17 April 2014

Nick Ogden

Nick Ogden - Voice Commerce Group

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Banking innovation and the customer

24 April 2012  |  3612 views  |  1

Banking is not a world often associated with innovation.  If anything, banking customers have previously sought out stable and conservative banks – the ones that you can trust with your money.  Furthermore, few question their banking loyalties, happily sticking with their long-trusted bank, regardless of offers and products elsewhere.

Account switching is more prominent amongst businesses than consumers but even then, banks benefit from a high level of indifference from their customer base when it comes to moving banks.

A combination of the financial crisis and technological advances has changed this. The growth in innovative financial tools has also increased competition, with the emergence of new players looking to capitalise on business and consumer appetite for improved banking products.  But what are these tools, and how are they impacting different types of customers?

Mobile banking is comparatively new, but is already regarded by many, especially the new generation of consumers and businesses, as an essential tool.  It is not, therefore, too difficult to imagine that customers could switch banking provider in order to gain access to more user-friendly online or mobile banking solutions.

Contactless payment capability (NFC) has been long-talked about, in terms of the convenience it will provide to customers and businesses, but few banks have really put themselves out there to promote such a service on a large scale implementation. 

For small businesses and the self-employed, mobile payments offer the opportunity to improve their business models; take the example of taxi drivers who can take payments via a touch pad in the back of their cabs, or plumbers who can ask customers for an immediate mobile payment, rather than send an invoice or receive a cheque.

Innovation for consumers is often the focus but small businesses can also reap the rewards of technological breakthroughs. E-invoicing, the ability to check and pay invoices online, generates both cost and time savings, improved accuracy and cash flow improvements for businesses.  Ultimately, e-invoicing offerings could be a key deciding factor for businesses when choosing a bank, for example.

It is clear that the times are changing, with a wide range of products and financial services to satisfy tech-hungry customers. It is great to see banks and financial institutions providing innovative solutions for small businesses. Everyone has a right to choose the financial services most appropriate to their needs – are banks finally realising that the customer is king?

 

TagsOnline bankingMobile & online

Comments: (1)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 25 April, 2012, 14:17

Needless to say, banks have to prioritize funding for innovation initiatives with expected returns, either through fees from customers or incremental interchange revenues, or whatever.

With mobile payments, banks probably know that the reality is quite different from a whole lot of theoretical usage scenarios.   

Let's take the taxi driver example. What do we see on the ground? Despite having mobile POS in their taxis, many taxi drivers quibble about accepting cards. This has not only been my personal experience in some cities of India but also the view expressed in a recent Finextra post about cabbies in Spain / Italy. Fact is, for small businesses like taxi drivers and plumbers, a 2-2.75% MDF is a lot of money and a T+2 delay in receiving their funds is a lot of time. No wonder they insist on cash whenever they can get away with it and don't seem to be sold on the potential of mobile payments to improve their business model.   

Now let's take Uber, the limo service available in San Francisco and a few other American cities (maybe even London by now). It charges almost 2X fares of regular cabs. It justifies its premium by offering, among other features, guaranteed credit card acceptance. Imagine the consumer and regulatory furore that would ensue if banks were to raise their interchange by even 25 bps for accepting mobile payments via self-owned mWallets?

I think banks are doing a smart thing by letting all innovation in many of these spaces happen elsewhere without putting themselves on the frontline. They pocket the same fees anyway.

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Nick Ogden

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Voice Commerce Group

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