Welcome to The Machine
Finally it is sinking in. Computers and internet have been with consumers since roughly 1992 with early adoption then adoption through late 90’s and early 2000’s. In our industry as recent as 2003 senior banking executives still referred to online banking as a passing phase. A consultant (Forrester?) coined the phrase “bricks and clicks” to summarise the obvious that branches would in fact be supplemented by online and life would carry on. Enormous amounts in the billions of dollars were invested delivering ‘common customer experience’ across thousands of branches over the next 5 – 10 year period.
Yet in one example I know, two web servers produce the rough equivalent of 90 branches worth of business every day for a bank and support 2 million customers on PC and mobile. hmmm
Ten years later since bricks and clicks internet is ubiquitous. Branches are largely empty when compared to the line ups out the door in the 90’s. Amazon can ship me things that get delivered next day. Future Shop is closing down big box stores and laying people off. It is rare to spot someone with a real book on the subway anymore. A significant group skipped books and watch movies on the subway now.
And on it goes. Gillian Tett writes today:
Digital v human: the new debate ft.com (registration required)
The real rub of invisible digitisation is exactly that: the revolution is unseen. Thus, while “the progressive response to the harshness of 19th-century capitalism was fuelled by a growing awareness of what was going on behind factory walls, CBS (Computer Business Systems) are by comparison invisible”. They are like black holes: sensed, not watched.
Recent books on the topic.
The Second Machine Age , by Andrew McAfee and Erik Brynjolfsson)
Relevance to Bankwatch:
There is a shift that has taken place that was significantly accelerated in 2007 with the introduction of the iphone. In the seven short yeas since then, smart phones and tablets have become virtually ubiquitous. Everyone has one and everyone of any age can use one. There are no instructions that come with it; it just works.
Online no longer means just computers and laptops. Barclays Bank took just 2 months to achieve the 2 million mobile users that took 13 years for PC web banking.
Yesterday RBC announced their digital wallet. Digital wallets were spoken of in the 90’s but it took smart phones to provide the catalyst for them.
For financial services we are indeed on the verge of another dramatic shift. The first which saw transactional banking shift to customer self service though online and mobile has happened with some stragglers to pick up. The next shift will be in payments and more importantly, how we buy things.
It is no longer about transaction migration. It is about experience and memo to marketers; we are not talking about a website redesign.
This is now about the entire experience and removing the friction of paying for things. Company’s such as Uber and Hailo have removed payment friction from taxis. Your focus is on getting from point A to point B. The focus is not “do I have cash” or “does this cab accept visa”. You can focus on the travel experience.
Flypay has a target of getting you out of the restaurant in 60 seconds. Simply scan the QR code on your bill, and leave. Again the emphasis is on the experience and the reason you are there, which is to enjoy a meal.
Gillian and the books she references worry about people and their jobs being either displaced or marginalised as poorly paid and repetitive jobs. Gillian fears the shift exacerbates income inequality.
These networks keep displacing jobs that used to be performed by the middle classes, tossing them out of work or into thankless, monotonous drudgery, even as a tiny elite of skilled managers (or business owners) gets wealthier.
Either way the shift to a significantly more technologically enabled world is coming. I say ‘coming’ deliberately because that shift has not really started yet. Sociologists and commentators will debate right and wrong. But Banks need to be continually taking that long term strategic view into deployment of capital in physical or virtual networks and considering the future impact of ROE for those that are further ahead.