But what are banks doing in this space?
From a customer perspective, banks have been adopting mobile, but fairly slowly. Part of the reason for that is banks tend to see mobile as a channel to reach their customers, when really mobile is part of larger change in banking that is moving from traditional to digital. The future of banking is much more about customer centricity – and part of that is you need the data to understand customer needs, and the agility to deliver products and prices in the way that customers want. Some banks understand this, and for them, mobile is less of a channel and more a means of aligning interests between the bank and its customers. For example, CEB TowerGroup estimated the cost of handling a transaction in-branch at about $1.34 versus $0.14 through a mobile device. The smartest banks are allowing customers to choose how they interact with banks in a way that aligns the customers’ needs with the bank’s wants. This is the smart way to monetize mobile banking.
If you look at a leading bank like Barclays, they are really doing some innovative things that go beyond just adopting mobile. First, they have Pingit, which is a simple application that allows customers to send or receive money with just their mobile. Yes, it is mobile, but it is also digital rather than ‘traditional.’ Barclays also has the Features Store, where customers can choose the features and benefits they want with their current accounts. As Barclays says in their ads, “some [features] are free; some you pay for.” These are two great examples of the digitization of banking – moving from ‘one size fits all’ to ‘banking my way.’ Smart innovators, like Barclays, understand this transition and are becoming more like retail stores. The challenge is that in a bank, the product and pricing environment is inherently more complex than in a retail store, yet customers still demand a simple banking experience.
As part of the trend toward simple, digital banking, banks also must look to the cloud, which is a means to unlocking further value through mobile devices. For example, having the power to deliver innovative customer experiences through mobile, which traditionally would have been limited by the raw computing power of mobile devices, is not really relevant if you can host managed services virtually. For example, today, if you want to do something simple like quote a price for a customer based on the relationship value, you can do that very easily by running your relationship-based pricing computations virtually, and delivering just the result to the mobile device. If it seems strange to imagine the shared experience of viewing a screen with pricing information on it, that is because we have unconsciously created a physical gap between the bank and the customer, partly through ordinary design and partly through clunky systems. It is through simple, tailored experiences like on-demand relationship pricing, that we can reduce the distance between banker and customer, and increase returns through mobile.
From an ROI perspective, we recently explored the opportunities for banks in mobile in our Relationship Banker Journal. We look at the potential returns and explore various carrot and stick models which could be effectively deployed for consumer and SME segments as revenue enhancement strategies. To learn more, you can read the article online or subscribe to the Journal for free.
In any case, I find the level of discourse around branch innovation highly encouraging. For my part, I have come across massive innovation in each area. We talk a lot about startups disrupting traditional banking, and that may still occur, but I for one am happy to see large banks flexing their innovation muscles in seemingly nontraditional ways.
In Technology:
In Experimentation:
In Design
This is a just a small taste of the type of innovation that is happening today as so called ‘traditional’ banks move the branch of the future conversation forward. To learn more, you can download our own findings on how banks can use these levers to generate ROI on a branch basis, and I encourage you to post any great innovation examples and other sources in the comments.
The brilliant thing that DiVanna does in Redefining Financial Services, is to put the problem into context, specifically a historical context. I had never considered why banks existed in the first place – this somewhat obvious question, despite having a history degree and having studied the medieval period when banking was born, had never dawned on me. If you asked me before I read this book why banks exist today I probably would have said ‘so people have a safe place to store money (ie. surplus)’, and while on the surface that is true, there is much more to the historical context than that.
For example I had never considered the obvious implication that someone living in 1250 AD did not at one point say ‘hey, we should have a bank so we can put our extra money in it’ – but if you stop and think about it – of course that could never be true. You cannot conceive of an invention without first having a need (or what do they say? Oh yes, that necessity is the mother of all invention.) So where did that impetus come from? People were beginning to embark on increasingly risky and lucrative international trade, and were finding that disparate geographic transactions were fraught with known and unknown risks, some of which included identity risk, currency risk, credit risk, and goods risk – ie., here I am with these spices in present day Turkey, how do I get them on a boat, get them over to Italy, find a buyer, collect on the goods (in a different currency mind you), and then get my surplus back home again? When you think of embarking on a transaction like that in the absence of a bank, it boggles the mind that international trade ever existed at all. In any case, some brilliant entrepreneur saw that there was an opportunity to provide guarantees on transactions in different forms, and thus value was offered in the form of contracts that could underwrite this precarious trade.
