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Right on John D!

I'm working up a post to further explore this given the entrenched views expressed in the comments here...

BK

Ketharaman,

I think you've missed my point. It's not about advertising, but a complete shift in the way you engage customers moving forward.

Today we send out thousands (or hundreds of thousands) of messages across a few channels that are the same (we call them campaigns). We then wait for customers to respond to those when they need a product. That mode of acquisition is rapidly failing.

The new approach will be real-time messages based on triggers or context to individual customers, that result in a journey or path for customers to follow to the bank - for want of a better term we call this engagement banking for now. This requires a completely new layer of capability from a messaging architecture and from a offer management capability. This has nothing to do with mobile banking or mobile payments more broadly, except that the mobile device is a perfect platform for engagement moving forward.

Regardless of your view on Mobile, you will need to 'engage' customers when and where they need banking instead of waiting for them to come to you in the future. This is not advertising, but an entire engagement strategy that starts with a message and encapsulates a 'user experience' that makes it very easy to engage or have a sales/service dialog with your bank as a service provider. Right now today, I can't think of one bank globally that is really ready for this level of engagement, but in 5 years this will be the norm.

In this environment the organisation structure, platform, messaging architecture, analytics enviornment, and whole end-to-end user experience process will be very different from today. Banks need to be thinking about this seriously for the future.

Let me put it another way. By 2015 the #1 channel will be mobile, #2 internet, #3 ATM, #4 Call Centre and #5 Branch for retail, wealth management and SME banking. What does the organization structure look like for that reality?

Step back from the argument about the wires or networks and think about what you need to maintain your RELEVANCE to customers in this space and you'll realize banks are woefully prepared to make this jump. Which leaves a massive gap that is being attacked by those much better at engagement.

This is the burning platform issue banks face today. Engaging the customer relevantly.

Brett

Ward,

I think that this is a pretty strong argument for a open, partnership-based approach for banks. They most commonly see that they should 'own' the domain, but the reality is no one can, so the only option will be to partner. This takes both a shift in psychology of the bank, and a shift in platform capability.

BK

Ketharaman,

I could not disagree more. The clear and present danger is absolutely massive.

Think of it this way. Right now today if you are a bank, you need to ask Google and Apple for permission to use their platform to provide mobile banking. Given the rapid failure of traditional advertising mechanisms, contextual engagement of customers around mobile payments is going to be the lifeline of banks in the future, but today there is almost no capability internally within banks for real-time engagement of customers. This is needed right now regardless of future platforms, otherwise there will be a bunch of organizations that own the customer and banks will either be disintermediated, or need to pay for the privilege of using someone else's platform to engage.

There is no argument in any scenario for sitting back and waiting.

BK

John,

Thanks. The challenges to go outside of the ecosystem are significant. That's why Google didn't bother, and went instead to augment the existing payment system I guess...

BK

FinExtra member (Anon),

You make a fair point. But the article is not about PayPal vs Banks. It is about the untenable KYC position as we move towards more and more mobile interactions. I stand by that assertion. 

Simplicity is the key. KYC will have to be re-thought in the future FI environment. One approach may be some sort of central identity facility that simplifies enrollment and on-boarding. The other is allowing anonymous payments below a certain threshold. 

Either way - customers don't value privacy and KYC. Generally its about an institution trying to mitigate their risk, it's not for the benefit of consumers at large. 

It's inevitable pressure will come to bear on KYC regs.

Brett

Seriously? Does PayPal think they can own the whole mobile P2P space and stop anyone else from playing?

They should be worrying about launching their own NFC enabled initiatives instead of going after Google and Osama B.

Classic banking response 11 years too late...

Don't let this fool you. I was at an event for FirstData two weeks ago and met with Osama Beider who is one of the guys responsible for the payments side. He very firmly sees NFC payments as the future of Google. Just because Gingerbread (Android 2.3) doesn't have NFC payments as native, does not mean Google isn't working on NFC payments.

BK

Aaron,

I get the challenges. It might be as simple as a PayPal approach where fees additional to interchange are levied, or an annual fee is introduced for enabling your iTunes virtual Debit Card.

However, if you just look at features comparison, NFC is most certainly the biggest single capability being added to handsets today. By passing on this in the short-term, Apple certainly would have to defend their status as the smartphone of choice. If, on the other hand, they're going to do NFC - obviously they'll do it big. 

BK

Google's move toward couponing and loyalty is just a shot across the bow for banks in respect to payments. They're starting to show their intent to change the POS experience. If you think they'll stop at loyalty NFC interactions...

BK