The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Customer Advocacy’ Category

All banks have the same strategy | what happened to the Starbucks strategy?


It was refreshing to read this piece, and takes us exactly where innovation in financial services ought to be going – the new (old) grand ideas.

Starbucks should start banking | FT

What if Starbucks opened an online-only retail bank offering competitive deposit rates and a modest range of loans and mortgages? It could do that by partnering with a finance company such as ING, which has the appropriate banking licences.

All it would need to do is install ATM machines in its outlets, which would involve investing some money but would allow it to get more out of its existing branches.

National supermarkets in the UK, such as Sainsbury and Tesco, have opened retail banks and placed ATM machines in their branches, but there is no national grocery chain in the US with a comparable reach. Even Wal-Mart lacks outlets on most urban high streets.

I recall the brainstorming sessions in the 90′s at the bank, where the discussion about competition arose not from other banks but from:

  • Starbucks levering their distribution and cards as a bank
  • ebay or Amazon offerring a credit card
  • internet only banks – ING was on the horizon – mbanx and Wingspan already out there
  • whether to join the S1 online banking commoditised platform
  • offer an All in One account that pulled together lending and deposits into one account
  • how to deal with the role of aggregation- offer it, join it, or ignore it
  • bill presentment – same idea – offer, join or ignore
  • shift in business model from generalist to:
    • product (manufacturer) – offer loans and deposts through others channels
    • distribution (channel) – sell products & services of others – Open Finance (Forrester)
    • segmentation (customer type)  – focus on a niche market, although most interpreted as the generalist, all things to all market which is where most banks ended

Relevance to Bankwatch:

The problem today is that Banks are on strategy defined 6 – 8 years ago to bricks and clicks, focussed on customer retention and wallet growth.  Customer Relationship Management (CRM) became the strategy de jour.  Who would claim that has worked?  Seibel disappeared inside Oracle for a reason.

Banks are all on the same strategy, focussed on mortgage as the entree, and upsell with other services later.

There is nothing out there that aims at shifting the balance of share of market in a substantial way.  This is not about acquisition or mergers – we have done that, and “too big too fail” is too fixated in everyone’s radar now, or until capitalisation is fixed, in any event.

No, this is about business model shifts … shifts that would have a target of:

  • double digit percentage shift in share of payments,
  • extraction of share of deposits and payments from an existing industry (the Starbucks example),
  • exponential elimination of costs relative to competition
  • focus on what your are good at and eliminate the stuff you are not good at

Business models –

Mr Bank Chairman …  what is your business model, and how is it different than the competition?

Supplementary question -

Who is your competition?  Do you lost sleep over Citibank and Wells, or Tempo and Wesabe?  Does your answer worry you?

PS …  as I finish this post the most telling thing is something I have become acutely aware of.  The blog categories I set up 5 years ago no longer apply, until I do a retrospective post such as this.  Either those were really bad ideas, or ideas yet to come.

The Enterprise of the Future in Financial Services | Five traits


Here is another study on the characteristics of financial services required to survive.  IBM is always thoughtful and this one is no exception.  They entitled the piece as applying to Financial Markets, but I have interpreted this to apply to Financial Services, generally, and not just say money markets.  Since they spoke to 1,000 CEO’s I think that assumption is reasonable.

The enterprise of the future in the financial markets industry | IBM

What will the financial markets enterprise of the future look like? To answer that question, IBM spoke with more than 1,000 CEOs from around the world. These conversations, together with our statistical and financial analyses, provide a unique perspective on the future of the enterprise. During this critical point in the market, five core traits of the enterprise of the future revealed through our study provide important implications for the financial markets industry—an opportunity, if not a mandate, to reevaluate business and operating models.

The enterprise of the future in the financial markets industry (188KB) – pdf

The central point is that this is no longer business as usual, and whether startups or old businesses, the traits mentioned are core to survival.