Fast forward to the modern day – and we see that banks are now in the position where some of that value has been eroded through the invention and commoditization of technologies that can deliver that same value much more easily (ie. cheaply), and we find that we live in a world of online only banks pushing margins on much more established, traditional banks.
What DiVanna then posits is that there are still means for banks to differentiate in the face of this competition to deliver more value to customers. One such example is through innovative pricing and specialized bundling of banking products. DiVanna notes that:
“…small businesses – especially one- or two-person shops or home-based freelancers – are not always well suited to a bank’s product and service offerings, which are laden with fees designed for larger retail and corporate clients.”
~ Joseph DiVanna, Redefining Financial Services, page 94.
Redefining Financial Services: The New Renaissance in Value Propositions
This sentence succinctly puts forth the value that Zafin Labs delivers to its client banks – our software solutions work within complex banking systems to pull out meaningful data that can be acted upon, and then to allow banks to innovate by making it easier for example to create new products within a banking production environment. To think of it another way, banking systems have generally been designed with security, and not necessarily agility, in mind. Our innovation is, like the earliest bankers, to see an opportunity (innovation agility) within a difficult problem (complex, layered banking systems). Based on the quote above, there is no reason banks should not be able to offer the right bundles of products to the right customers.
“Well, organizations that are founded to solve problems end up committed to the preservation of the problems. So Trentway-Wagar, an Ontario-based bus company, sues PickupPal, an online ride-sharing service, because T-W isn’t committed to solving transportation problems. It’s committed to solving transportation problems with buses. In the media world, Britannica is now committed to making reference works that can’t easily be referred to, and the music industry is now distributing music that can’t easily be shared because new ways of distributing music undermine the old business model.”
– Clay Shirky, in conversation with Dan Pink in the June 2010 issue of Wired Magazine.
Good organizations are flexible and not constrained by this need to preserve the problem as Shirky has noted. When I was a tutor for BrainBoost Education, we used to regularly discuss our overall and individual goals. On one hand, the goal of tutoring a student was to create a situation where tutoring was no longer necessary. The goal of the organization was to show that for-profit private education was compatible with tax-supported public education. So, in both cases, we were against framing our service as a solution to a problem. We didn’t say, ‘for students who need tutoring’ because if that was the case then we would always need students to need tutoring in order to have jobs. In the second case, we didn’t say, ‘we exist because the education system is broken’ because that would mean we always needed it to be broken. Instead, we focused on goals that constantly sought to put ourselves out of jobs, because only in that mindset will be flexible enough to adapt to changing conditions and thrive in a sort of evolutionary atmosphere.
At OpenCal, we talk about solving the frustrations of online booking. But in truth, we want to go beyond this. We want to help entrepreneurs and small businesses to grow and thrive by creating online tools that solve actual problems they face everyday. Right now, our context for solving their problems is to build a great calendar and booking system. But we are not focused on the preservation of the problem – we are focused on outcomes that entrepreneurs and businesses want, which, in general can be translated to more time and/or more money.
For now, we have a flagship product that is online appointment software. Deep down, I knew we stood for more than this, but in order to figure that out, I needed to change my perspective of what we were doing. In hindsight, the only metaphor that makes sense to me is imagining one of those 3D puzzles that featured a secret image inside all the noise. One the surface, there is one vision, and underneath, another. Both are related but it isn’t clear from the outset what lies underneath.
Consider the case of Zappos. Now, if I say Zappos to you, probably the first thing you think of is shoes, or buying shoes online. If Zappos were committed to selling shoes online, they’d be trying to preserve a problem, which could be defined as delivering shoes to customers through online shopping and sales. And eventually, they’d probably find themselves out of business. Instead, Tony Hsieh, CEO of Zappos, says his company stands for ‘Delivering Happiness’ or ‘Delivering Delightful Customer Experiences’. And because that is what Zappos stands for, it can become anything that fulfills that goal. As Tony has said on numerous occasions, it’s no stretch to imagine Zappos one day running an airline.
