Multiple research reports have shown that customers find their banking services and products commoditized (see ref 1 for one example). However contrarian as this may seem, that trend by itself is not a hindrance to effectively engaging customers and meeting their needs. How can we solve this customer engagement challenge? Here are some thoughts on what we should evaluate and how we could proceed. These are in part based on my new book – Connected! How #platforms of today will become apps of tomorrow (see ref 2).

Innovation and technology adoption is not new to banks of course. For example, banks have been working with APIs for several decades now for a significant portion of their online capabilities. So what’s new? Why is this getting such a buzz? I personally think that the biggest factor that is changing the landscape so dramatically is not just a new way of delivering the same products, but the ability to meet broader customer needs and engaging them effectively. It follows that engaging customers today means looking outside-in, not just playing the game of better.

Recent Fintech innovations and the emergence of online only banks with a technology buzz has everyone excited about the advent of the banking-as-a-platform era.  Following PSD2 in the UK, recent Wells Fargo announcements (see ref 3) have also triggered a new wave of API usage and data sharing debate in the US. It will become easier than ever for customers to manage their taxes and use 3rd party personal financial management tools. In addition, innovations in different parts of the banking value chain are making it easier for customers to save, send money, and spend wisely.

That said, it is no secret that the ability to innovate can be dramatically slowed down or even stagnated depending on the state of legacy and our dependence on it. This is much starker for smaller players (see ref 4). Hefty transformations may not be feasible for everyone. Innovations in core platforms are coming, slowly but surely. In the interim, we should be thinking of keeping up with new age customer experiences by working around the limitations, e.g. through digital innovations in CX that may be less capital intensive, and less intricately dependent on the core.

First, as industry boundaries crumble, it’s important to extend customer personas and customer journeys to reach beyond the four walls of our own products ecosystem. Customer needs are much broader than what our products can address. So the services that are succeeding are those that provide customers with the tools to fulfil their overall needs. The customer journeys we set out to meet should define how our own products and those of external parties can come together. For example, allowing customers to spend wisely by providing curated offers based on what we know from conversations with customers, or allowing them to make savings a part of their spending. For that we need two things. On the one hand, we need new digital tools and capabilities to speak with customers, and on the other hand we need conscious partnerships with the right cross-industry partners such as retailers, and maybe the right fintech platforms. The commoditization is true for platforms as well. For example, the offers aggregator platforms must evolve as well or be disintermediated! It’s no longer enough to just make a better guess. We cannot hope to achieve this goal of engaging customers in a connected world simply through analytics based targeting. The famous quote from Henry Ford applies here no doubt – “if I had asked people what they wanted, they would’ve asked me for a faster horse”. In more recent times, that’s Steve Jobs or Jeff Bezos for you.

A similar analogy holds for branch banking. For years, a debate has been raging about branch feasibility. We’ve been busy converting branches into digital hubs, and asking customers to do in the branch what they can do from home or from a supermarket kiosk. Instead, we could try engaging customers through financial advice and planning by converting our branches to community hubs. Being close to the local communities is a strong differentiator, and we have the perfect assets to do so. Instead we are measuring the future with metrics of the past. As Amazon itself moves to brick and mortar stores, we can extrapolate for banking that existing assets such as branches can help create new business models. Creating new ways to input into the pipe is as important as getting stuff through the pipe quicker. Outside-in and new ways of community based thinking, not just branding, is the only way.

Finally, I believe that banking-as-a-platform or service is not what we should be looking at as a long term option. The platform play will translate into commoditization, with the biggest fallout being that customer engagement and experiences will be ceded to third parties.  Instead, the right way to counter the disruption is become a customer hub that attracts and works with other platforms, as a platform.

 Some useful reading sources and links:

1. Banking services are commoditized, http://www.millennialdisruptionindex.com/
2. My new book on this topic, Connected! How #platforms of today will become apps of tomorrow, https://www.amazon.com/dp/B06Y3SZBZK or www.manishgrover.com/connected
3. Wells-Finicity deal furthers data detente , https://www.americanbanker.com/news/wells-finicity-deal-furthers-data-detente
4. Don’t Trust Your Future to Your Core Vendor, http://bankinnovation.net/2015/06/dont-trust-your-future-to-your-core-vendor/
5. Core banking migrations and alternatives, http://blog.leveris.com/core-banking-migrations/  and also https://www.forbes.com/sites/tomgroenfeldt/2014/11/26/core-banking-systems-gartner-says-the-debate-has-shifted/3/#574d8d244eb0
6. Image credit - https://pixabay.com/en/ecommerce-selling-online-2140604/ 

Thanks for reading. Opinions welcome!