Archive for April, 2016

POST 4: Digital banking is all about Interactions not transactions

April 22, 2016

 Post 4 of the series Transformational Banking – Digital banking is all about Interactions not transactions

After my previous posts API’s and Big Data I was asked by a few people, “these are great ideas, but how does a bank make money from doing this”. This to me was an eye-opener as I assumed it was clear that this drives customer engagement, what I hadn’t appreciated is that not everyone see’s the link between engagement and creating revenue.

We know customers are moving online, banks can expect 90% of customers to interact with them through digital channels. As this happens, how do Banks sell, advise, reward and drive advocacy? The answer is simple they have to:

  • Provide good content and useful services to drive more interactions and to gather data about the customer interests, habits, life stage etc.
  • Drive even more interactions by being able to identify the customer wherever they are online be it on your or another website, mobile/internet banking or social media. Be where the customer is online, I call this Omni-Presence
  • Provide more ways to interact online email, IM, Video, social media…
  • Use each interaction to communicate with the customer, but respect privacy, channel communication preferences and acceptable frequency.
  • Provide communication in timely (real-time), relevant and appropriate way
  • Use analytics and machine learning to improve the decisions you make on what to communicate, when and how

Each opportunity (interaction) is a chance to sell, advise, reward, retain or engage the customer.

So how does this link with API’s and Big Data?

Banks can profit from API’s directly by either selling / licencing access to partners or just making money from the underlying transactions driven by the API’s. However API’s used to create more innovative services (either by the bank or partners) can drive much more interaction. Every interaction is not only a chance to communicate with the customer but is also a valuable source of data. As the result of any communication can be captured and if successful can replicated to other customers, if not then refined and another approach tried. The continuous improvement of communication creates a self-learning, self-tuning engagement model that is more effective than traditional marketing.

By incorporating 3rd party API’s Banks can also open up new revenue streams from 3rd parties, for example by taking a margin on ticket sales for travel or music festivals in the case of students.

In a similar way creative use of Big Data can also drive greater interaction and create new revenue streams. In terms of the latter some banks are already capitalising on PFM (Personal Finance Management) data to provide 3rd party offers and rewards to their customer base. The customer gets something for nothing or a discount, the bank gains a commission from the merchant and the merchant gains a customer. This is a win-win-win scenario driven by the banks being able to provide more targeted offers (based on customers spending patterns) than the merchant would be able to themselves. There are many more opportunities to profit from data that Banks hold but this is a stark change to their current business models, but one that challenger banks are already looking to exploit.

There’s money to be made from API’s, Big Data and driving customer interaction but it will require a mind-set focused on transformational banking rather than incremental change of existing banking services.

Post 3 of Transformational Banking Series – Getting the right focus on API’s to transform banking

April 15, 2016

Post 3 of Transformational Banking Series – Getting the right focus on API’s to transform banking

Whilst mobile, cloud, big data and social (Gartner’s nexus of forces) have stolen the limelight in being transformative, a relatively silent storm has been brewing in the world of API’s. For business people it doesn’t help to have an acronym like API (Application Programming Interface) as it sounds very technology oriented and something that IT should manage. However the good news is that many banks IT have been very active in the API space. Many have participated or led their own “hackathons” – essentially a short fixed time period to use API’s to create new software.

Regulations like PSD2 and initiatives like OpenBankProject and a driving banks to publishing API’s to their systems and data (of course in a controlled and secure way). And the benefits for banks to drive innovation through a plethora of start-ups and software companies is clear:

  • Developers get access to bank data/services to create new applications to sell to the banks customers
  • Customers get a wider range of useful applications from a broader range of suppliers than the bank alone
  • The Bank creates a broader eco-system based on their data/services that will help differentiate and compete harder against their competitors.

Done well, it really is a Win-Win scenario. And yes there is a but, are the banks making the most of this technology? Whilst a lot of focus is given by Banks on publishing API’s, not as much focus is given on foraging and consuming 3rd party API’s.

API’s are used broadly across all industries and there is huge potential for banks to create real value added services and products or to dramatically optimise processes. Also to drive real transformation in Digital Banking. For example look at CommonWealth Bank’s property search app, although the “augmented” reality feature stole the headlines, it was the use of 3rd party API’s to provide sale prices, property history and details that is the smart feature. Of course the customer can go to the different sites themselves, but this puts everything in one place, aggregating data from multiple sources to make the buying experience much easier.

Similarly there are opportunities to create better experiences around key decisions that have financial implications like buying car, planning a wedding, going to university, having a baby. Transformational digital banking solutions can create better experiences for all life stage events, and API’s are the key to creating a seamless experience where the customer perceives all the data and service is being managed by you.

