Future of the Branch: Are Branches viable going forward?

March 23, 2017

Innovative, modern branches, with a primary focus on offering a digital-based experience in a physical branch, appear to have found a way of keeping the branch a relevant and frequented banking channel, despite the ever-increasing popularity of online and mobile banking. Banks that are considering how their branches could create a unique and stress-free experience offering a greater level of service than can currently be gained through purely digital channels, while still acknowledging the value and importance to the customer of an interactive, convenient interaction, have found success with their forward-thinking approach to updating their branches. Though such branches are experiencing greater popularity and continue to attract customers, the considerable emphasis on digital interaction in-branch is not without its difficulties.

Implementation of user-friendly interactive screens, from self-service expansive wall fittings to branch representatives offering banking products and advice with the aid of a tablet, have become intrinsic to these streamlined branches as key points of interest for customers, replacing computer monitors only viewed by branch staff. These interfaces that were only accessed by branch staff, not shared and utilised by branch customers, therefore required considerable modification to be suitable for customer use, become more user-friendly and of a modern, simple design. For some banks, the potential cost and timescale of this alteration would be huge, with a full overhaul of a crucial branch system costing the bank a significant sum of money they may not have the ability to allocate to branch renovation, while also resulting in prolonged closure of branches while the systems are altered. The scale of this project could also be a concern for banks, with hundreds or even thousands of screens requiring redevelopment. Though innovative branches around the world have illustrated how the branch can still be valued and required by customers when offering a more agile, personalised service, the time and cost involved in updating and transforming branches is a significant concern, preventing some larger, older banks from adopting this relatively new approach to branch banking.

Currently, elevating the appeal and ease of branch banking using innovative technology is imperative to keeping branches relevant, useful and desired by customers, but will the rapid advances in technology eventually bring the end of the need for a physical branch? There are a multitude of possibilities for what could finally cause branches to become obsolete, with innovations such as pure voice interaction seeming to pave the way. The relevance of voice powered technology in banking is beginning to be recognised, with Barclays recently introducing voice recognition software for their phone customers, eliminating the need for multiple security questions and passwords. The technology identifies a complicated “voice print” from customers using more than 100 characteristics, highlighting how voice-powered banking can be secure and easy, becoming a more desirable alternative to visiting a branch. A similar concept has been incorporated into banking apps, with Santander providing a service in their SmartBank app that allows customers to verbally ask simple questions about their transaction history, rather than search through this data manually. Already, this app offers an easy, speedy service unable to be matched by a branch, and is intended to eventually enable customers to fully service their accounts, engaging in valuable services such as reporting lost cards and making payments. Mashreq Bank in the UAE has also seen the potential benefits and convenience of this technology, partnering with Apple to use Siri for voice-powered payments. Providing customers with a service more user-friendly and less time-consuming than other current digital channels further reduces the need to visit a branch, showing that ever-improving digital channels are able to adequately answer customers questions and reduce the time and steps involved in using banking channels. With voice-powered technology looking to become more universally used, through deals such as Samsung’s with the creators of the next gen AI VIV, a sophisticated, learning, voice-powered platform able to make app usage, including banking apps, more convenient and user-friendly than ever, the advantages of branch banking will continue to diminish, with stylish, tech-heavy branches unable to compete with the ease of access and scope of emerging digital channels.

Future of the Branch: Unconventional Branches

March 16, 2017

Solving Unaddressed Customer Problems 

While internet and mobile banking have revolutionised the ease of access to banking products, there are occasions where neither digital nor traditional branch banking are accessible options, an issue FNB is determined to resolve in the unbanked rural communities of South Africa. First National Bank recently opened a mobile branch housed in a converted shipping container, featuring key banking services including an ATM, ADT and teller services, providing customers with a means of depositing cheques, applying for loans and opening savings or investment accounts. Though the low-cost and rapid construction time of FNB’s mobile bank cause the endeavour to be more desirable than opening a traditional branch, the primary benefit is the mobility of the compact branch, permitting the branch to be transported to whenever it can be of service. The advantage of such an adaptable branch is clear, with the initial destination of the branch (Mutale, Limpopo) being changed temporarily to Tembisa following a natural disaster, in order to aid the impacted community. The potential benefits of such easily movable branches are plentiful, with FNB already continuing to assess areas where demand for this branching option may exist. The value of innovative, customer-centric banking is a concept that must be incorporated into branches if the demand for branch banking is to continue, and the success of FNB’s project illustrates how unconventional branches can offer something unique and desirable for customers.

