Awful wordplay just to get that image in, I know. But it does make for a haunting, memorable visual, doesn’t it?
Anyhow, as businesses transform and adapt to the digital age, a key area seeing innovation is finance. Interestingly, a lot of innovation in this domain is invariably a step behind popular technological innovations. Paypal, which innovated with payments over the Internet, only makes sense when there are enough people out there using the Internet, and looking for easy ways to spend or collect money while doing business online.
A similar trend now emerging is that of what you might call ‘always-on banking.’ When they were completely manual, banks operated at fixed hours, and the rest of the time transactions were mostly not possible. When ATM came along, the cash dispensing part of banking became fully automated, so it became possible for people to walk up to an ATM at any time and perform a few basic transactions.
But now, a new wave of technologies—high speed cellular networks and smartphones—have gone mainstream, and they are forcing the financial industry, particularly the retail banking industry, to innovate on several different fronts.
Much of this innovation depends on whether banks understand customer expectations and usage habits, and deploy systems that are streamlined to handle these habits.
And it’s about time too. According to a report by The Economist, four-fifths of smartphone owners check their devices within fifteen minutes of waking up, and that the typical user does so 150 times a day. But then I didn’t need to cite any report for a stat like this did I? I know what’s the first thing that I do in the morning. And you know very well how many times you look at your phone in a day.
But that doesn’t mean your bank is going to shut down a bunch of branches and go all virtual. What happened with Borders (that bookstore, remember?) is unlikely to apply here. Borders was all about selling books though physical stores, but as Amazon ramped up its online books sales, that directly impacted the business that Borders had set up until Borders finally went out of business.
Retail banking is clearly not headed in that direction. Or not yet, anyway. People are certainly starting to rely on digital channels for their banking needs, but they are not quite abandoning the traditional channels either. For example, a study by Gallup highlights that: “78% of people have withdrawn cash from an ATM, 71% have made a bill payment through online banking, and 21% have deposited a check through a mobile app using Remote Deposit Capture (RDC), while 65% have deposited a check in person at a branch.”
Which is why the big interest in omni-channel presence in retail banking. The key focus area is ‘Zero drop rate’ channel integration. For an efficient and reliable banking experience it is essential that the customer should be able to move seamlessly between different channels. If I start filling out a banking related request form on my phone, I should be able to save it filed out partially, and then pick up where I left off from my laptop.
As banks make this transition to having a pervasive presence across various channels, some key factors that make the digital channels stand out are worth noting:
- Context and presence: A mobile app has clear awareness of a lot of your context such as location, family and relationships (for those add-on cards, for example), and more. Moreover, the app can also modify its behavior to take into account your presence. Away for a meeting for the next thirty minutes? The app will prompt you for that bill payment later.
- Preferences / behavior awareness: Have some specific goals for savings? Enjoy spending big money on Amazon late on Friday nights instead of risking driving? Well, neither do I. But some people do. Drunken binge shopping is a thing. The app can gradually become aware of your various preferences and behavior patterns, and offer you the right services in the right order of priority accordingly.
- Security / identity: Apple pay is a terrific innovation on this front. In general though, it would be exciting to see how banks get better at ensuring security in mobile banking. They certainly have a lot of data-points to work with, so we are sure to see a lot of progress here—even beyond all the work done so far.
- Personalization: This is the smartphone version of the IVR prompt that allowed you to set your preferred language for the phone service. Run a little business and pay the same vendors multiple times a month? Maybe you will see the list of those people at the top along with he option to wire money. Need to track the expenses on that add-on card carefully? Set up some trigger so this info floats to the top whenever it’s relevant.
- Alerts and notifications: This is a big one of course. Notifications play a big role in security as well as convenience.
But that’s probably just the near future, come to think of it. I’m not sure for how much longer banks will need the whole omni-channel strategy. I did physically visit my bank branch recently, but that was only because the bank did not offer the service I needed online. If banks get better at virtualizing themselves, they can soon enough wind down their physical presence, and maintain just a few branches and the network of ATMs. After all, among all the various things we use on a daily basis, money is the easiest to virtualize and probably stands to benefit the most.