Comments on: How can a Bank go online, and set itself apart?

By: Colin

Colin — Wed, 10 Jan 2007 17:52:49 +0000

Nothing is free and easy!

By: rshevlin

rshevlin — Wed, 10 Jan 2007 17:23:27 +0000

Does it have to be tied to the expensive CRM systems?

I don’t know how to answer that. You posed a question about differentiation. That’s a business strategy issue in my mind.

Executing (successfully) on a new strategic direction is (or can be) expensive and painful.

Sorry for the depressing answer.

By: Colin

Colin — Wed, 10 Jan 2007 17:08:21 +0000

Thanks for that Ron …. I support the concept, and even have a category here on the blog for customer advocacy. The issue for Banks seems to lie in the execution, and doing it well, cost effectively. For example does it have to be tied to the expensive CRM systems? This is hard, and costly, and I am lately leaning towards avoiding that cost, because I don’t believe CRM implementations have met the early promise.

By: rshevlin

rshevlin — Wed, 10 Jan 2007 16:03:21 +0000

How can a bank go online and set itself apart?

Given the state of the banking industry, the answer is easy: Become a customer advocate (not to be confused with the whole Net Promoter Score thing which purports whether or not customers are advocating for you).

Consumers need help — objective guidance and advice — making financial decisions. And many of these decisions are not about “how do I allocate my $3 million in assets?” But everyday (and some less often) questions about managing their credit scores, allocating funds between checking and savings accounts, making 401(k) (sorry, Canadian readers) allocation decisions, etc.

Nobody is helping consumers make those decisions today. The firm that figures out how to do that — cost effectively and profitably — will begin to build strong LIFETIME relationships with today’s Gen Yers.

Ron Shevlin
htttp://marketingroi.wordpress.com

By: Colin

Colin — Wed, 10 Jan 2007 03:13:46 +0000

Great comment David. I take the point on customer research in particular. How many times is research commissioned by those with a vested interest, and the research merely confirms. Whereas research will never tell us the last point that you make, about ease of transfer to ING.

By: David

David — Tue, 09 Jan 2007 19:06:31 +0000

Colin, great post and ‘head in the sand’ approach will not work much longer. Bank’s cannot “go the way of the corner book store or paper encyclopedia” and I have hope that some bankers will come through with strategic thinking. I believe most banks would love to innovate but agree that they are really just playing defense on an “as needed” basis to keep up with innovative competition and strategies. In reality, only a few banks are truly innovative and usually it is just one business line as opposed to the organization as a whole. Sadly, in some cases, I believe innovation is actually discouraged. Speed to market and cycle times are a hindrance to bankers and without a crisis at a particular institution, decision making is quite slow (even in very small banking institutions…any sense of urgency is typically not there) and culture of any sort of innovative (risk-taking) is just not fostered given it’s so contrary to historic aspects of banking. Additionally, customer research is severely lacking and/or not focused – while most financial institutions do spend on customer research they rarely are forward-thinking enough to actually ask what their customers want and take that information and utilize it – it’s more for the satisfaction scores…takes me back to post where you mentioned Hamels quote that “The biggest profit center at banks is customer ignorance, which banks have mistaken for customer loyalty.” I wonder how long it will take bank customers to realize just how easy it is to transfer one’s checking account to ING Direct and pick up 450 bps…

By: James Taylor

James Taylor — Tue, 09 Jan 2007 17:46:51 +0000

I completely agree. Most banks are very behind the times when it comes to their online presence. They could be building the bank of the future online (see http://www.edmblog.com/weblog/2006/09/using_decisioni.html) but they are not. All too often they force customers to do things the old way not a better way (see http://www.edmblog.com/weblog/2006/09/a_banking_story.html).

By: Colin

Colin — Tue, 09 Jan 2007 17:28:56 +0000

Dave … I think you have nailed the general Bank ‘versness well. As James pointed out, there are lots of innovative ideas tabled, yet something holds Banks’ back.
Yet I watch examples such as Prosper, Zopa, and now Wesabe who are distermediating financial advice, and I question how long the ‘head in the sand’ approach will work.

By: Colin

Colin — Tue, 09 Jan 2007 17:11:04 +0000

Dan … How will Banks differentiate on Payments? Isn’t that market already lost to the Paymentech’s, Moneris’s etc?

By: Dan Dickinson

Dan Dickinson — Tue, 09 Jan 2007 16:07:51 +0000

Dave,

I think banks are also starting to recognize the value they get from payments. While they’re reluctant to jeopardize their core business — lending — they see the innovation taking place in payments (which has nothing to do with the age-old perceived strength of banks, which is that they have guarded vaults, physical and/or virtual) and worry that they’re losing their grip on the market.

That said, banks are still set up to acquire and manage lending; payments was functionality they kind of fell into. A lot of bankers still think that way too, as if anything happening outside of a branch gets lower priority. Since there’s little or no regulation protecting bank monopolies on payments (as there is for deposits/lending), and since it takes years for “this is what we should be doing” to overcome “this is how we’ve always done it” in a bank, smaller faster companies are the ones making real progress right now.

By: Dave Birch

Dave Birch — Tue, 09 Jan 2007 09:02:34 +0000

It isn’t so much thanks banks are risk adverse but that they are money-verse (if that’s a proper word!). As our guru Christensen points out, no innovation in a bank can ever earn the return that the core business of lending does, hence competition for funds will always mean “business as usual”. Banks don’t innovate because it’s not worth their while, if you see what I mean.

By: James Gardner

James Gardner — Tue, 09 Jan 2007 06:29:01 +0000

Oh, I could not agree more with this post. All the banks I work with are very much trapped in the bank-analyst-bank word cycle, and their strategies are almost always the same.

But I would say, from a vendor perspective, that whilst we spend a lot of our time coming up with innovation that we can sell, it is a very difficult task to get institutions to move forwards.

Banks are naturally risk averse, whereas the companies you mention in the list don’t seem to be.