With ease of access appearing to be one of the most important aspects of the future of banking, Metro Bank seems to have looked to the past for inspiration, opening American-style “drive-thru” branches, a style of branch that first operated in the UK in 1959. Despite not being a new, original concept, Metro Bank have garnered considerable success from their first drive-thru branch operating in Slough since 2013. Metro Bank’s faith in this style of branch caused them to open a second drive-thru location, situated in Southhall, West London in a retail park. Drive-thru branches offer many services found in traditional branches including the ability to pay-in cash and cheques and withdraw funds, all without the customer needing to leave their car. Metro Bank have found these branches receive the heaviest traffic on days where the weather is poor and is frequently used by parents with young children in the car, while its seven day a week opening hours and 8pm close on weekdays adds to the convenience of the branches, enhanced by being located close to a main road. The primary aim of this service is to provide customers with more choice over how they bank, prioritising convenience through acknowledging that every customer will have different preferences. The success of Metro Bank’s drive-thru branches showcases how shifting the focus of branch banking to meet the needs of your customer base is now more important than ever in ensuring that branch banking offers something unique and relevant to the customer.

Another non-traditional branch solution that has operated in the banking industry for quite some time is the concept of mobile banks, utilised by Natwest since the 1970’s and continue to visit numerous rural communities throughout Britain. Idea Bank in Poland have pushed the envelope of this concept, creating a fleet of driverless zero-emission BMWs fitted with ATMs to permit small businesses to deposit their daily revenue at the end of each day, as well as make withdrawals. The service is incredibly user-friendly and easy to use, with customers simply requesting the car to arrive at their place of business using the Idea Bank Money Collection app. The car will arrive at the chosen destination within minutes, or alternatively can be booked in advance for a specific timeslot. The service has been a great triumph for Idea Bank, now offered across 12 Polish cities, with the number of cars expanding from 4 to 12 in the first year of its inception, with the intention of reaching 30 by the end of this year. The mobile ATM sees deposits three times larger than those of a bank branch, and is considered a noteworthy success by the fintech industry, receiving “Innovation in Payments” recognition at the BAI-Finacle Global Banking Innovation Gala. The idea for this innovative approach to ATM deposits was developed in order to change the cumbersome process of business owners taking their money to the bank in person, a practice adopted by 80% of Polish SMEs. Idea Bank’s mobile ATM fleet is an impressive example of how identifying a problem for a bank’s client base, that can be successfully resolved with innovative and user-friendly technology, can lead to the installation of branch banking that is more reflective of the needs of the customer.

Is there life in the old bank?

March 12, 2017

About 3 years ago when I started presenting on digital I’d open with a couple slides. The first about Fintechs nibbling around the edges of Banking the notion was these were piranha’s – one wouldn’t kill a bank, but there would be shoals of these that could. The second about GAFA (Google, Amazon, FaceBook, Apple) being sharks that could take larger chunks out of banking. The premise of the opening was that banks were under threat and if they didn’t change they could be squeezed out of the market.

Now as we face a new dawn of Open Banking I question that line of thinking, and I wonder whether it is the traditional banks that will get squeezed out or whether we will see a raft of FinTech fall by the way side and whether GAFA actually want to go anywhere near banking? I recently finished reading Elon Musk’s biography who too had questioned the efficiency and customer focus of banks and he wanted to disrupt banking. So it was interesting that he decided that banking was too complex and that regulation would make it very difficult for him to do that. So much so that he would only focus on payments, and in parallel focus his efforts on colonising Mars instead!

What I hadn’t accounted for was for new banks sometimes called “challenger banks” or neo-banks or even new business models like banking platforms.

Addressing Fintechs first: A Forbes article estimates that globally anywhere upto 6000 Fintechs having been created1. The article highlights OnDeck and Lending Club but despite growth in their sector both debuted in 2015 around $25, and both now sit at around $5!  It remains to be seen how the Fintech boom plays out in comparison to the dot com boom / crash of 2000.

The current trend is towards creating banking eco-systems, a collaboration of banks and Fintechs. The challenge for banks will be to pick “winners” and for Fintechs to get scale through this B2B approach and their own B2C efforts. I see a trend of “build API’s and Fintechs will come”, however I am not convinced the partnership will or should work this way (more on banking API strategy later this month) as banks will have to be selective about who they work with to protect the interests of their customers. Fintechs that heavily rely on a B2B approach will suffer on valuations for funding/exit, so scaling a B2C approach is key to their survival.