So tell me, dear readers, what do you stand for? Are you committed to solving and preserving a problem, or are you committed to something grander, like delivering happiness?
Want to know all the secrets? Go read the post over there.
Great examples are all around us. What is amazing to me is two particular features that stand out about our culture of remix. The first is just is how quickly these things take shape. For example, it was probably a month ago that the Double Rainbow Guy took us by storm (video here). A day later, I was in Starbucks ordering a double-tall latte, and the guy behind the counter gave me a chuckle when he said, ‘whoa, a double latte all the way’, and two days after that, there was the Double Rainbow remix song (video here), which I heard on the radio a day later.
I mean, it’s obvious that when you give people the tools and you connect everyone and everything, this is where you’ll end up (given hindsight at least), but to think about what this means for the future is perhaps more interesting. Which brings me to the second interesting thing, and that is the fact that no one is generally getting paid to create these remixes. People do it because they can and because they want to create, or share, or are passionate about something. Clay Shirky gives us a term which allows us to quantify the ability of our culture to create further remixes (or other things, for that matter) – cognitive surplus. The video below is well worth the time.
Social media will likely follow this same cycle. First it is everything, then it is nothing and it was all a big waste of time, and then we’ll find out it really is necessary and relevant and important. So after all that, we’ll end up with the equivalent of websites everywhere, of needing a website, but of course I’m talking in terms of tweets or whatever they will be known by then. You will need your check-ins, your facebook fans, your contests, your mentions, your online referrals and reviews, or whatever all of that is known as by then.
So assuming all this is correct, that still leaves us with what to do with that information. I’m not advocating you go and try and invest in social media companies (not that it’s even possible given that they are all generally privately held), but rather that you think about how this changes the way people will interact with each other, and with companies. Then, if you’re like me, you’ll think about what it would take to build a product that will be needed then. For example, consider the intersection of social media, augmented reality (AR), and online booking applications. If we’re connected to each other through smart phones and geolocation, it would not surprise me to have ads or referrals pushed to me when walking past shops in the future (indeed, I’m told this already happens in many places such as Asia). But what if I could then take my phone and point it at a shop – an AR overlay appears and I see that there are a few open spaces for a haircut or maybe a massage in the next 30 minutes and, lo and behold, the reviews are there too – my friend has gone here and gave it 5 stars. Because the time slots are perishable, booking now means I’ll save some money, and that’s great, because not only do I like discounts, but I also like not sitting and waiting for things. Instead, I would love to be able to book that massage instantly and then go grab a coffee or do some quick shopping instead of sitting and waiting for it.
And you know what, I’m sure that product or experience will one day exist. So it’s up to us to go make it, because that’s a better world, and that’s where the tools are telling us we can go.
Here’s another vision of a possible future:
Augmented (hyper)Reality: Domestic Robocop from Keiichi Matsuda on Vimeo.
Well, here’s what I do. I read stories, listen to the news, see what people around me are doing, and then I choose a specific area to consider. So let’s go with social media, and run it through the check-list. Is it super-hyped right now? Check. Is everyone talking about how it will change the world forever and none of us will ever be the same? Check. Has it done anything particularly disruptive so far? Not really. So what does that mean in 10 years? It means that at that time everything will have changed noticeably and we should be figuring out what that will look like right now.
So don’t restrict yourself to thinking about what the technology is right now and how we use it. You need to think in more generic terms than that. First, what is different between twitter and its closest look-alikes – text messages, blogs, and email. Well, the difference is you can only send short messages (or posts), they go to anyone who is potentially listening (generally – there are of course DMs as well), and they tell the public who you are or what you are doing or thinking about. But those aren’t the only things twitter is similar to. It is also similar to google-searching, but instead of asking an indexed set of pages something about what you are looking for, you instead are asking anyone who is listening a certain question in the total set of active and indexed brains at that moment. So, in many ways, twitter is a communication tool, but it is also a specialized recommendation engine. It is like hunch but instead of asking a cluster analyzed data-set you are literally publicly asking everyone you know socially (and people you don’t know) for advice, or a product, or help of some kind.
