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Three Christmas Wishes for Digital Banking

Whilst most writers will turn their attention to reviewing the past year or more likely their predictions for the coming year, Christmas is a time to think not only of our loved ones but of others less fortunate. So my Christmas post this year is three wishes of Banks globally to help those less fortunate than us. I believe banks can make these wishes come true as part of their business strategy for digital.

Almost 20 years ago the Harvard Business Review published an article by Micheal Treacy and Fred Weirsema, titled “Customer Intimacy and other value disciplines”. The paper proposed to survive in an industry companies have to be at least industry average at three principles: Customer Intimacy, Operational Efficiency and Innovation. To be a leader, companies only had to master one of them. Now in the digital era their theory has never been truer.

Open Banking is driving a wedge through manufacturing and distribution, whilst fostering innovation in new business models, segments and products. Banking manufacturers will leverage scale to drive down cost per transaction and create much greater operational efficiency, whilst distribution banks are leveraging the customer shift to digital to create deep customer intimacy through targeted customer journeys and mastery of data. Innovation driven by open banking models is most prevalent today with the rise of challenger banks aiming to dethrone traditional banking models.

 My three Christmas wishes for digital banking are based on these three sound principles for digital banking strategy.


The Wish of Customer Intimacy

Digital banking is a shift away from business models based on physical reach of customers. Challengers are creating new offerings based on very different customer segments like Henry (high earner not rich yet) and Dinky’s (dual income no kids yet). My first banking wish is for banks globally to use a Customer Intimacy strategy to help those with mental illness. On a good day most sufferers are indistinguishable from those around them so it’s understandable that many of us are unaware of the challenges people with the illness face. However mental health is a growing epidemic, and some even point to technology as a contributor for some of the growth in this illness. In the UK over half of people with debt problems have mental health issues says UK charity ‘Money and Mental Health’. A survey by the charity highlights sufferers problems are made worse as spending increases when they are in periods of poor mental health.

Money management is complex and made worse with so many products and providers in the market, customers have to juggle limited funds through different products to maintain a household. Often the most readily available funding options, like payday loans, are the worst for those suffering rather than a solution.

Banking has a role to play here and that is to simplify money management, to help people understand their finances better and reduce stress for those most vulnerable to this illness. Banks could provide the apps and data to help people not only reach their aspirational goals like buying a new car or sending kids to university, but to help them understand when spending is out of control or advise of the most affordable options to finance important purchases. Challengers like Monzo and Starling already help users to block gambling sites from the cards to help them ensure their problems are not made worse. Barclays goes further in allowing users to set blocks on more categories of spend like bars. And Lloyds bank works with charities like ‘Rethink Mental Illness’ to create guidance and assistance for those in need.

So my first wish is that banks globally look not only how to profit and drive customer intimacy from customer data but also to protect those with mental health issues by providing support and best advice so that managing money is not another pressure in their lives.


The Wish of Operational Efficiency

According the “Findex” report produced by the World Bank Group 31% of adults (1.7bn people) globally don’t have a bank account or a mobile money provider. Virtually all of these are in developing countries. The poorest 40% account for half of these, and are likely to only have had a primary school education. Yet organisation’s like the World Bank group and the Bill & Melinda Gates Foundation identify that those in poverty are much more likely to escape poverty when their money is held in an account rather than held as cash where it can be lost or stolen.

In the past transaction processing costs may have been a reason why banks haven’t addressed this customer segment, in the digital era with banking in the cloud leveraging elastic scaling this is no longer the case. In some countries mobile money providers have partly filled the void, but banks and fintechs have quite some way to go before they make a bigger impact to reducing the number that are unbanked. Between 2014 and 2017 the report identifies that 515 million opened an account, reducing the percentage unbanked from 38% to 31%.

When money is held in an account not only it is protected but banks can provide better money management options and advice to help those that need it most to lift themselves out of poverty.

In the digital era challenger banks are already leveraging the cloud to improve operational efficiency whilst traditional banks are yet to move.

My second wish that more is done not just to compete but to specifically address this segment. By moving to the cloud not only will banks be able to improve operational efficiency but they will be able to scale to address the 1.7bn adults that remain to be banked.


The Wish of Innovation

One of the biggest trends in digital banking is the recognition and focus of banks on customer experience. It is the challenger banks that have really exploited this focus, but traditional banks too are investing on improving customer experience. We are seeing banks move from servicing transactions to providing deeper customer journeys that make life easier and better.

My first two wishes address specific segments of customers that banks can help those in need, my third wish for banks is to use Innovation to address more segments of customers that need help. Some banks provide very basic accessibility options, but disability is another large segment. What about the homeless, or refugees? How can banks use innovation to make life better for more customer segments? For example in the case of the homeless often those that want to help them on a rainy/cold day are put off from helping for fear that money donated to them is used for alcohol or drugs instead of food, clothing or shelter. Could banks create a currency that could only be used to purchase food, clothing or shelter? Can social networking tools and principles be used to help charities focused on similar issues collaborate better to greater a stronger force to tackle issues?

My third wish is for Innovation to address more segments that are in need of financial assistance. As banks move towards methods like Design Thinking to improve customer experience, can some of these sessions be used to identify and address more segments of customers in need so that banking is helping make life better for those that most need it.

In my 30 years of focusing on customer experience solutions for banking, this is the most exciting period of change driven by technology, regulation and customer behaviour.

Let’s work together to make life better for everyone and not forget those that need banking most.

Merry Christmas everyone, I also wish you all a well-deserved break and happy holidays with your loved ones and thank you for reading my posts.



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