Next thinking about “challenger banks”. I fail to find an independent one that has amassed a customer base of more than 500,000. Simple has been acquired by BBVA, who also acquired Finnish challenger Holvi and have invested heavily in Atom. Similarly the German banking platform Fidor was acquired by BPCE. No pure play Internet banks survived and standalone brands launched by traditional financial services organisation have been acquired (or is that rescued?) such as Intelligent Finance and Egg in the UK. Whilst from starting out triple digit growth is the expectation, a year of double digit growth could define the writing on the wall.

And what about banking platform plays? Moven has transformed itself towards a “front office” platform, whilst many others like Thought Machine are re-inventing “core banking” as a platform. Their challenge is similar to that of Fintech’s, getting scale. For them providing a solution that handles different regional issues like internationalisation, regulations and tax whilst also providing the flexibility to those on the platform to differentiate themselves is it not an easy task.

This doesn’t mean I advocate traditional banks not addressing the digital challenge, rather that “there is life in the old bank yet” and that you can “teach an old bank new tricks”.


Future of the Branch: Re-inventing Branches

March 9, 2017

 Inviting, Innovative and Inspiring

Despite the growing preference for digital banking channels, branch banking is far from obsolete, with banks worldwide endeavouring to re-invent the branch experience to increase appeal and convenience for customers. Mindful of the value of digital engagement and the declining need for conventional branches, Polish mBank opted to combine digital marketing techniques with the familiarity of branch banking by opening smaller Light Branches, situated in areas yielding high foot traffic such as shopping malls. Rather than adjusting oversized branches or abandoning them completely, the new Light Branches take advantage of mBank’s online and mobile banking products, permitting the bank to both improve efficiency and scope of the sales network and to fulfil the expectations of the growing number of digital consumers. This overhaul of their branch network includes operating 40 Light Branches by 2018, 80 larger Advisory Centres housed in office buildings focused on advisory, cross-selling and business banking support while still making use of recent technologies including remote digital support, and 60 manned mall mKiosks designed for both private and corporate customers to make use of further bank offerings such as acquiring a loan, credit or debit card.

The key concept of the Light Branches is to use innovative digital engagement to attract customers to the quick and easy methods of opening new accounts, receiving a loan and cash handling to name a few, available both in branch and online.  The branch entrance features an interactive screen utilising Kinect technology, able to present discount offers to customers as they approach the screen. Inside, a touchscreen video wall makes browsing the banks products simple and engaging, further streamlined to the customer by video-camera age and gender identification offering targeted mDiscounts. Customer service stands dispersed throughout the branch featuring tablets allow customers to engage in key banking services. mBank has also deployed a central management system for the project, with all devices and interactive activities united on a single local network. This amalgamation of traditional branch banking with recent technology innovation presents a forward thinking attitude to branch banking sure to slow the process of branches becoming obsolete, as well as the importance of a centralised rather than siloed system, and has seen much success.  Just six months after opening, Light Branches were found to outperform traditional offices in sales, attain 200 visitors a day and increase efficiency while lowering floor space costs.

The importance of integrating branch banking with digital services has also been acknowledged by digital banks, most notably Italy’s Chebanca!. Despite having begun as a digital-only bank, Chebanca! now operates 50 branches, in order to greater establish a sense of trust, branding and service that digital-only banks are not always capable of achieving. However, Chebanca!’s branches are far from traditional, with their self-service machines and appointment-only advice stations seemingly the only aspects found in a traditional bank branch. Though Chebanca! branches do feature teller stations to discuss opening accounts and other services, the staff pride themselves on not being bankers but experienced retail workers heavily focused on customer satisfaction. These branches also operate video stations, essentially advice stations that require no appointment, able to connect customers with video operators on large screens and make use of biometric recognition. These branches have been greatly beneficial for the bank, with the video stations alone enhancing customer relationships and increasing cross-sell and up-sell success rates. In areas featuring a branch, asset holdings are 2.5 times higher than in unbranched areas, 45% of new customers each month come from the branch, and 37% of all Chebanca! customers make use of the branches. This illustrates that there is still demand and value in branch banking, when tailored to reflect the needs and concerns of the customer.

