The Bankwatch

Tracking the consumer evolution of financial services

Its a Wonderful Life, but not for Banks and payments

The payments theme is developing, and getting resonance. Somehow, three related posts from others mashed together in a perfect concoction of elements, suggesting one view forward for smart folks keen to disrupt financial services.

Guillaume says

Guillaume’s blog » Blog Archive » A bank’s payment strategy in 3 words: Convenience, Convenience, Convenience

But at the same time, Bart Decrem, CEO of Tapulous, a social app company for the iPhone, was saying in the background: “Ease-of-use, Ease-of-use, Ease-of-use”, in other words: convenience drives customer value and their willingness to pay.

And Chris, who has been on fire lately, speaks about the Long Tail of Banking, and says:

The FinanSer: The Long Tail of Banking

However, in the case of the long tail of banking, there are no accounts. You want to reach people who were previously underserved, because it would not be profitable. Using technologies such as the internet means that, today, you can serve them. You can serve them because there are no people involved, no account onboarding process, no branches or telephone support services, and no account maintenance costs.

Finally and critically, this well written piece from James back in 2006, re-opening the Open Finance debate [Forrester Research coined the phrase in the 90’s to reflect selling any product, not just your own]:

Of course, since it is impossible for a bank to offer every product to every customer in every niche, it will need to be selling the products of other institutions. That’s what Amazon does with books, ebay with retail, and iTunes with music.

Its time to go back to the drawing board, and consider the essence of the customer relationship. In the times of the fictional Bedford Falls, banking was all about the security of the bank institution, and the money in the Bank account.

But Its a Wonderful Life, was produced in 1946. Thats 62 years ago, and to say much has changed is something of an understatement.

Yet Banks are still fundamentally operating with the mindset of the “Building and Loan” bank operated by James Stewart in the movie. Everything revolves around the Bank account. Access to that account is on Bank terms, by visiting the physical location within the appointed hours. In fact in the movie Stewart rightly opens during off hours to help customers out.

What has happened to change how Banks think about accounts is that the focus for customers has shifted to access and service. Yes interest rates & fees are important, but the day to day experience is driven off the access, and that is what payments are all about.

Relevance to Bankwatch:
From a payment perspective, Banks will become obsessed with the primary client experience, which is the effect every time they make a purchase in a store, online shopping, access online banking, access an ATM in the Caribbean on vacation. That access occurs thousands of times annually. If that experience is exceptional, then the clients opinion of the Bank will be, at a minimum, better than today.

However the opportunity to excel in this area by creating new value could be enhanced by selling other products and services, even from other Banks. You could even in some cases, as Chris offers above, eliminate the account altogether.

Written by Colin Henderson

July 30, 2008 at 13:41

Posted in Payments

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