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What are banks for?

I had an interesting week last week. Not all of which was 'on the record' so to speak - Chatham House Rule and all that jazz. But I believe I can give ya’ll the gist of it.

It started out with bankers confused about the future of banking. Then round the middle was a dinner with some investment banking folks entering the seventh stage of grief for their industry (for those who don't know - it's acceptance). Then I ended the week in a brightly coloured Victorian School house in Shoreditch, East London watching young men (why is it always men?) trying to build that banking future. 

I was asked to give the opening keynote at Nacha Payment's Global Payments Forum last week in Vienna (45 minutes to myself - eke!) on 'The Role of Banks and the Future of Payments' (thanks Nacha!)

I think it went well - well people laughed at the right places and they didn't throw me out :-) I would reprint the speech here - but it incorporated stories I've told in these blogs pages before and (see above) it's a bit long. 

So, I thought I would offer some thoughts on what I heard and chatted about during the first day of the conference. I'll keep the names and job titles out of it as Nacha runs the GPF as a friendly meeting and not an 'all singing all dancing, media-invited event' 

One thing that struck me, as the room was a mix of North American and European banker-types, was all had thoughts, concerns and questions (although no concrete answers - hey, me neither) related to the massive amounts of change happening in the payments and banking space. 

But one question hung in the air, almost 'sprinkled on top of' the many presentations and discussions. It was what to do with the most difficult of banking problems - the customer. 

I made a point in my speech that banks are one of the cornerstones of civilisation simply by providing the general public with secure, protected and regulated bank accounts. Bank accounts are used as an agent of social change in developing countries or can serve as the basis of civil unrest in others (Hello Cyprus, welcome to the party).

But banks only hold onto to that position by nature of the service they provide - managing money.

Banks need to embrace more of that attitude - that they are one of the pillars of civilisation - into any product, innovation or customer service they produce. Customer-centric should not mean you've glued together product legacy systems with creaky middleware, sticky tape and chewing gum. It should mean the customer is part of the value ecosystem. However, banks seem blinkered on how to do that.

I got a glimpse of why last week. 

The people present in Vienna were generally interested in discovering - in a sort of 21st Century Freudian way (hey, it was Vienna) - What it is customers want? While others outwardly lamented that if banks sold sushi they sell it as 'dead, raw, fish'.

As with most problems, I feel, you get the most insight looking at it from a far off angle. The conversation shifted to Sepa. Yes, folks the Single Euro Payments Area - which has subjected us, on this side of the pond, to almost a decade's worth of 'when will there be end dates?' Morphing into the current mantra of 'When will our corporates be ready for Sepa?'

When will corporates be ready for Sepa? It is the question of the year. Why aren't central banks doing more to push Sepa? After all, Sepa will be EU law. Why aren't the central banks promising deeper, stronger, stricter sanctions on those corporate clients who fail to be complaint by the time we reach the end date for direct debits and the end date for credit transfers?

Where is the threat of sanctions, cries the industry!?

Ummm...why do banks want to punish their customers? 

Seriously, shouldn't banks take the lead and (I don't know what is that word....) help their corporate clients with some of the real technical issues that are raised by Sepa compliance? (don't get me started on data fields - you'll need a stiff drink)

Why don't banks think like their customers? Would they like the threat of sanctions - especially for a mandate that wasn't developed by them?

I'm going to skip over our poor, mid-week, operations folks - let's just say there was a fair bit of 'let's put our heads down and work on this' and 'is there anymore wine?'

The end of the week saw a development team from Barclays Bank win top honours at the Microsoft Digital Wallet hack-a-thon (over ten videos on the week's events up in Finextra TV now!)

There's no need to go into detail on the event - as it was covered extensively in the virtual pages of Finextra. But do you know how Barclays showed off their digital wallet payments app? I'll give you a clue - it didn't involve a Power Point presentation detailing the backbone infrastructure of Pingit. 

Barclays took their system and put it in a theme park and showed the judges how they could use their phone to jump the queue. Not how sanctions could be used to penalise customers who dared to pay for entrance to Wally World with a pocket full of loose change. (do you see what I did there? ;-)

Listen; there are a lot of valid reasons why legacy infrastructure, corporate culture and global regulations make it difficult for banks to innovate. Conversely, I'm not in the camp that thinks we are seeing the beginning of a complete and total collapse of the banking ecosystem. (I don't feel that would be beneficial for anyone, least of all the consumer. And anyway, so-called Wars and the language of disruption is always more useful for news headlines than it ever is in real life).

I have said variations of this before, but the banking world needs to focus on creation and collaboration. There are plenty of smart companies, cool developers, and snazzy thinkers that don't label sushi as 'dead, raw, fish'. Banks need to court, collaborate and embrace those people.

Because if banks don’t - the threat isn’t that our banking ecosystem will be destroyed – but instead banks will probably just will chug along, managing paper checks and dealing with cash, calling for Sepa sanctions and not advancing and providing innovative financial services – which is a far worse proposition.

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Comments: (1)

A Finextra member
A Finextra member 27 March, 2013, 16:30Be the first to give this comment the thumbs up 0 likes

A fantastic post.

You ask them to think lke their customers and ask "Would they like the threat of sanctions?"

Isn't that the whole point about banks? They are permanently under threat of sanctions regulatory and legislative...you just need to see the fines. They are permanently under attack from fraud and theft attacks. Inside and out.

So maybe a bit of paranoia is understandable.

But accepting that benefits tend to win over coercion.

Mostly: have you ever tried paying cash on a London Bus?

 

Elizabeth Lumley

Elizabeth Lumley

Global FinTech Commentator

Girl, Disrupted

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More from Elizabeth

This post is from a series of posts in the group:

Disruption in Retail Banking

Growth in internet and mobile technologies has transformed many industries and economies. The market forces and competitive landscape has completely changed in many sectors. iTunes has fundamentally changed music industry, Amazon has driven most big brick and mortar book sellers out of business, Expedia is one of the worlds' biggest travel company….. the list goes on. Internet and mobile technologies are big disrupters for most industries. What started (and tapered a bit!) with the dot com boom of 2000 has become a lethal threat to most business models today. Powered by mass adoption in mobiles phones, proliferation of smart phones and cheaper band-width, internet and mobile technology have changed many industries. The banking industry in has been dominated by a handful of big global or regional banks for 100s of years. While the credit crisis has shaken this industry, the core market forces for the industry have not changed. Will Innovation in Internet and Mobile technologies disrupt retail banking? Will there be 5 new names in global top 10 retail banks in 2020?


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