Canadian bank Tangerine also sees the value in alternative branch banking, with its “Café” approach to branches featuring self-service kiosks, a coffee bar and children’s play area. The aim of such Cafés is to give customers of this largely online bank the opportunity to discuss their finances face-to-face, with associates who aid customers in learning to manage their money and accounts. Similar to the approach to branch banking held by Chebanca!, Tangerine’s “Café Associates” aren’t bank tellers, with no access to Client Files, while the Cafes themselves do not accept or carry cash. It is possible to access accounts online while in the Café using the iPads and computers while seeking help from the associates, and ABMs are available for deposits and withdrawals. The simplicity and breezy attitude of these branches aims to attract customers to an easy and mobile system of banking, with the branches seemingly acting primarily as means of gaining new customers rather than a key point of access for existing customers. This concept is also present in Tangerine’s Pop-Up Locations and mall Kiosks, offering a fast and easy way to open Tangerine accounts. While innovative technology such as scanning a driver’s license to fill out an account application form is key to the ease of access Tangerine presents, it’s unavoidable that the value of branch banking to attract new customers is still of great importance.

The role of non-traditional branch banking is also an intrinsic aspect of Vietnam’s first digital bank, Timo.  Timo, standing for “Time is Money”, aims to save its customers time and money by removing paperwork, queues, and the inconvenience of conventional branch banking. Timo’s sole branch operates in Ho Chi Minh City and is referred to as the “Timo Hangout”, where the primary aim is to encourage potential customers to open an account. However, the “hangout” operates more like a café than a bank, offering free wifi and complimentary drinks to potential members, as well as 50% off the bill for current Timo members. The hangout endeavours to showcase the bank’s different account and app options to customers, offering an introduction into the ease of online banking. The relaxed and casual setting targets Vietnam’s key demographic of millennials, in a country where the average age is just 30, aiming to sell a lifestyle rather than solely a superior product. Though Timo’s inability to operate purely online can be attributed to banking regulation in Vietnam requiring accounts to be opened in-branch, the informal, comfortable setting of a Timo hangout shows the importance of assurance and trust that can be best established face-to-face.

While Timo and Tangerine incorporate digital elements into their bank branches, operating with the primary aim of offering customers an easy way to open an account rather than encouraging repeat visits for banking support, The Bank of East Asia believes the branch to still be a valuable channel for regular visits from customers. Committing to offering an engaging and helpful branch experience, The Bank of East Asia focused on creating digital branches to offer a cohesive omni-channel experience while targeting the crucial demographic of young, tech-savvy customers. This wholly paperless branch system is brimming with innovative and engaging digitised banking services, including the touch-screen i-Counter that operates as a manned counter during the regular business hours, converting to i-Teller, BEA’s interactive service station, in the evening to connect customers with staff via video call to still enable the facilitation of transactions or loan applications. The digital branch also features the i-Window touch-screen system, showcasing information on investing products and offering easy electronic application for such products by incorporating electronic signatures and real-time audio recording, the i-Zone credit card self-application, and the i-Kit automatic form completion system dependant on OCR and digital signatures. These digital branches have reaped the benefits of operating as a smaller branch, such as a rapid branch renovation time and a reduced back-office area making them well suited to highly-trafficked mall locations. Their success in also rooted in their considerable customer appeal, with the digital branches seeing a 35% increase in deposits per customer and a 65% rise in mortgage drawdown compared to conventional BEA branches. Customer response to branch banking that feels modern and helpful is clear, illustrating how branches can continue to succeed and form a key part of the banking experience for the customer, simply by effectively targeting the needs and preferences of its customer base.

Are traditional banks doomed?

March 5, 2017

Before I answer that, let me ask a couple of other questions. How many of us have transferred our nest eggs or life savings to a digital only bank? I suspect the answer to that is an overwhelming majority haven’t. Ok, how about do any of these players claim even 1% of the UK market, 640,000 roughly? Why is that, is there a niggling concern that the new kids on the block haven’t quite got the maturity to handle ‘grown up banking’?

Yes I’m hoping for a reaction from the challenger Banks how about: Tom Blomfield, Ann Boden, Anthony Thomson. Or would the Fintech Mafia like to comment?

The point I really want to make is that whilst the challengers have compelling front end journeys, banking is more than that, especially when things go wrong. Let me give a couple of solid examples from a customer perspective for my case.

I applied to for a “mobile only” new bank account. Having downloaded the app at the weekend, setting up was only 10minutes away, so I was told. Now being a seasoned traveller, I was unable to provide photo-id as my creased passport was not being recognised. There was nothing more I could do online. This bank didn’t have online chat, and a tweet didn’t give me the instant response I had expected. I found a phone number online, great, but having dialled I got a message saying the contact centre was only open Monday-Friday, 9-5! So I sent a good old email. Tuesday I got a voicemail from the bank having picked up the email, and Thursday I got another call saying that they had picked up on their logs that I had problems applying, hardly a “joined up” responsive bank. Ok, not a serious issue opening up an account, it though raise doubts on service, and whether the bank had focused too much on “happy path customer journeys”.

