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7 innovative concepts a bank should adopt

The internet and internet based technologies have revolutionized the way how people interact with their environment. E-commerce is growing, social networks are immensely popular, and 'cloud services' get mainstream consumer interest. New start-ups leveraging internet technologies are raising tremendous amounts of venture capital. How do banks adapt to these developments?

Banks are often accused of showing a lack of responsiveness to such innovations. To give an example: an online banking payment initiation screen anno 2011 looks very similar to a payment initiation screen in the early days of internet or electronic banking.

It could be interesting to think about what will happen if a bank adopts the innovations that revolutionized the way we interact with our environment. In this  blog article, I will list the innovations that have made our lives so much easier. In a next blog article, I explore how a bank could leverage such innovations.

The innovations I am talking about can be broken down as follows:

1. Social relevance: social networks make it easy to stay in touch with friends and family, discover new music, and find interesting business relations. The power of social networks really is in the ability to analyze profiles and segment them based on like mindedness and then leverage this data (e.g. by recommending new music, as iTunes Ping does). This concept is sometimes referred to as 'social proximity'.

2. Contextual relevance: if you search for restaurants on your smartphone, your search engine will return restaurants in your proximity (if your smartphone supports it). A good search engine uses contextual data to predict the relevance of its search results. PayPal uses 'bump' on a mobile phone to authorize a person2person transaction based on their location and the bumping movement of the phone (measured by the accelerometer). Contextual relevance becomes more and more important as the online and the offline world blend.

3. Ubiquity / multi-channel: In interacting with their environment, we use channels that fit our context best: @home we use our desktop computer, on the road, we use our smartphone, @work we use our laptop to interact. A multi-channel approach is required to have presence in all these contexts. This relates strongly with the point of contextual relevance.

4. Fun: People are driven to a certain extend by 'fun'. Photos can be sent by email, but it is more fun to do it with Instagram or Path. FourSquare makes it fun to check-in with Starbucks and earn credits for that. Waze (social navigation) makes it fun to hit the traffic and collect credits while navigating home and interacting with other 'traffic jam victims'.

5. Simplicity and convenience: The power of PayPal, Square, iPhones & iPads and Twitter is how simple it is to use their service: instead of entering the 18 digit beneficiary IBAN, one can just enter somebody's email address with PayPal. Square really simplifies accepting credit cards for small merchants. 3d-secure transactions are perceived by consumers as inconvenient, leading to aborted checkout processes. All these services have excelled in keeping the complexity of the underlying technology away from the user.

6. Interactive: We more and more expect real-time interaction and immediate response as opposed to overnight batch processing. With the current stage of technology, I really doubt if cost efficiency still is a strong argument for batch processing.

7. Networked business models: opening up a platform so that third parties can develop innovative new services on top of that platform significantly creates new value. Example of this is TradeShift allowing third parties to develop capabilities on top of the TradeShift e-invoicing network. Similar developments can be seen with PayPal, Mastercard, Visa. In the consumer space Facebook, Twitter, Google, etc. have done this for pretty long time.

So in other words: how would a social, context aware, fun, really simple and interactive bank that adopts new business models look like. We will have a look in my next blog article.


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