- Not every touch needs to be a sale.
- Foregoing short-term income for longer term gain can (in many instances) make sense
- Surprising customers on the upside can yield long-term benefits
May 5, 2014 by Leave a Comment
NetFinance 2014 just finished in Miami. Celent spoke on “Engaging Mobile Customers through Content, Display, Alerts, and More,” which generated a number of follow-on conversations on how to execute on the notion of engaging with customers, and a great question on how long today’s innovation stays differentiated. Our answer: “not very.” I’ve mentioned before that customer-centricity is becoming a key concept that many banks are highlighting as a key point of their retail strategy. What NetFinance crystallized for me is that the necessary follow-on to this customer-centricity is this simple idea: The best defense against continuing commoditization is a solid customer relationship. Technology, clearly, can go a long way to enhancing that relationship. A number of vendors at the show (like AdRoll, Backbase, Domo, EarthIntegrate, Ektron, Epsilon, IgnitionOne, Leadfusion, Liferay, Message Systems, Message Broadcast, and Personetics, among others) focus on helping banks touch customers at the right times, or giving them an omnichannel view of all customer touch points, or enabling customers to start a transaction in one channel and continue it in another. But for these technologies to be effective, customers need to be receptive. And they’re going to be more receptive if they think, and feel, and believe in their gut, that their bank is going to do the right thing by them. All the technology in the world can’t replace some very visceral customer feelings. To engender these feelings with their customers, and stop them from transacting with one hand holding their wallet so their pocket doesn’t get picked, banks should consider some potentially radical ideas (simple concepts?):
February 23, 2014 by Leave a Comment
Celent Banking Senior Vice President Dan Latimore, Insurance Senior Vice President Jamie Macgregor, and Tsukasa Makino, Manager, Corporate Planning Dept. & IT Planning Dept. at Tokio Marine & Nichido Fire Insurance Co., Ltd. Admission is free, and exclusively for executives from financial institutions. Pre-registration is required. If you have any questions, please contact Anna Griem at email@example.com or at +1.617.262.5503. Please click here for more information.
February 6, 2014 by Leave a Comment
Celent Senior Analyst Mike Fitzgerald and Mick Simonelli, Innovation Consultant and former Chief Innovation Officer at USAA. This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Anna Griem at + 1 617 262 5503 or firstname.lastname@example.org. Please click here for more information.
February 4, 2014 by Leave a Comment
We just held our 3rd Innovation Roundtable in New York City and the event further underscored how important this area is to financial services institutions. The format of these gatherings is discussion-based and senior leaders from banks and insurers share their experiences in building innovation capabilities in their firms. The New York group included large insurers (all were $5B DWP and above) and a variety of banks, from among the largest in the world to smaller, regional providers. Mick Simonelli, previously the Chief Innovation Officer at USAA, also attended and contributed his experience. Across these firms, there is a real diversity in their approach – a reflection that innovation programs are most successful when they adapt to the culture of a company. One attendee describes their innovation strategy as making big bets only on carefully selected areas that are the highest importance to their company. Another wants to increase their “innovation velocity” and pursues incremental initiatives that, when added together, result in meaningful contributions the short to medium term. In contrast to these differences, the participants agree that that their senior leaders recognize emerging disruptive threats and/or opportunities posed by new entrants, increasing commoditization, and changing consumer expectations. For example, one bank reports that its senior leaders are very actively tracking Amazon’s recent activity offering loans to small businesses. This awareness in these companies is not surprising, since these roundtables are attended by organizations which are already actively pursuing innovation. Most attendees mentioned that they regularly report to their Boards of Directors on their progress. In Celent’s opinion, just the presence of a firm at the roundtable signals that they are building, or on their way to building, a competitive advantage. Without identifying individual participants, here is a sampling of the content of the afternoon:
- One company, in their 5th year of a focused innovation program, describes their current approach as “moving away from the Carnival”, away from event, one-time crowdsourcing ideation efforts and towards making innovation a systemic and continuous part of their business. Their objective is to “create a social layer of innovation.” They were kind enough to detail the technology and process that they have used so far.