Last week I had been travelling in Asia, and whilst I had a bit of free time thought I’d sort out a few things I’d been meaning to do, one of which was moving money to use up my ISA allowance. I tried to do this online using my debit card, but was declined by my traditional banking provider. After receiving a text and getting an email from my wife that the bank had rung at home, I knew the transaction had been blocked as “suspicious activity” by the fraud department. An automated service had allowed me to unblock the transaction. So I tried the same transaction for my wife’s account, and yet again it was blocked, however now I was on my way back. On returning home, I called the fraud department to get my transaction unblocked, but this time I had got one of my security questions wrong so was advised to unblock it by coming to a branch with photo-id. As inconvenient as that was, I did sit back and think I’m so glad that the bank provides this as a standard part of what they do. It did make me wonder how advanced fraud detection could be in these start-up banks who don’t have as much data, whether a start-ups personnel (when accessible) on phones could be as diligent with handling situations outside “the happy path”. And beyond that, without a branch, how could a digital only bank unblock my account and make me feel safe that anyone with a photo/scanned copy of my passport couldn’t defraud me?

For me the real measure of a bank is not how well they perform when things are going well, but how well they perform when things don’t go to plan. Here it is not just the wealth of historic data that helps traditional banks, but years of running and optimising business processes. Years of handling processes online and off, of training staff (my bank had told me they had questioned the transaction because of my IP address outside of the UK). And whilst much of this is in need of a “digital refresh” there is maturity which we value and hence the vast majority of us keep our savings in traditional banks.

So I don’t believe traditional banks are doomed, but I do believe there is a race for challenger banks to reach maturity and for traditional banks to reinvent themselves without throwing out the baby. In this race, it will be survival of the fittest. I’ll end with what I feel is an apt quote from Thomas A Edison:

“Maturity is often more absurd than youth and very frequently is most unjust to youth.”

Future of the Branch: Where do we go from here?

March 2, 2017

Evolution Of The Bank Branch – Where Do We Go From Here?

While the history of banking can be traced back as far as 2000BC, the advent of modern banking really occurred in the 17th century when banknotes were first issued. Although the first cheques were written in the 1600’s, the first “clearing house” to process cheques between banks was not set up until the 1800’s. Branch banking also boasts an impressive history of longevity and innovation, dating back to 14th century Italy. However, it is only in the last 50 years, with the rapid advance of technology, that banking has undergone dramatic and diverse changes, most notably illustrated by the acceleration of the pace of change with the adoption of mobile banking.

To look towards the future of banking, it’s vital we understand how banks have evolved over the last 50 years. Until the 80’s, banking was a privilege granted to the customer by a bank manager in a branch. Banks typically opened numerous branches close by to one another to service the maximum number of customers.

As more branches opened, the increased volumes of customers and staff led banks to begin managing the group of branches centrally. Meanwhile, products offered by banks became broader and grew in complexity, as did the processes behind them and the management structure of the bank. With this widespread growth, banks opted to centralise functions such as clearing, while the significant progression in computer technology led to the creation of data centres; designed to automate accounting and offering opportunity for greater scalability for banks.

As the number of branches continually increased, more processes were centralised or even outsourced to aid the efficiency of the bank. Customer service was revolutionised by the introduction of the contact centre, effectively removing the need for phone calls from customers to be answered in-branch. These centralised functions were siloed by product and customer segments to improve efficiency within the bank, but ultimately resulted in the spread of customer data across different systems.

Advances in technology continued to offer new avenues for banking, with the introduction of internet self-service banking in the late 90’s, and mobile banking following shortly after in the millennium. The rising bank web presence prompted the growth of online marketing teams, focused on the importance of customer engagement through social media.
For many banks, their online presence has been implemented using product and process siloes, creating a banking legacy plagued by duplication, inefficiency and cost issues.
In contrast, the relaxation of banking regulations to allow for new competition in banking, creates a valuable opportunity for new “challenger” banks, armed with the advantages of hindsight and new technology, to follow a more “customer-centric” approach to banking. These emerging banks have the ability to operate at a much lower cost than their well-established competitors, while still producing compelling customer experiences and developing strong relationships.

So, how is this possible and what is the future of the branch? This blog series examines how changing customer behaviour and preferences, alongside the rapid pace of technology innovation, will impact the future of the branch, and whether it can survive in this ever-changing, digitally focused banking landscape.