The five core traits of the Enterprise of the Future revealed in the IBM Global CEO study hold important  implications for the financial markets industry as it navigates one of the most financially devastating
periods in history

The five traits [only partial implications shown here - click through to IBM for full report]

  1. Hungry for change

      Implications:  … having the right governance, culture and incentives will allow firms to manage change, not simply react to it.

  2. Innovative beyond customer imagination
      Implications: … Moving slowly on this trend puts firms at risk of losing clients to innovators that are improving client collaboration and segmentation capabilities …
  3. Globally integrated

      Implications:  To drive faster and bolder innovation, employees need the means to collaborate openly across organizational fiefdoms. And despite the industry’s bias toward proprietary intellectual capital and a do-it-yourself approach, market realities are making external collaboration even more crucial.

  4. Disruptive by nature

      Implications:  Firms must also nurture a series of innovation programs that span multiple business
      model areas and include industry-changing plays. In this industry, perhaps more than most, technology will serve both as an enabler and an instigator of business model innovation.

  5. Genuine, not just generous

      Implications: Their negative reaction to client and regulator demands for increased transparency and ethical behavior may be causing financial markets firms to underestimate a major financial opportunity. We believe industry leaders will find ways to grow their bottom lines while being a socially responsible role model. They’ll not only work to become more “green” and invest in social causes, but also eliminate incentives that encourage unethical behavior inside their own ranks.

Relevance to Bankwatch:

The most intriguing part for me about this paper is that none of these characteristics come natural to any financial institution.  There are a couple of exceptions for one or two of the points and while I accept that, I can think of no institution that has all five.  This particularly applies to big banks.  Any exceptions within individual traits would be in the Credit Union world.

All five traits require a deep look inside the culture of the organisation, and the ability to see yourself as others see you.

Written by Colin Henderson

October 23, 2008 at 09:31

Banks | Today is the perfect day to start a blog – begin the conversation with your customers


Confidence in financial institutions has been shaken, and the rules for regaining confidence are not clear.  Part of the reason that the road ahead is unclear, is because the rules have changed.  Its not uncommon for people to suggest that banks don’t ‘get it’, however in fairness to all concerned the new rules are not always clear.

One side outcome from the financial headlines has been to isolate some clear rules that anyone can follow, including Banks.  These posts deal with some of the issues for banks, and any company to consider.  Incidentally, this is the heart of step 1 of  Web 2.0 for banks.

5 Steps: How Banks Must Regain Trust (hint: Not Via Advertising)

But some serious trust has been lost. Managing our own personal finance is one of those things that the average American feels less and less confident about. Most of us have no choice but to surrender our trust to financial experts and institutions.

And this from my own contribution over at thebankwatch.com.

“Stop reinforcing the idea that bank leadership is out of touch with reality by delivering your same “plan for retirement” ads”

The main page is running their (AIG) latest ad here, and it speaks about ‘what we see’, has photo’s of football players, and is generally a typical wealth management type ad.  … If I had an AIG policy, what are you doing for me – is my policy still working?  Simple basic comments addressing what people are actually thinking.  This is what people expect and what social media mean.  Talk to people and listen to people.

In the ’5 steps post’ John speaks about 5 rules, and here are three of them with a similar theme.

  • Stop your traditional advertising with your old campaign now
  • Whoever said corporate blogging is dead is an idiot – start a blog for godsakes
  • Listen and react to your customers publicly

The theme here is simple.  Get personal with your customers, and get real with your customers.  Ask yourself and ask your friends.  Does the sight of football players jumping around, and other typical corporate branding exercises engender trust in a time of confidence crisis?  If a friend is have a crisis is the first thing that you would do is suggest a new paint job, or buy a new car? 

