The Bankwatch

Tracking the consumer evolution of financial services

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

 The problem with working in a Bank is that everything looks like a Bank.  You can always tell a Banker because your hear a ton of acronyms, and words like channel, multi channel, integration, etc. 

In fairness Bankers are not alone in their industry view of the world.  Anyhow, in preparation for LIFT07, I got to thinking about why Banks are having such trouble breaking out into the internet space, and with something that’s probably obvious to everyone else, I compared to others in different industries.

The well known, and two not so well known, (but will be well known), online names that are successful, are successful for a reason. 

In simple terms they made it, because they brought an innovation … a new element, a combination of not just self service, but with added value.  The key being added value that made the online self service, experience worth the customers effort. 

At its simplest, online is merely self service, but that’s kind of boring if there is nothing in it for the user.  Why should I do it myself when you (the Bank) are getting the benefit (cost reduction)?

So lets consider some big names, with undisputed business success, and their online angle that makes them valuable.  As I read the list, I thought of it this way … what does Amazon sell – books? really?  How about eBay … do they sell online auctions?  (note I omitted social networks until they prove a business model – I believe social will work when its tied to a successful financial model, such as Amazon, Flickr, and eBay have already done)

  • Collaborative Filtering
  • Reputation
  • Finding others’ information
  • Finding Yahoo’s information
  • Teens/ youth
  • social photo’s combined with control & ease of use
  • Simple and incredibly useful
  • Cheap and efficient – your virtual hard drive



  • Banks
  • online ATM – dumb terminal (pardon my bias)


  My take:  they all (except Banks) sell something more than the basic service provided. 

  • Amazon sell comparison service, and convenience
  • eBay sell trust
  • Google sell reliable information
  • Yahoo sell consistency
  • MSN sell youthfulness
  • Flickr sell control and immediacy, along with dissonant innovation. For example, – Information on which camera’s are used & ranked. What’s the odds the camera manufacturers are taking note of that, and what’s the odds none saw THAT coming! 
  • 37 Signals sell simplicity, and cross channel utility
  • S3 sell computing as a utility, at a very low price (for those who are curious, check out the owner, and consider if they are a book seller, but we digress).  If you are interested to pursue this thought go here.

These online brands have differentiated themselves from the competition.  These are brand names that are universally known (last two will be known).  The premise is that anything that hasn’t established a point of differentiation online, versus paving old cowpaths, is doomed.

The poor old Banks … held up as one of the most successful online ventures have none of that innovation.  They have automated that which was handled by tellers, but little more.  We see signs on the edge … such as Wells Fargo with the spending reports, but not much more – mostly just hard old style defensive marketing. 

Following that premise, are Banks are destined to go the way of the corner book store, and the paper encyclopedia? 

The innovations appear to be coming from vendors such as, Cashedge, Corrillian, OneVu, Scivantage, eFunds, S1, Andera, Accenture, uMonitor, and Infosys … to name just a few.  None of these are Banks.  The innovation is coming from providers of services, and Banks are buying those services at a rapid pace. 

But none of this activity is Bank business model changing or differentiating. 

Relevance to Bankwatch:

 Where is the point of differentiation that sets a Bank apart from the competition?  The pieces of Banks’ strategy are remarkable similar, and the analysts perpetuate this approach.  Words such as:

  • multi channel strategy
  • channel integration, and optimisation
  • customer segmentation
  • product simplification
  • customer centric
  • putting customers first

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


Written by Colin Henderson

January 8, 2007 at 20:46

12 Responses

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  1. 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.

    James Gardner

    January 9, 2007 at 01:29

  2. 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.

    Dave Birch

    January 9, 2007 at 04:02

  3. 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.

    Dan Dickinson

    January 9, 2007 at 11:07

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


    January 9, 2007 at 12:11

  5. 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.


    January 9, 2007 at 12:28

  6. 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 but they are not. All too often they force customers to do things the old way not a better way (see

    James Taylor

    January 9, 2007 at 12:46

  7. 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…


    January 9, 2007 at 14:06

  8. 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.


    January 9, 2007 at 22:13

  9. 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


    January 10, 2007 at 11:03

  10. 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.


    January 10, 2007 at 12:08

  11. 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. 🙂


    January 10, 2007 at 12:23

  12. Nothing is free and easy!


    January 10, 2007 at 12:52

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