For the majority of banks worldwide, customer interaction has largely moved to digital spaces, with many banks experiencing almost 90% of all customer interactions online or through mobile. Witnessed in numerous other industries, banking is following the trend of moving interaction from a physical, manual world, to a virtual, automated one, to meet the needs of the 21st century customer.

While removing the physicality out of banking initially appeared restrictive, this drastic change actually offers the greatest opportunity for innovation in banking and the branch. Services and knowledge are no longer hindered by the limitations of being spread geographically, but can now be centralised to offer customers the best advice and products anywhere, anytime, on any device. This significant improvement to accessibility of key services and knowledge offers banks the chance to build upon their customer service.
Although this does not remove the need for branches in the short to medium term, the number of branches will undoubtedly decline. Branches may instead shift their focus, operating as self-service centres offering sales and financial advice.

However, the next evolution in banking will be the management of customers online, an area of utmost importance since digital customer interaction has become so vital to banking. Banks have become well acquainted with managing websites and content, alongside providing online and mobile banking products. Social media support has been incorporated into their offerings and specialisation in digital marketing has become a wide-spread practice. Despite the benefits of such progress, these new offerings have often been implemented in a silo fashion, using different technology and processes for various customer segments and products.

Therefore, the next crucial step for banks will be the creation of the “digital front office”, largely focused on digital marketing to manage prospects and turn them into customers. This, in turn, will provide banks with the opportunity to present customers with an exceptional level of service and advice, creating loyal advocates of the bank. So, what does the front office need to focus on? The first step is to successfully manage customer interactions online or through mobile; I call this Digital Engagement.

Back to the future for Banking

January 2, 2017

Having been involved with delivering internet banking solutions since 1997 I recently looked back on some of the research I was reading at the time and also some of the presentations I was giving at conferences and to Banks. What I found is that many of today’s trends were identified early on in the era of e-commerce.

McKinsey’s wrote a paper in 1997, titled “A Revolution in Interaction”1. It proclaimed “An upheaval of equal proportions is about to be triggered by unprecedented changes in the economics of interactions”.  They described interaction as “the searching, co-ordinating, and monitoring that all people and firms do when they exchange goods, services or ideas”. Given when this paper was written it is certainly worth a read, as it provides a really good analysis of how business changes as interaction moves online. Whilst some banks have achieved an omni-channel approach to self-service banking, the majority of these still lack the ability to exploit interactions for sales, advice and loyalty in an efficient and effective way.

The McKinsey paper also mentions the concept of “mass personalisation” but this was six years after Don Pepper and Martha Rogers wrote “The One to One Future”2. This book created a step change in marketing thinking and was very applicable to Internet businesses years later, however much of this would still be revolutionary in banking even today. Banking products are virtual so are ideal to be priced and or configured to the individual customer. Some modern core banking solutions now provide this, whereas it would be rare for a legacy banking system to support this flexibility.

The Economist wrote a piece titled “The Rise of the Infomediary” 2 back in June 1999. It wrote about three very different companies that exploited the Internet with a business model whereby they sat between buyers and sellers and mediated the exchange of value. One of these was an auction business, Adauction, very similar to ebay (launched in 1995). These were the very early examples of what we would now recognise as platform businesses, a big trend again in the last few years because of the successes from the likes of AirBnB and Uber.

In 1998, I gave a presentation to the British Computer Society on the future of banking, highlighting a few trends. One of these was about data, “Data is the new currency” it was about how data could be more valuable to banks than the currency they managed. In 2006, Clive Humby of Tesco Clubcard, talked about “Data is the new oil”, he gave a great analogy how refined data (oil) was worth much more than the actual data itself. Yet today many banks still underuse the data they have, let alone, fully “refine” it to extract its best value.

In 1991 I worked for Lloyds Bank where I was involved in creating the vision for Single Customer View. It took many years and a huge amount of investment before the bank realised its vision, but this is paying huge dividends now. I’m sure many of you have similar stories and I would love to hear about them in the comments.

So, if you are currently reading about trends for 2017 or what the future of banking will be, I say “go back in time to understand” the future. Happy New Year everyone!

  1. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/a-revolution-in-interaction
  2. http://amzn.to/2j0fQwK
  3. http://www.economist.com/node/215703

The Future of UX in Banking

December 29, 2016

Virtual reality, voice recognition, artificial intelligence, augmented reality: these are the technologies that are set to change the way we interact with each other and in business. They are the way of the future, a future not that far away.  They will have a huge impact and are already making their mark.


