines, photos and film, its current form means it is easy transported in a digital format. Removing the need for tangibility or physicality of money. In today’s world, sending money from the United States to Singapore is as simple as knowing your email address through the likes of PayPal. This opens the door for more technically savvy companies to create superior experiences or offerings that harness the power of money is new and exciting ways.
Mobile At The Center Of Daily Life
In the modern world, many of our daily services have shifted into Apps on our mobile device, making us increasingly dependent on our phones and tablets. Multiple studies have shown that people these days are more likely to forget their wallet than their mobile phone. The device has become such a central part of our life at such a personal level. In his book The Third Screen, Chuck Martin explains… ‘no two people are the same, and the same is true for Smartphones. Each phone is highly personal an intimate to its owner’. People setup their phone to create their own personal context, where it be stocks, weather, messages, photos or maps, the user creates a central device to manage their daily interests.
Mobile Payments Are Mainstream
Given my experiences in Mobile Financial Services over the years, I am continually frustrated by comments such as those by industry commentator Chetan Sharma in his 2012 Mobile Industry Predictions. Chetan forecasts that Mobile Payments will become mainstream in 2020…. seriously? 8 years away? I think he, and everyone else needs to wake up. The reality is PayPal did $4 Billion dollars in payments JUST ON MOBILE in 2011, and are forecasting $12 Billion for 2012. These are no minority volumes. Mobile Acceptance startup, Square, did $2 Billion in its first year 2011, processing over $5.5 Million Daily and seeing 25 percent month on month growth. Again, this it not minor volumes, Square is mainstream. On his blog, Bank 2.0 Author, Brett King, states a clear case that bank need to wake up, cause mobile payments are already here
Democratisation Of Opinion
With the proliferation of social networks over the past 8 years, social opinion can virally spread FAST. Famously, Ann Minch, ranted on YouTube about Bank of America raising her Credit Card rate to a whopping 30% APR. Her four and half minute rant went viral, reaching over half a million viewers and forcing Bank of America to ‘correct’ the situation. Or the hugely covered Arab Spring, where prior to the revolt, there were only 12,000 twitter accounts in Egypt. But they managed to amass 100,000 followers to support an idea. An idea that would eventually over throw the government, in a nation of 82 Million. That means Social Media empowered less than 0.2% of the population to give an idea enough force bring about Egyptian president Hosni Mubarak’s resignation. Scary thing is, every G20 nation, with the exclusion of China, has higher Twitter penetrations. Just something to think about 😉
Know Me & Demonstrate It
The powerful part of digital world is the ability to leverage customer insights to optimise, refine or target services. Google is known for its advertising optimisation, Amazon for product suggestions and Facebook for friend suggestions. Each of these services is under pinned by a bilateral value exchange, where the user volunteers information in exchange for an enhanced experience. In world where banks have a wealth of information on our financial lives, they rarely use it to ‘enhance’ the banking experience, choosing instead to feed it into cross-selling platforms. Customer information has the ability to create something that has lacked in all forms of media, print & digital, for decades. It allows for the creation of context, tailoring a experience to an individuals demographic, geographic, sociographic, timing, location, modality, preferences, internets, past behaviours and/or dislikes. In the modern information age, with a abundance of information flowing all around us, we tend to be attracted to services that demonstrate a level of knowledge in us through effective use of contextualisation.
Legacy Has Too Much Friction For Modern Life
Over the centuries banking has matured, and over matured their businesses to be resilient in the face of recessions, depressions, bank robberies, fraudsters, money launderers, and organised crime. What its created is a service culture that embodies over controlling defenses, that not only derricks the business, but also creates deep layers of friction across the organisation. Think the processes, checks, validations, etc. that you go through to open a basic deposit account, or even worse a mortgage. Many of these ‘required’ steps are the result of the accumulations of risk and regulatory controls that have deeply entrenched themselves as the way a bank should be when is comes to service design. As a result and increasing amount of consumers are opting out of traditional banks in favour of lower friction offerings like Pre Paid Cards, PayPal, Dwolla, etc.
Blind And Dependant
Over the years over preaching these points I am continually commended on my thoughts and insights, but feedback comes with a onslaught of excuses…
- ‘We’d love to innovate in X, but the regulator hasn’t told us how to yet’, or
- ‘We Are Only Targeting High Net Worth and they love Branches’, or
- ‘There is no Business Case in X’
These excuses comes of a industry full of individuals that have been shaped by the legacy I mention in the previous point. Shaped and moulded in such a way that they can see the market changing in front of them. Majority of banks are still considering a response plan to PayPal. But PayPal has been around for 12 years, and today do volumes that embarrass the banks. I hear similar comments from banks about mobile… ‘We launched an iPhone App, but usage was so low. Our customers just aren’t interested in Mobile.’ Banks are blind to the market cries for digitally friendly, contextualised, mobile offerings. Because lets face it, they make their dollars leveraging the cash of the Baby Boomers, addressing the needs of a digital society can wait.
The reality for banks in the modern era is they are huge Goliaths with over whelming inertia for a legacy driven business model. Inertia that can only be illustrated by something my good friend Brett King mentioned. Banks are Tankers, the very largest are called supertankers which can manage over 300,000 tons of oil. These ships can weigh 200,000 to 400,000 tons all by themselves. The top speed of a supertanker when carrying a full load can be as much as 18 mph (or nearly 30 km/h). The immense size of these ships, as well as the heavy loads they carry, mean that each supertanker has enormous inertia. A crash stop maneuver (from ‘full ahead’ to ‘full reverse’) can stop a fully loaded supertanker within approximately three kilometres, which takes about 14 minutes. The turning diameter is almost two kilometres.
If banks were to regain their vision, shed their dependency on excuses and regulators. It would take the equivalent of 3 kilometres to alter their course and attempt address the needs of the modern consumer. If they fail to make the necessary course changes in time, they may face the same fate as these Super Tankers.
Would you let a Blind Man Command a Super Tanker?