Hence in the same way that Banks need to think beyond banking data (link to previous blog), Banks also need to think beyond banking products and services. Again the opportunities can seem so vast that this can be an overwhelming task, but a focused approach could be to specialise content and services for a more targeted customer segment (link to 1st blog in this series). So for example using API’s could Student banking also provide:

  1. Purchase travel tickets
  2. (
  3. Notification of festival ticket availability
  5. Price checker/locator (buy anything at lowest price locally)
  6. ( + )

Almost 15000 sites/apps have listed their API’s on so there’s already a huge amount banks can do to drive innovation in Digital Banking for all customer segments today. The bank customer of the future however might want something more though.

Whilst there is a lot of focus on Millennials, this generation weren’t mandated to learn coding, not like the generation after them who have yet to leave school! This is a generation that will have done their hour of code (, many will have written their first apps before reaching puberty. We have yet to learn what this generation will be fully capable of, especially as they utilise even simpler scripting capabilities using sites like or It’s likely this generation will be scripting their own interactions, mashing up banking operations with other sites themselves.

What’s clear is that API’s are as strong an enabler for Banks as Cloud, Mobile, Social and Big Data, and that Banks have to take advantage not only by publishing their own API’s to create an ecosystem of partners, but also to consume 3rd party API’s much more voraciously than they have done so to date.


Post 2 on Transformational Banking: Big Data Not Banking Data

April 8, 2016

As everyone in the banking industry is well aware, banks hold a lot of data and many have spent several years utilising it. Some banks I know have been mining, analysing and really making their data work for them for over 25 years…but there aren’t as many banks like this.

Banking data has been used broadly: sales targeting, fraud, credit scoring, retention etc. And now in the era of “Big Data” more banking data is being collected, especially through online and mobile channels. All good? Yes, and here comes the “but”; it’s all “banking data”. Some may argue that clickstream data is not banking, but it is if the clicks are on bank pages, whether it’s internet banking or the banks web page.

Initiatives like PFM (Personal Finance Management), whilst useful, have further legitimised the collection of financial data only. However, for transformational digital banking, banks have to be more voracious about collecting data and more creative in its use.

For example a bank’s typical approach to credit scoring involves financial analysis of the customer’s income, outgoings and payments history. This approach assumes you need to check financially a person’s ability to pay. Companies like FriendlyScore and Veridu turn this model on its head and use social media data to validate a person’s identity and trustworthiness to pay. Similarly, last year China launched an initiative which will be rolled out nationwide by 2020 to create a “Social Credit” system. Initially, 8 companies have been invited to define scoring approaches, and these vary from analysing online spend (Allibaba/Sesame) to scoring on online dating (Baihe).

Imagine how much more customer service can be improved by understanding the customer’s emotional state when they are contacting you. Companies like are leading the way in providing emotional detection and analytics. Similarly, several years ago Samsung demoed a prototype phone with in-built emotional detection that worked with several sensors. Their analytics worked on things such as the speed of typing, errors made, pressure and vibration. Microsoft have also demoed “mood sensing” couches and even a “mood” bra.

Some banks have investigated the use of geo-location, for example to highlight the nearest ATM or branch. Some have gone further with geo-fencing, using “beacons” to present offers in real time, or to change electronic billboards as customers walk by locations pinpointed to 5m2.  But how about using Google image search to help you identify where a picture was taken. How could this be useful to a bank? If you could identify the location, you may understand the kind of holidays the customer takes, providing you with an idea of their lifestyle. Customers that use sites like Instagram will also give away how frequently they go on holiday.

The sources and use of data that banks can access are clearly vast, and with the Internet of Things the growth of data is about to explode further still. It will soon be possible to record a person’s entire life: what they saw, what they ate, where they went, how they felt, what they like/dislike, their heart rate, how often they brush their teeth, even how often they wear the same socks before they are washed, and more.

The key to using big data to transform a digital bank will be to gain the customer’s trust, giving them reason to volunteer the data to you, and this will happen more easily if the customer sees value for themselves in the way you use data. For example, being able to extend a credit facility instantly and easily whilst out shopping, getting discounts on things the customer likes, or even just helping them to manage the privacy of their data online.

For some time, one of my favourite sites (I wish a bank would do this for the UK) has been launched by UBank, which allows you to compare how you spend your money with people similar to you (by age, earning, location, marital status etc). It recognises that either consciously or sub consciously we make comparisons and decisions based on other people. This site can be used by anyone, not just bank customers.

Going back to China’s social credit system. Some of the feedback from users was that they were happy to give up their data as it simplified processes; for example they could make a hotel booking without having to pay a deposit. Also, as less than half the people in China have a financial credit history, something that works on data broader than financials will also allow people access to credit.

It is clear there is a huge amount of data available and that with the right value for the customer in providing it, they will volunteer data to you. Even regulators with initiatives like PSD2 are pushing for data to become more openly available with the aiming of improving service and products for customers.

To drive digital transformation it time for banks to think broader thank bank data and really get creative about big data, before somebody else does!