This is especially true in financial services where they promise to make the user experience richer, more efficient, more effective and more convenient. Barclays recently introduced voice recognition software for phone customers, cutting out the need for multiple security questions and passwords. Meanwhile, Santander has an app that allows customers to voice questions about their transaction history rather than have to search manually for the data. The result is speedy access that can’t be matched in branch.

Finding the right use for the technology is all it takes. You probably aren’t going to want to be told your account balance in front of your children or parents, for example. But voice control is ideal when banking blends into the background of everyday life – buying lunch, booking theatre, train or bus tickets, or paying bills.

Not sure if it’s your mother’s birthday next week? Ask your phone to check your diary, get the date, find a local florist, choose some flowers, look up her address, check your balance to see if you can afford them, pay for them, get a receipt, know they’ve been sent, get your new balance. All by talking to your phone.

There are already hundreds of thousands of developers working to plug in new voice driven services to make our lives easier, and many will have a financial or banking element. Banks are also on the case. At least 10 around the world have launched chatbot services in the past three months alone as adoption moves from the early to the fast follower stage. Mass market will depend on how quickly the analytics mature to make the interactions truly smart.

The successful ones will be those that add value to the users – the customers, us. This means banks need to make sure they are looking beyond banking. It’s about the role they will play in the background. Successful banks will enhance their services and role by pushing analytics further and become data generators rather than data capturers, and from this they will provide value-added services.

When banks collect and analyse data they can do so much more. Combined with artificial intelligence, and augmented and virtually reality, banks will be able to help customers manage their money so much better.

I love the idea of a VR meeting where a customer’s total assets and commitments can be clearly set out. Advisers can come in to offer suggestions about making the income and assets sweat, according to the customer’s risk appetite. Does it make sense to release some equity in a house to invest in a higher yielding product? Would buying a cheaper insurance policy with a higher excess rate make more sense as the customer’s claims are historically low? Not only would the bank be offering advice, the connections and inter-relationships between it and third parties mean it would be able to affect any changes. The more data across the population a bank has, the smarter the system can be, the better the advice it will be able to give.

Perhaps the most exciting prospect in all this is augmented reality. Shopping, you pick up an item and the screen you’re wearing gives you availability, reviews, the best deal, and compares alternatives. You can access finance, order, and pay. It’s not just going to be glasses that can do this; Google Lens is already patent-applied; VR systems will get there; car windscreens; school whiteboards. This is going to be really powerful from a user perspective.

Together these technological advances have all been termed the Fourth Industrial Revolution. It has arrived and its impact is being felt. The banking sector might think it has a choice. It really doesn’t. Their customers have seen the future and are demanding it today.

Solving The Legacy System Problem For Big Banks – Is There A Solution?

December 15, 2016

Despite the considerable risk involved in removing legacy systems, not all big banks are hesitant to attempt to combat the problem, including NAB. Yet NAB’s implementation of a new core banking platform has been accused as the reason for the multiple online and mobile systems failures the bank has encountered this month. Though NAB are actively attempting to rid their system of the cumbersome legacy issues, the process of the change has presented new difficulties that are likely to affect the trust customers have in the bank, and their quality of service. Similar incidents seem likely to increase for banks with large systems requiring a complex overhaul, due to the size, scope and timescale of this change. The reputational damage system failure can incur works in the favourite of smaller fintechs and incumbent banks, who are unlikely to suffer such outages due to operating on far more reliable architecture. With the risk of upgrading been proven by such incidents, the notoriously cautious established big banks may become even less likely to consider addressing their core system issues, limiting the extent to which they can take advantage of digital products and transaction increases.

Yet system failures are far from exclusive to banks attempting to combat the issue, with big banks RBS and HSBC facing similar technical difficulties this year due to the weakness and strain on their legacy systems. Both types of system failures, whether from upgrading or refusal to upgrade, are likely to impact customer loyalty, particularly that of Millennials who are content to change their bank more frequently than older generations. Paired with the increasing competition in the market from digital banks free from the limitations of legacy systems and able to innovate in-line with the changing customer demands, the immense difficulty faced by banks “too big to scale” could lead to a declining customer base and inability to offer competitive products.