So, long term, what does that mean? It means that more than ever we will be connected to a greater web of people. But right now you also have to ask why are people helping each other so much through twitter? Is it because we are fundamentally helpful? I think the answer is no. I think the answer actually lies in the fact that we are fundamentally selfish, and currently, because no one knows for sure how this all will play out, you get people being as helpful as possible because they gain status by doing so (whether in the form of followers, or a higher klout score, or any other measure you can think of that exists currently). Moreover, they can get wealth – because everyone is talking about social media and why your company needs it, companies are going out and looking to hire people who can show them how to do exactly that.
Remind you of anything? Seems a lot like the late 90’s when every company needed a website and would pay practically anything to get some skin in the game. And of course we had a bubble and a crash and, lo and behold, 10 years later, you really do need a website and some skin in the game. Remember, we tend to think the world changes forever very quickly, but in truth, it takes some time for the world to become fundamentally different.
For example, let’s consider how Apple got to its decision about pushing AppleTV more aggressively. Did they wait to see if people wanted pay-as-you-go programming? Not really, because if you wait for something like that to show up you’re usually too late to the party. They probably looked around the world 10 years ago and started thinking about what the world look like 10 years forward. How would we watch TV? What would we watch? Why? What if p2p sharing goes bigger? In 2000, it clearly appeared that the genie was out of the bottle and would not get put back in. So, barring a p2p blocking technology, the future then was always going to be in finding and stealing entertainment online. Some people would continue to pay cable operators of course, but increasingly (and young folk especially) would be questioning why they would pay $50-100/month when they only watch a few shows a month and having all-you-can-eat cable means you end up watching more shows than you want to anyway. But maybe pay-as-you-go, a model we had been seeing with some cell phone users, might do the trick. You pay only for the stuff you want and none of the crap you don’t want. And the price had to be very low or otherwise you’d be tempted to steal. So, in the future you will pay for each show and it will be streamed live to your television for $0.99. That, my friends, is the future (which is here!)
So consider all that for a moment. Consider that all of these things were set in motion at least 10 years ago. You need to also remember that we as humans tend to overstate the short-term implications of a new technology and understate the long-term ramifications of said technology. It wasn’t long ago when p2p sharing started gaining traction and many pointed to the imminent demise of all commercial recordings. Did that happen? Of course not. But certainly p2p sharing has changed the commercial music landscape dramatically and altered the way we digest music digitally, how artists share it, how they promote their work, all (in my opinion) for the better. But let’s bring it back to today’s world. Yes, all these things were set in motion a long time ago. Yes, there are disruptive technologies being shaped and created every day. Which ones will greatly affect the world in 10 years? How will they change the world? And how can you ride the wave that gets you there?
First off, Groupon adds e-commerce to small businesses that can’t do so. You don’t need to install anything (though online booking can help you deal with the onslaught of new business), you don’t need to purchase an https cetificate, you don’t need to sign up for a merchant paypal account. So, that’s actually a pretty huge deal for a lot of businesses.
But this is what it really does: it sells advertising. It signs up however many pairs of eyeballs, probably at least 10,000 in a new city, and then it gives one (!) business all those eyeballs for one day. As a business owner, this is great. I mean, not only do you get to sell stuff online (if you didn’t already), but it’s also as if you’ve had a giant spotlight turned onto your business. All kinds of people that have never heard of you are suddenly lining up to buy your product at a deep discount.
But of course, the question a lot of people are asking is, what are return visitors like? Are you selling your product at 25% of the normal price (you generally need to discount your service at half it’s normal cost, and then Groupon takes half of what is left) for one-off sales or are you creating any loyalty? I would think you’re getting an audition which could turn into repeat visits, but in reality, I think Groupon is the only one getting any real loyalty out of this deal.