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!


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.



Are Banks too big to scale? Who’s to blame?

December 1, 2016

The ever-increasing size of traditional, long-standing banks has been a fascinating point of discussion for many years now, with the possible problems arising from banks being “too big” having far reaching consequences. The financial crisis heightened the pressure for regulators to be more stringent on capital adequacy, but high profile government bail outs prompted many to question whether “too big to fail” banks should remain so large and influential. While the financial crisis is no longer at the forefront of our minds, the global digital revolution is seemingly impacting every aspect of banking, with no signs of slowing down. While digital banks and fintechs are well equipped to face the challenges the impact of digital preferences and advances will have on the industry, larger traditional banks seem to face a multitude of struggles. With the unprecedented growth of digital interactions and transactions, this blog series looks at whether the new and emerging demands on banks’ legacy systems will mean they are too big to scale?

Transaction growth in the last year alone has been monumental, seeing a 10% rise in 2015[1]. Payments methods are becoming overwhelmingly mobile as the use of cash is dropping, with the volume of mobile payments via a smartphone, tablet or wearable growing by 300% a year[2]. 34% more customers have made use of mobile payments in the last year[3], showing a clear shift to digital and the self-service options it provides. Transaction growth is also being heavily impacted by the popularity of pay-as-you-go subscription services such as Netflix and Spotify, instead of occasional, individual purchases of media. The rise in digital services, able to reduce their business costs, such as Uber not owning any vehicles themselves, creates opportunity to offer a cheaper service, encouraging repeat transactions and resulting in a greater volume of payments and rides. Both the change in channels and vast transaction volume puts pressure on large, aging bank systems, while smaller, younger, digital banks with more flexible systems are not impeded as heavily.

The changing payments habits of consumers will be further altered with the ease of access automated Internet of Things (IoT) technology will create. As far back as 2008, there were more objects connected to the internet than people[4], and a not-so-distant future where devices including refrigerators and washing machines be connected to the internet is fast approaching. Already, washing machines can hold enough washing powder for multiple washes and are able to detect when quantities are running low, but it won’t be long before they’ll be able to automatically re-order the powder themselves. The potential in payments services using this technology is limitless, as every bank customer could have dozens of devices linked to their bank account, with frequent automated transactions able to occur. The use of IoT will also generate huge volumes of data, stored by banks and able to offer insights into customer intentions. Smaller and digital-oriented banks should be well-equipped to offer IoT services and benefit from the data it will collate, but the scale, cost and maintenance of IoT banking processes raises questions over whether big banks will be able to make the best use of it. Many may not have the architecture to facilitate this communication of devices, as their limiting data silo issues prevent communication of current data. Though some banks are considering the application of IoT to banking, such as U.S Bank’s Innovation Lab project involving cars able to order items to repair themselves, this is not common practice for traditional banks, and it’s likely those that aren’t able to make use of IoT opportunities will become obsolete.

[1] ttp://




The Internet of Me: Connected People

June 8, 2016

This is the 4th and final blog in the series ‘Bank of Things’

Connected people is really about the rebirth of “Personal area networks” (PAN), the concept that multiple devices on/with a person connect up in a private network to that person. Today this is as simple as your phone syncing with a smart watches. In the future this could be many other devices that are part of your jewellery, clothes or even embedded in your skin.

While Google have patented a contact lens for reporting glucose levels, Samsung have patents for them to project content directly to your retina, replacing the need to wear Google Glasses. Sony launched Xperia Ear as a device more like a personal assistant that you can interact with rather than listen whilst Nuheara is launching a device that improves your hearing experience.

Motorola launched a smart tattoo that can be used to unlock your phone though the technology has a much wider possibilities and again payments is an obvious one. A report from The World Economic Forum however forecasts that smart chip implants could be commonplace by 2023. This may be in a number of ways from simple chips for identity and payments to health devices like cochlear implants or heart pacers. The report also identifies the advancement of Brown University’s research into connecting technology directly to the brain to enable mind control of devices.

The development of mind control and improvements in speech recognition could lead to apps moving towards a Zero-UI, a user experience that does not necessarily involve a screen image. Although Emerge Interactive have created a screen that can be embedded into the skin! The demo shows how an app can control tattoo’s which can even be animated or used to display running stats.

Google’s project Ara is a modular phone that allows you to upgrade parts of the phone like the camera or battery so that you don’t need to replace the whole phone to upgrade. Taking this concept further perhaps the PAN could mean that eventually you only need one GPS, one camera, one battery etc. each wirelessly communicating to other devices like your phone, car stereo, watch?

From a banking perspective identity can truly be multi-factor combining both biometrics and a physical device/chip either on or in you. And again this enables payments to be made without have to use a card.

However with access to the broad range of sensors attached to devices in your PAN, banks will have access to ever richer data to understand more about your lifestyle. As an infomediary banks have the possibility to provide much more relevant and targeted offers, advice and rewards. Banks will need to extend their omni-channel capability to utilise these sensors not only to respond to real time events created by these sensors but to capture the data they provide.

With increased information it’s clear that products like insurance will change dramatically, personalised to individuals lifestyles. As I highlighted at the start of this series the Internet of Things is only limited by imagination and a huge amount of innovation has already been brought to market, too much to cover in any blog or even a book!

The key for banks is to look at opportunities to engage in creating compelling new customer experiences afforded by these devices and the data they will provide. As usual Banks will need to respect privacy and look at how they can provide a valuable service in return to the rich data that will help you to understand your customers better.

Students from 5years old upwards are already learning how to use the internet of things, and now is the time for Banks to define how they might engage customers in “The Bank of Things”