In a time of confidence crisis, the first thing to do is match the communication method, and media to the times.  In times of confidence crisis, people want to be spoken to.  They want to have a conversation, ask questions get answers.  In fact as you follow this theme along you will see that this is not just in a time of confidence.  This is something to expressly do at all times – because at any given time someone is having a financial confidence crisis and needs re-assurance.   This football player ad don’t help those people at that moment.  They want … a conversation. 

Something to try Mr financial services executive:

Adopt the persona of a customer – read a few headlines in the business section …. close your eyes … now go to your web site – how does it feel?

Written by Colin Henderson

October 1, 2008 at 12:41

The power of internet, and drivers of change


Internet has flattened old hierarchies, made information freely available, and eliminated distance. This is a revolutionary driver of customer expectations, and customer buying methods. It has also had the impact of opening previously closed kimono’s and exposed old style advertising for what it is … management of peoples opinions. Internet has allowed people to form their own opinions, and act on them.  That empowerment is fundamental to many changes we see now.

One market driver is therefore ‘customer empowerment’.

Another driver, comes from the way customers are continually required to manage their own affairs, at the ATM, the pin pad, online banking, bill payments, office card access, airport check in, car rental drop off, quick hotel checkout, travel booking. This frequency of self service is now pervasive and required several times daily for everyone. Organizations have become impersonal and are represented by their self service touch points. Self service has been underway for a long time, and internet has only sped up that process for Banks’.

Customers appreciate self service, but the sheer pervasiveness of it, means customers are continually, comparing and evaluating it. Without realizing it, customers are comparing your bill payment web process flow, to the Hilton quick check out, the credit card pin pad machine to your ATM, etc etc. People do not interact with products; they interact with self service touch points, and that is where the value is experienced, or value is lost.

So our other main driver is the advent of ‘the experiential economy’.

While Banking has benefited from technology advances in information management, and elimination of human processes, it has absolutely not addressed these drivers.  Bank motivation has been entirely financial driven by the vagaries of the quarterly announcements and the impact on stock prices.

Banking has benefited from detailed analysis of customer behavior allowing enormous profits on credit cards through targeted marketing, and portfolio management of card holders supported by high interest rates.  However banking has suffered from having to bear the additional costs associated with the new technologies, and in particular the plethora of new channels, including direct mail, ATM, telephone banking, online banking, and disruption in traditional marketing channels.

Relevance to Bankwatch

How has your Bank adapted to customer empowerment within the online experiential economy?  This would involve re-thinking marketing tactics, site design, and even branch personnel training and tools.

Written by Colin Henderson

September 4, 2008 at 15:03

Where are Banks in Community Management?


James has a good post on the shift from traditional PR to Community Management, and he explains that mechanics quite well. His example of Debbie at Wesabe is an ideal one.

BankerVision: PR shifts to Community Management

One final question is in my mind, though, is what use HSBC’s or Citi’s Community Outreach Coordinator will make of a competitive bank’s blogger like myself? Will they just ignore me, or take a leap of faith and realise that the community is powerful regardless of who is in it?

Relevance to Bankwatch:
His final paragraph says it all. With the lone exception of Ed Terpenning at Wells Fargo, where are the community managers at the big Banks? I know a large part of the reason lies in the fear of loss of control of the message. Any Banks care to comment?

Written by Colin Henderson

August 25, 2008 at 12:52

How can your Bank help with the other 95% of a customers mindshare relative to their money


After the previous post, thought I’d check out Andera, the service provider for those online account openings.

The graphic below from their site is the classic view to which all Banks with an integrated multi channel strategy aspire … ie almost every Bank.

Andera Corporate Web Site

The Andera platform offers financial institutions an end-to-end solution for online account opening and funding.


The Andera platform is accessible everywhere – to tellers, call center representatives, Website visitors, and more – on an on-demand, as-needed basis.

It got me thinking about whats missing in the picture. This picture [sorry Andera] is what bankers expect to see, but is dead wrong.

Relevance to Bankwatch:
The view above is 100% bank centric. It accurately depicts the activities customers undertake at the Bank, but those activities only account for what … 5% of the customers interactions with their money?

