Broadband video-servicing is set to shake the foundations of retail banking says Chris Skinner.
There is a theme I explore regularly which seems to hit the “Edupyerryr Syndrome”. Edupyerryr, pronounced phonetically as ‘ed-up-yer-rear’, occurs when people are confronted by something so obvious but so threatening that they don’t want to hear about it. Therefore, they use the edupyerryr principles and blank it out. I usually get this reaction to the idea of the death of cash or the death of plastic. This month I got it again when I announced the death of something else … the keyboard.
The fact is that things only die when something else is born. Cash dies due to micro and contactless payments. Plastic cards die due to contactless payments, wearable computing and biometrics. These are areas explored in previous Finextra columns in depth (The death of cash
and The cashless, cardless society
In fact, I was pleased to see these views corroborated last month by the keynote session at the first annual EBAday payments conference in Frankfurt. Mark Garvin, chief administrative officer at JPMorgan Chase AG, agreed with the vision that the payments industry in 2016 would be one where paper cheques are non-existent, payment by mobile phone is commonplace and biometrics have wiped out fraud (see Payments 2016
Therefore, it came as a shock to find an audience of technology people roundly denouncing a new vision for banking which I expounded at a recent conference. The focus of the presentation is a vision I’ve held for three years that the biggest technology disruption for banks will be the widespread usage of video channels: video over IP, video over 3G, video over anything. As an extension of this concept, I promoted the idea that if everyone connected visually and verbally, then why would anyone type? After all, we only use keyboards because we can’t see and talk with each other. Twenty years ago, the only people who used keyboards were in typing pools and secreatarial roles. Now, we all type and so the typing pool has disappeared, and secretaries have found a new role as personal assistants.
Maybe it was that last bit that caused the audience to vote the presentation the worst on the agenda! And yet I presented the same idea again in Amsterdam the following week where it was voted the best presentation.
Something strange is afoot.
Let me explain the logic of the presentation.
In 1986, I was in discussions with a major UK insurance group around the theme of direct insurance operations. The radical concept was doing insurance new business on the telephone, rather than face-to-face or by post. The insurance firm in question told me that such a radical new scheme would not work. They had tried it and it failed. Firstly, it failed because consumers did not have the technology: touch-tone telephones. The clients they dealt with were impoverished types who only had rotary phones. Secondly, it failed because consumers did not like dealing with underwriters on the phone. There you have it. Point proven. Been there, done that. Move on.
The shock came a year later when Direct Line wiped out their business. As did First Direct in the banking world, when they grew at a pace of 100,000 new clients per month and soon knocked out incumbent players.
The radical concept being a touch-tone telephone, call centres and people on the phones who were not underwriters or credit risk managers, but Customer Service Agents! People who provide Customer Service, who like customers, who know how to deal with them and can talk to them on the telephone.
The result was that that insurance firm went bust in the early 1990’s and was acquired. Wow, how times have moved on.
Since 1986, we have seen a massive surge in call centre operations with thousands of people employed in the industry, both in the UK and increasingly in offshore locations. Having said that, the UK call centre industry is still thriving with over 375,000 UK citizens employed in call centre and customer related jobs, representing an 8.8% growth since 2002, according to the Office of National Statistics. We even see a return to onshore call centres as highlighted in last month’s Finextra (see UK backlash against offshore call centres brews
Since 1986, Direct Line and First Direct have become two of the biggest financial brands in the UK, and all banks now offer 24x7 call centre customer services, some of them even onshore.
So far so good.
However, we have also seen a proliferation of other forms of channels and communications.
From the touch-tone telephone, we have moved to the mobile telephone. From letters in the post, we have moved to instantaneous email. Layer on top of this WAP, SMS and instant messaging and we have call centres that are over-burdened with an avalanche of communication.
TowerGroup estimate that US banks will be receiving over 1 billion e-mails per annum by the end of the decade, employing 70,000 staff across America just to service those e-mails. That is good news for some, as US bank call centre numbers are on the decline so those folks can get jobs answering e-mails. According to the North American Call Centre Report, the USA had over 50,600 call centres employing 2.86 million agents in 2004 but this is estimated to decline by 2008 to 47,500 call centres with 2.7 million agents because of self-service technologies, increasing use of speech recognition, the growth of offshore outsourcing and the federal ‘do-not-call’ list.
This means you will have to hedge your bets on call centres numbers being on the rise or the decline, but the one thing you can bet your bottom-dollar on is that you will be upgrading your call centres to IP-based telephony.
Skype-based telephones, VoIP, all that cheap and easy calling using wireless and Internet....there’s the future. For banks, it means that the traditional PBX switchboards are being ripped out and replaced by integrated Digital Exchanges that manage not just their telephony, but branch security services, broadband bandwidths into branch systems, CCTV and so on. All over cheap, Internet lines.
Here’s a few figures.
Various estimates state that VoIP line shipments increased by over 50% in 2004, while PBX-based line shipments were down almost 30%. Spending on VoIP will jump from just over $1 billion in 2004 to almost $25 billion in 2010.
I hear a few whoops and hollers from the IP camp, but this really does miss a trick.
All of this misses one fundamental.
A fundamental flaw in our short-term logic.
VoIP is not about supporting cheap telephone calls, or even placing them globally to wherever the cheapest service centres reside.
VoIP is not about Voice over Internet Protocol.