Big banks’ architecture is already struggling under the pressure of changing banking habits, and the growing preference for digital options renders change imperative. Yet the risk involved for banks of such scale is of considerable consequence, but waiting too long to upgrade will only aggravate the problem. Big Banks appear to be facing a Catch-22 – upgrade as soon as they can in order to remain competitive and encounter issues like that of NAB, or allow caution to win out and not attempt to rectify their scaling issue until it becomes impossible to ignore, by which point they may have fallen too far behind competitors for upgrading to be of use. For either option, both face the threat of not having enough time to overhaul their system to compete with new digital banks, falling too far behind to catch up.

Clearly, scalability has far reaching consequences and is crucial to a bank’s continued success in an increasingly digital world, where technology is advancing faster than ever before. The multitude of possibilities new innovation brings create new problems for large banks; where size was once an advantage it is now an obstacle. Being “too big to scale” is as great a threat to a bank’s survival as new competitors saturate the market, and the inability to scale could severely alter the banking landscape.

Will Industry Progress and Innovation Be The Downfall Of Big Banks?

December 8, 2016

While changes in payments trends from consumers are placing increasing strain upon large, traditional bank systems, they aren’t the only force altering transaction and data volumes. The European PSD2 regulation requires banks to adhere to standardised changes intended to improve the industry, bringing significant, unavoidable adjustments to an industry infamous for being stationary and resistant to change. The PSD2’s focus on the role of AISP’s and PISP’s will drive both interaction and transaction as well as competition, and the direct connection between banks and retailers through use of APIs will lead to innovation and new opportunities. Banks are beginning to realise the use of APIs affords a chance to create a larger ecosystem of value for their customers, with some venturing to offer innovative third party apps through their own marketplace. This concept is already underway in BBVA’s API market, and is likely to become a popular means of adding value for customers, as well as boosting transactions and interactions. The implementations of PSD2 requirements provides banks with an excellent opportunity to innovate and differentiate themselves from competitors; a particularly vital opportunity for bigger banks threatened by digital competitors offering speed and ease-of-access they cannot match. When also considering the influx of new banks entering the market, with 30 new banking licences in process, leveraging the opportunities the PSD2 offers could be essential to survival, but there are concerns surrounding big banks’ ability to do so. Large, rigid legacy systems may hinder traditional banks from taking advantage of these opportunities, while digital and smaller scale banks with more flexible systems facing less risk have the infrastructure to cope with these changes, able to leverage them to offer a superior service.

Banking differentiation is not solely limited to opportunities created outside the bank, but is also stemming from within the bank through increasing service functionality, with offerings in personal finance management. Offering tools to help customers remain mindful of their budgets and goals boosts bank transactions as the bank becomes a more valuable source of knowledge for the customer. Similarly, Neo Banks are going one step further with offerings including expense tracking and invoice issuing, also adding to volume of interactions. While Neo Banks are unlikely to find this boost in interactions problematic, operating on newer, simpler systems designed for a digital future, traditional big banks are of such a scale that further strain on cumbersome, siloed infrastructure could prevent them from offering products to compete with smaller competitors, thus giving innovative newcomers an advantage.

Evidently, the ever-increasing volume of transactions, the growing preference for digital channels, the changes brought about by PSD2 and the infinite possibilities of IoT will all place considerable strain on the architecture of big banks, relying on systems implemented decades earlier and unable to keep up with the pace of changing customer needs. Many banks considered to be “too big” continue to operate on aging legacy systems, plagued with data silo issues and pulling time and resources away from investment in new technology able to operate in this new digital landscape. Despite awareness that these systems are hindering banks’ potential and growth, with 86% of banks citing legacy technology data silos as their biggest internal challenge[1], the risk, time and scope of implementing a new core system for such large banks is a serious concern. However, the ease with which influential technology companies such as Google are able to scale due to their single data view origins, growing from 10,000 search queries per day in its infancy to the colossal 3.5 billion per day it handles today[2], is reflected in the ability of digital fintechs banks to expand with minimal issues, due to being data-focused and unaffected by the limitations of siloed systems. As a result, the ongoing struggle encountered by traditional banks to make use of their data and effectively manage the growing scale of data and transactions, is an unavoidable problem in a market gaining a steady influx of younger, more agile competitors, firmly focused on the changing direction of banking needs and processes. Banks that are “too big to scale” will inevitably lose out to fintechs and incumbent competitors able to offer a service more aligned with the requirements of today’s, and tomorrow’s, customer.

[1] http://www.mobilepaymentstoday.com/news/study-global-digital-payment-transactions-set-to-reach-10-growth-for-first-time/

[2] http://thefinanser.com/2016/10/internet-giants-competition-banks-ready-compete.html/