A more complete view would require not just web, branch and call centre, but also:

  1. debit card purchases
  2. credit card purchases
  3. spending pattern analysis and advice
  4. account alerts to mobile
  5. messaging between bank and customer
  6. new service notifications, and sign up or opt out
  7. bill payment and management
  8. etc etc

These items and the ones I missed account for the other 95% of a customers mindshare relative to their money. How can your Bank offerring help with that experience?

Written by Colin Henderson

July 30, 2008 at 22:25

Financial Services in 2010 – Deloitte | Review and analysis


Thought provoking and well prepared new report from the prolific team at Deloitte. Following is a brief summary and analysis of the report, then my take on the conclusions. [hint: no-where in this report does the word internet or social media appear - is that right or wrong?]

Financial Services in 2010 – Deloitte Touche Tohmatsu [produced June 2006]

The worldwide market for financial services is evolving rapidly, and is likely to look very different by the year 2010. This study from Deloitte Research identifies major market drivers and operational challenges that financial institutions will likely face over the next four years and pin-points the strategies and practices recommended to create the “Hallmarks of Success.”

Hallmarks of Success
These are characteristics Deloitte Touche Tohmatsu (DTT) expect to be exhibited by the winners in 2010:

  1. Global markets and a business model to match
  2. Mass efficiency and focussed premium service
  3. Consolidation (mergers) with a purpose
  4. Winning the struggle for growth through stronger customer relationships
  5. Transparency and compliance as a performance springboard
  6. Cracking the IT value code

Market drivers

  1. New asset classes
  2. Aging population
  3. Payments
  4. Emerging markets

Some key quotes:

  • on customer retention and growth: successful organisations will embed innovation into … strategy, processes, people …
  • on transparency and compliance: .. using transparency and compliance as a way to win hearts and minds of investors
  • on general observation: we expect evolutionary progress … unlikely to see revolutionary change … highly regulated and high barriers to entry
  • on market driver – new asset classes: the major impact of new asset class firms is likely to be on the business models of traditional capital players
  • on market driver – aging population: .. large influx of retirment related funds .. people who neglected their nest egg trying to catch up … seeking higher than average returns
  • on market driver – aging population: next wave of retirees .. more
  • will the consumer identify their relationship with the FI as peer to peer? [Anyone from Deloitte care to explain this one further?]
  • On market driver – payments: each market area of the financial services marketplace has its won separate infrastructure .. plumbing is duplicated .. opportunity to eliminate or truncate paper
  • on market driver – emerging markets: exportable, repeatable model
  • more top performing FI’s need to commit themselves to enhancing customer experience through service innovations .. even where the cost is high [example Commerce Bank - 30% annual growth / exceptional service/ below market returns offered on products]

Summary:
DTT see a shift to payments and away from product. Product margins in traditional products will continue to become thinner, with greater competiion for yields. The markets will be awash with boomer money, and this will both force competiion for returns, and development of new assets classes that offer better returns.

People still need to move money however, and the focus on payments and revenue from that source, as well as eradication of duplication and costs will be a focus.

The few, and getting fewer big Banks (DTT expect to see 700 banks disappear worldside by 2010) will require globalk scale to achieve growth targets.

Relevance to Bankwatch:
I see the market drivers as a mix of drivers and outcomes:

  1. New asset classes – outcome
  2. Aging population – driver
  3. Payments – outcome
  4. Emerging markets – outcome

This where I get on my internet bandwagon. Internet changes everything, and now that it is pervasive it is easy to forget that. Internet has flattened old hierarchies, made information free, and eliminated distance. That is a revolutionary driver of customer expectations, and customer buying methods. It has also had the impact of opening previously closed kimono’s and exposed old style advertising for what it is … management of peoples opinions. Internet has allowed people to form their own opinions and that empowerment is fundamental to many changes we see now.