It’s about video.
This is not 3G mobile video, but true, High-Definition, Broadband and Wireless Video.
Video over Internet Protocol.
If you want to see what the new generation of IP video can really do, just checkout Apple’s iChat AV (iChat videoconferencing
The idea of high-quality person-to-person video is coming of age right now.
This is not the crude web-cammy stuff, but the real deal.
You think an HD-ready TV is hot, wait till you see HD-ready Internet.
Having said that, Apple’s been delivering HD-ready Internet over a technology called H.264 for over a year. Microsoft will get there eventually when Vista, the successor to Windows XP, finally hits the streets.
Why is this critical to banks?
Because it brings back face-to-face communications.
It finally gives bankers what they lost when the technology revolution moved us all out of branch and onto ATMs, phones and keyboards.
Add onto this the fact that you can talk with someone, see them, touch the screen and be animated, and you might get the idea that this is not just cool, but it gets us back to what ‘services’ is all about, as in human contact.
Services are not about products, things you can manufacture or kick. Services are about ephemeral promises, dialogues, relationships and human interaction. That is why ‘Financial Services’ cannot be marketed like a box of cookies or a car. You have to focus upon the human elements to differentiate and win.
This then leads us back to the Edupyerryr Syndrome.
Whenever we talk about video telephony, the luddites say things like "Who’s gonna walk down the street staring at their phone to talk?" Just look around at what people do today buddy. "No-one’s using Video yet." Is that why you can put ‘videophone’ into google and get over 5 million returns including the offer of free videoconferencing, and videophones from under £100? "Yea, but people don’t want to see who’s on the other end?" Read the last paragraph. "What about the fact that you might not look the best yourself?" Thanks, but there’s always the button that says "Only Let Me See You" isn’t there?
It makes me think the Edupyerryr Syndrome sufferers are only looking up there because that is where they keep their brains.
This then leads to the seminal moment when you accept that video bank servicing is here and now.
What does that mean?
It means you have to rethink the call centre.
The call centre – whether on or offshore – will be your key alternative virtual channel to your physical branch. The imperative will be to have culturally and visually acceptable staff on those centres, which already leads into arguments over diversity and globalisation.
In addition, it may mean a massive increase in staff numbers, unless you automate the front-end with robotics, or ‘avatars’ as they are known. Avatars can either be cartoon or realistic automated agents who, like the touchtone menu systems of the traditional call centre, can handle 80% of the calls. "What’s my balance?" "Where’s my payment?" "I need to change a regular payment order?" can all be dealt with by these automated videobots. The remainder of calls are more service oriented anyway. "I need a mortgage – should I go fixed or variable?" "My pension fund statement is wrong!" "Should I build my own cross-asset class, multi-region hedged trading strategy or just use yours?" Whoops, sorry. Last one a bit of a surprise.
The core of what we get into is that the video-servicing world will mean very different service cultures and structures. It will most definitely mean that your back office and core systems will become transparent and totally visible to Joe Public. You will have to carefully rethink the way you route calls but, more importantly, the impression given once the call is routed. If your culturally and visually acceptable call centre operators are struggling with multi-screen legacy systems, it will show. Therefore, you will need to have single screen, simple systems to support the new world of visual communications, especially as many of those screens will be shared with the customer in collaborative communications online.
Now, I am jumping. This leads into all sorts of implications. For example, if I can talk and see you, why would I talk and type? In fact, why would I type at all? Most of us only type as that’s our interface to the PC. If you can use voice recognition systems integrated with visual services, then drop the keyboard! Oh no, another edupyerryr moment.
So there’s the presentation logic.
Since I started this mantra three years ago, I’m still waiting for a bank to offer me video-servicing via broadband or mobile wireless. I know that some banks are doing this for their employee communications; some banks are doing this to deliver expertise to remote branches; and some are offering video services to their high net worth clients. But the bank that offers the mass market the video channel, efficiently, appropriately, conveniently and easily will dominate the next generation of retail banking as there’s no easy way to respond to this dilemma. You cannot just bolt a video screen onto your offshore call centre. You cannot just reinvent your core systems overnight to provide seamless servicing for collaborative commerce.
By the way, if anyone out there knows of a bank that does this today – for their mass market retail customers – I’d love to hear about it.
Anyway, back to that rubbish presentation I did. Maybe it got a poor vote as it not only foretold the end of the keyboard but the end of many retail banks. Maybe I frightened everyone so much that they had to have an edupyerryr moment. Or maybe it’s because the conference organiser told me later that they scanned the feedback forms into their database incorrectly and instead of recording my scores as the best, they recorded as the worst.
Either way, the world is moving to one where we will be visually and vocally connected, 24x7, through HD-ready Internet protocol based systems that will feel as easy to deal with as real-life communications. That world will no longer demand that we type and dial, but that we talk and share. We already talk about collaborative commerce and IP-based communications, so this world is purely an extension of those foundations. It is a world that will command massive investments in core systems renewal and infrastructures, staff training and organisation, smart sourcing and smart services.
For the bank that gets it right, they will become the next generation of the First Direct’s and Geico’s. For the banks that wait for it to happen, they may well be the, urm, what was that bank’s name again? Y’know, the one that went bust.Chris Skinner is a director of TowerGroup and founder of Balatro.
Web links: www.towergroup.com
Author's email: Chris Skinner