- There was agreement that financial services firms advance innovations much too slowly. This has been confirmed in numerous conversations that Celent has had with clients and has also validated our research. In order to address this, one company actively establishes 3rd party partnerships in order to move innovation faster. They partner with startup firms in order to increase their velocity of change.
- A common theme throughout the day was evolving digital capabilities and how other firms, outside of financial services, are changing the customer experience. One firm concentrates on building a “macro view” of what they want their customer to experience. As they improve and innovate their current customer process, they are using this this wider set of considerations to ensure that they remain focused. This is exactly consistent with a recent post on this blog regarding designing digital platforms (see Stop Designing to be a Digital Insurer; Use a Business Value Proposition)
- The attendees were also global, both by birth and by company. They report the greatest adoption of mobile platforms occurs in Asia and in emerging economies. It was also noted that in EMEA, the experience of dealing with multiple languages, cultures and multiple European regulatory regimes increases their companies’ agility and, thus, their innovation capability. For firms that have global operations, concentrating on reverse engineering innovations from one region to another is a valuable investment and a viable strategy.
- During the discussion about changing company culture to further innovation capability, one practitioner noted that innovation leaders have to be very careful about the manner in which they discuss emerging threats (and opportunities) with their business partners. Leaders must be very careful to use what was called “empirical specificity” in such discussions. In other words, before beginning a discussion about an emerging threat or opportunity, an innovation leader must do their homework and be prepared to offer exact examples of actual cases where the threat/opportunity has actually taken place. Otherwise, the communication is ineffective and “Pollyannaish”.
January 29, 2014 by Leave a Comment
Senior Analyst with Celent’s Banking Group Zilvinas Bareisis. This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chris Williams at +44 (0) 208 870 7875 or email@example.com. Please click here for more information.
December 18, 2013 by Leave a Comment
November 27, 2013 by Leave a Comment
Senior Analyst with Celent’s Banking Group Zilvinas Bareisis. This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Ken Kilduff at 1.617.262.3128 or firstname.lastname@example.org. Please click here for more information.
November 26, 2013 by Leave a Comment
We recently held a banks-only roundtable at our offices in Toronto to discuss “New Imperatives for Omni-Channel Delivery.” With representation from Canadian and US financial institutions, we had a robust conversation around the movement from “multi-channel” (old and siloed) to “omni-channel” (integrated and mutually reinforcing). Some of the attendees had interesting – and fairly recent – titles: “Director, Multi-Channel Experience” and “Director, Multi-Channel Strategy” were two that were particularly noticeable, while two others had “Channels” in their title. Taking an integrated view of the channels portfolio appears to be catching on in Canada! Some interesting observations surfaced.
- Banks are rolling out channels and touchpoints without necessarily teaching the customer how to best use them. When ATMs (or ABMs, north of the border) first came out, bank personnel would walk customers over to them and give them a basic tutorial. There is precious little analogous activity in our new digital channels; we simply assume that customers will pick up on how to use them. Apple has trained us to think that really good experiences need no tutorial, but that’s not necessarily the case in banking, particularly when it comes to security concerns.
- The session didn’t address Personal Financial Management (PFM) directly, but when we touched on it, the group took off on a twenty-minute tangent! There’s clearly a lot of interest in PFM despite anecdotal adoption rates that continue to hover around 10%.
- Piggybacking off existing infrastructure, e.g., the AppStore ratings engine and comments section, is a great way to garner customer feedback. The key, obviously, is to listen and act on the comments that customers provide, and at least one bank watches its ratings assiduously and uses the feature requests and complaints as a key driver of release improvements.
- As in the U.S., the fate of the branch network is an important strategic issue. One component that will have some bearing on this is video banking, whether through hardpoints or consumer devices (laptops or tablets). Bankers are clearly keen to determine how video can supplement other channel experiences.
