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by
Brett King
Read between
July 29 - September 16, 2019
Customer/Business impact scoring matrix.
What is the core utility a bank offers, and how best can that utility be presented through the technology layer in real time? That should be at the heart of great CX design in everyday banking.
Research from Innovative Leader found that the vast majority of companies don’t even have effective metrics to measure their successful transformation. The research did show that both activity metrics and impact metrics were critical in measuring the success of transformation efforts.
Technologies like artificial intelligence, blockchain and cloud architectures are fundamentally changing the way we build financial institutions for the 21st century.
When I see the likes of HSBC promote a CEO who has practically zero technology experience and has spent his entire career in the bank19, I’m going to bet they will probably fail to transform their business20 before it is materially disrupted.
You simply can’t claim to be transformative, innovative, customer-first or “a technology company”, unless you actually have leadership that gets the tech stuff. Leadership that can execute for the 21st century.
Your ability to attract great talent is about culture and your ability to leverage technology. Artificial intelligence at the heart of your future business won’t be built by guys who started off as a teller in a branch.
debated and Apple was yet to decide their strategy; but up until October 2017 China alone did US$12 trillion in mobile payments across two non-bank networks, Tencent and Alipay.
Since 2009 financial inclusion has boomed in India, sub-Saharan Africa, and elsewhere around the globe, with more than one billion people getting access to a simple store of value; virtually none of those individuals have entered financial services through traditional branch access.
behaviour, let me give you some of my predictions for the 2025–2030 period: By 2025, the largest deposit-taking organisations will be technology players, whether technology leaders like Alibaba, Amazon, Google, Tencent and Apple (potentially), or pure-play FinTech disruptors who have simply worked out how to scale deposits more efficiently. By 2025, almost three billion unbanked will have entered the financial services system over the preceding 15 years without ever having stepped foot in a branch. By 2025, every day more people will transact and interact with their money on a computer,
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The latest news is not only that Alipay is getting into the banking game, but Amazon is as well. At Money 20/20 in Singapore in 2018, Piyush Gupta observed that despite banks’ confidence that they have brand and network advantages over tech giants, these new players have access to billions of customers already and their acquisition cost is effectively zero. There is no bank that can claim the same today.
The foundation of banking in the 1.0 era was simply being great at banking—good ROE, good credit risk policies, good distribution and network, etc. The foundation of banking in the 4.0 era is being great at technology—full stop.
But remember at the core of this is a simple extrapolation of an overarching trend. Technology is increasingly about these things—instant gratification, ultimate personalisation, frictionless engagement and margins based on scale.
The Bank 4.0 “digitisation” scorecard If you want to know how close you are to becoming a Bank 4.0 player, use the questions below to score yourself: First principles is your mantra—Your organisation doesn’t work off conventional wisdom, doesn’t iterate off the analogy of the existing banking business. Frankly, you’re prepared to burn it all to the ground and start again, because you realise the way banking works today based on a system that is 700 years old isn’t the way it’s going to work 20 years from now. You are excited to reimagine banking from scratch. Any traditional operations are
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But technology is not the end goal—compelling embedded banking experiences are. As a platform, your bank needs to be integrated into its customers’ lives when and where they need it the most—this is where the technology is taking us. Understanding that technology means they’ll never have to “come to the bank” ever again.
The foundation of a Bank 4.0-ready organisation.
The Bank 4.0 organisation focuses on frictionless, agile delivery for revenue and relationships.
wanting to buy that new iPhone but you can’t afford it without credit. The answer isn’t applying for a card, it’s applying for credit—an experience that by its nature will redefine the way we organise the business. The credit card department gives way to teams that can surface the utility of credit contextually where it makes the most sense. Sure, you need credit access; but no, you don’t need plastic, you don’t need to apply months or weeks in advance—you just need the core credit capability surfaced through the technology layer.
The BATs, FAANGs, and GAFAs all have access to hundreds of millions of customers and banking is just another service they can deliver to their already willing customer base. In this banks are at a distinct disadvantage.
Let me make one prediction over the next 10 years: I predict that somewhere, a competent digital regulator will decide that there’s no reason why customers of a bank need to be residents of a specific geography, they just need to be adequately identified. Once that happens, jurisdictions and financial centres will not just compete for venture capital dollars and talent, they’ll start to attempt to be truly global centres for banking where a digital value store for a customer doesn’t need to be tied to where you live.
A FinTech doesn’t have to worry about those things. They choose the most digital savvy customers, they don’t have legacy processes or systems, and they have investors more concerned about their ability to scale than profitability. Look at Amazon, they didn’t really start making big profits until they’d been in business for a good 10 years. Incumbent banks can’t commit to 10 years of losses to rebuild. FinTechs just need to worry about raising the next round, and that comes down to scale and growth, not profitability.
Ultimately this will lead to parings of FinTech, technology players and incumbent banks. Banks who refuse to partner with these more efficient players will find it effecting their bottom line and speed to market increasingly, and this will be under the microscope of market analysts. It’s the same reason why markets will, over time, start to discount banks who are reliant on branch networks for customer access—simply because challenger banks will consistently demonstrate much cheaper acquisition costs, and thus the ability to scale and take market share in a way that can’t be defended by branch
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Figure 5: The Bank 4.0 roadmap.
Blockbuster, Borders, Kodak, and their ilk have taught us one thing about the scale of disruption that we’re seeing in financial services. Simply, that no industry is immune, and no one admits they are being disrupted until they have to file for chapter 11.
First principles thinking not only creates rapid innovation, but also rewrites the rules governing the industry’s economics and market dynamics. It changes the baseline of how society operates around the core utility they’ve innovated on. Right now we see strong evidence that the likes of Alipay, Tencent WeChat, M-Pesa, the challenger banks of the world and others are all using elements of first principles thinking to start from scratch and deliver banking more efficiently at scale.
Bank 4.0 is about the emergence of banking that is everywhere through ubiquitous technology capabilities. Advice at scale through AI; revenue and relationship based on instant service capability; bank accounts that help you save and don’t reward you for spending; millennials that reject credit, and seek simply an answer to their problem or question. Money that isn’t paper-based. Revenue that isn’t paper-based. Relationships that are not people-based. Banking everywhere, but never at a bank.
the end of the next decade the largest “bank” in the world will have close to three billion customers in 100 countries, and be worth almost one trillion dollars. I’m making a bet that “bank” will be Ant Financial and in 2025 it will already have surpassed ICBC, the largest bank in the world today, in respect to customer numbers, assets, deposits and market capitalisation.
In 2011, Brett King co-founded Moven as the first US direct to consumer neobank to offer account opening via a mobile app. The app’s engaging design helps customers spend, save and live smarter.