I would respectfully suggest one market driver is therefore ‘customer empowerment’.

Another driver, comes from the way customers are continually required to manage their own affairs, at the ATM, the pin pad, online banking, bill payments, office card access, airport check in, car rental drop off, quick hotel checkout, travel booking. This frequency of self service is now pervasive and required several times daily for everyone. Organizations have become impersonal and are represented by their self service touchpoints. Self service has been underway for a long time, and internet has only sped up that process.

Customers apppreciate self service, but the sheer pervasiveness of it, means customers are contunually, comparing and evaluating it. Without realising it, customers are comparing your bill payment web process flow, to the Hilton quick check out, the credit card pin pad machine to your ATM, etc etc. People do not interact with products; they interact with self service touch points, and that is where the value is experienced, or value is lost.

So my next driver is the advent of ‘the experiential economy’.

Why are customer empowerment, and customer experience important? I believe they help us understand why the items I marked as outcomes above.

Payments come across as obscure to many, but if we think of them not as SEPA, or as interchange, but as customer experience, the complexity falls away. If ever anything is crying for innovation it has to be payments.

Similarly the need for new asset classes is driven by a surplus of worldwide liquidity seeking higher returns, but those new classes do not just apply to the hedge fund type money referred to in the report. In fact the report mentions the current vlaue of hedge funds at $700 Bn, and 15,000 funds so its relatively small. The real money, and the war for Banks will be in the new asset class expectations of the mass affluent (as the report recognises). Their experential needs must be taken into account, and that includes how they expect to interact with their FI. I note one item mentioned in the report ‘peer to peer’ [refer above] and I suspect that while it was not discussed, one of the authors may have intended this point.

Anyhow, great report, worth taking the time to read and digest, and hope this was of some value.

Written by Colin Henderson

July 18, 2008 at 11:33

How not to be customer focussed | Microsoft example


What strikes me about this email initiated by Bill Gates over 5 years ago is not a techie issue. The important email is not Gates words … its the two emails right after that begin a thread that is classic internally focussed, and just wrong. If you see your Bank here, then start cringing.

Look for:

  1. no reply all to Gates – so we have to assume Poole sent a separate email to Gates profusely apologising, then wrote the cool, no problem email to Amir & Chris.
  2. Amir’s email refusing to acknowledge there is an issue. Note he says that Bill’s experience is not his. This is the opposite of customer focussed, but note that Bill did not see that response.

Full text: An epic Bill Gates e-mail rant

It shows that even the Microsoft co-founder — who champions the “magic of software” — isn’t immune to the frustrations of everyday computer users. Keep in mind that this was more than five years ago, so it doesn’t necessarily reflect the specific state of things now.

Written by Colin Henderson

June 24, 2008 at 23:49

Egg customer anger at credit card cancellations


Egg (CitiBank) credit card does a very poor job at cancelling 161K cards.  They provide the reason that peoples credit history has deteriorated, which sounds legitimate but from the litany of quotes on this BBC page, it sounds more like they cancelled people because they were paying off their balance in full, thus making them unprofitable.  However the opposite is true.

If the example I note below is anything to go by, this is a major screw up.

BBC NEWS | Business | Egg customer anger at credit move

Egg says 161,000 cards belonging to people whose credit profiles have deteriorated since they signed up will stop working in 35 days’ time.

……

I too have just received one of these letters. I have
had an Egg card for almost 8 years and have never missed a payment
(like others here I usually pay off the balance if I have one) and have
never gone over my limit and my credit rating is excellent. It seems to
me that Egg are picking on those who are in control of their finances
and therefore not paying them lots of interest. If they deem fit to
remove my Egg card, I shall be removing my Egg Savings (which has a far
larger balance than my Egg card!). I think this is disgraceful
behaviour on their part.
Mary, Edinburgh

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Written by Colin Henderson

February 2, 2008 at 20:11

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