- A sneak peek of a Celent survey of Canadian banking customers showed their behavior to be remarkably similar to Americans’. While there were a couple of exceptions (to be detailed soon in an upcoming report), there were no huge disconnects. Despite some of the differences in the structure of our two banking systems (oligopolistic vs. fragmented, and cooperative on infrastructure vs. wildly independent), our consumers tend to view and use their banks similarly.
November 25, 2013 by Leave a Comment
Earlier this year, Celent released a report, Branch Boom Gone Bust: Predicting a Steep Decline in US Branch Density, which made comparisons between the decline of brick-and-mortar video rental stores, like Blockbuster, and branch banking in the US. Celent argued that the decline of Blockbuster at the hands of digital alternatives is a cautionary tale for banks that still value a traditional branch network. As I’m sure no surprise to most, Blockbuster recently announced that they would be shutting down all remaining retail locations—around 300—effectively ending operations.
“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said Joseph P. Clayton, DISH president and chief executive officer. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”From the chart below, taken from the above Celent report, its clear that this has been in store for a while. blogs and news articles praise or nostalgically lament the once-great video giant’s downfall, an old question is being explored once again: what will happen to the independent video rental store? Put simply, they’re evolving. Faced with years of low business and an ever shrinking cult customer-base, many small video retailers are innovating in an attempt to draw business back into stores, adding value in areas un-served by Netflix or Redbox. From the an article by Indiewire.com:
“Videology in Brooklyn put a bar in front and a big video screen in back, where customers can sit at tables and drink while watching free screenings. It doesn’t even look like a rental outlet anymore — it moved all the discs aside from the new releases off the floor and put in computer kiosks for customers to browse the inventory. Vidiots in Santa Monica, supported by its community and patrons from the Hollywood film community, raised money to open a screening room and a non-profit foundation that holds workshops, classes, and outreach programs. It’s redefining its sense of purpose.”Is this an example for banks? Sure it is. Similar to what’s happening in retail, banks can add value to a branch-based experience. Consider this line from the above quote: “[The video store] doesn’t even look like a rental outlet anymore.” Small video retailers are refreshing the idea of what a video store is, and what it could be. Smaller banks like Umpqua Bank have already explored this idea years ago, and even megabanks like Wells Fargo are exploring the possibility of compact “boutique” branches. The rise of digital The other day I came across a cool chart from Horace Dediu that does a good job at visualizing the change in consumer behavior that drove Blockbuster underwater, and is driving younger generations toward less branch engagement. A larger version can be found here. The adoption of smartphones and tablets, even in relation to internet and mobile phones, sit in stark contrast to the group. The second part of the graph shows the duration of growth from 10% adoption to 90% adoption in years. For smartphones and tablets (estimated), these numbers are in the single digits. The result is a substantial decrease in the development life-cycle of innovation, early adoption, and late adoption. For branches, this means a dramatic and rapid shift in the way consumers interact with their financial institutions. Blockbuster trailed both Netflix and Redbox by almost five years before releasing competing products. The company not only failed to react to shifting demand, they arguably contributed to it. The founder of Netflix started the company after he paid $40 for a late video rental. Blockbuster continued to remain unmoved by customer complaints over late fees, eventually settling a series of lawsuits over the matter. Customers in turn, looked to innovative start-ups (i.e. Redbox and Netflix) to fill the void. Blockbuster failed to adapt. The path forward is a mix of early adoption and, like independent video stores, a rethink of traditional business practices. Let’s be clear, branches won’t die, but it’s difficult to make the case that significant redesign won’t happen. Will banking bloggers someday down the road, sitting in an independent video rental coffee shop, write about the nostalgia of traditional branch banking? Probably.
October 19, 2013 by Leave a Comment
We just assembled a group of UK retail bankers for a discussion on The Future of the Bank Account. Against the backdrop of the month-old implementation of the directive that bank switching be seamlessly completed in seven days , banks were keen to understand the implications of changing consumer needs and behaviors, evolving regulations, and new competitors. Celent see a consumer’s bank account serving three main purposes:
- Receiving funds (money in)
- Storing and Managing funds
- Paying funds (money out)
- Perceived fairness
- Value added services