Brett King

The Total Disruption of Bank Distribution – Part 2

In Bank Innovation, Customer Experience, Future of Banking, Internet Banking, Mobile Banking, Technology Innovation on July 7, 2011 at 05:30

Rapid Acceleration of Technology Adoption makes change easier

The rate of diffusion is the speed at which a new idea spreads from one consumer to the next. Adoption is similar to diffusion except that it also deals with the psychological processes an individual goes through, rather than an aggregate market process. Since the late 1800s the rates of technology adoption and diffusion into society have both been steadily getting faster. While the telephone took approximately 50 years to reach critical mass, television took just half that (around 23–25 years), cell phones and PCs about 12–14 years (half again), the Internet took just seven years (half again), the iPod 3 years (half again) and Facebook was able to reach 200 million users in just over 1 year.

A very real part of the acceleration of technology is the application of Moore’s Law, named after Gordon Moore one of Intel’s founders and the individual credited with inventing the integrated circuit. Since 1967 Moore’s Law has predicted that every 2 years the power of a chip will double in processing capacity/speed. That means that the iPad you get in 2 years time, will be twice as fast as the one you have now. To illustrate Moore’s Law the 1Ghz chips now powering smartphones and tablets are exactly 1 million times the speed and capability of the Apollo 11 guidance computer that took Neil Armstrong and Buzz Aldrin to the moon.

Ultimately, this means that consumers are now adopting new technologies and initiatives such as the iPad and Facebook en masse in a period measuring months, not years. As we all become used to this rapid technology improvement, it is taking us less time to adopt these technologies into our lives, and this further increases the magnitude of impact on business. Let me give you an example of how this impacts banks specifically.

Internet versus Mobile Banking

The web launched in 1994, but most banks didn’t understand the significance of the web and lagged in the provision of Internet Banking services, waiting until 2000 or 2001. That’s 7 years from the start of the commercial web to the launch of Internet Banking for most banks. The iPhone launched in July of 2007 and in doing so created the market for “Apps” and increased our expectation of mobile interactions. Within a year more than 1 Billion Apps had been downloaded from iTunes, by 2010 that number had exceeded 10 Billion downloads. As a bank, ask yourself whether you could successfully argue for delaying the deployment of a mobile banking solution until 2014; 7 years after the iPhone’s release? Unimaginable.

Mobile Internet Banking is being adopted 300-500% faster than Internet banking was adopted, mobile payments will be even faster again. Thus, if you’re a bank, by 2015 your #1 channel for day-to-day retail banking will be Mobile, then Web, then the ATM, then Call Centre, and at #5 Branch.

Isn’t it ironic that banks today need to ask Google and Apple for permission to allow customers to access their bank through a mobile App? Today, some 17-year-old developer can develop an iPhone App in 2-3 weeks that would rival what it takes a bank 9 months to deploy. We’re increasingly going to find ourselves playing catch up, especially when it comes to new customer experience on devices like the App Phones, Tablets, etc.

It has long been argued that a face-to-face or human based interaction is vastly superior to that of a technology one. There are two issues that undermine this school of thought. Firstly, regardless of whether a face-to-face interaction might be better for a customer, increasingly we’re opting NOT to go the face-to-face route in favor of the simple convenience and utility afforded by technology. Secondly, with the incredible advance in recent times of customer experience, persuasion and interaction design, and the application of usability sciences, the fact is that technology is now competing head-to-head with traditional approaches to customer engagement, and winning.

So what comes next?

The use of gesture-based interfaces such as Oblong’s TAMPER and as demonstrated by various XBox Kinect hacks show that technology is becoming more natural, more intuitive. Image recognition technologies are now allowing digital signage to recognize whether you are male or female, happy or sad, and respond with a real-time offer accordingly. Avatars and voice recognition technologies are being combined to create customer support response systems that are act like a human agent, but are effectively IVR 2.0s.

Itautec's 3D gesture-based ATM and SapientNitro's Happy Smile Ice Cream Vending Machine are two simple examples of rich device experiences

Today, PayPal allows us to transfer money using a mobile phone number or email address, as compared with a routing number, ACH number, SWIFT code or account number, and in doing so provides a vastly superior person-to-person transfer process, especially when compared with a unwieldy branch experience. Very soon even cash, plastic and cheques will be succumb to the mobile phone as P2P and NFC become the norm – not because of technology, but because it is simpler and more convenient. Just as Internet Banking is the preferred channel of choice today.

Banking Everyday, but never at a bank

More than improved interaction is happening though. Social media, geo-location services, augmented reality, and predictive analytics, are forcing us to think about the application of banking and other services contextually. Banks are going to have to offer banking when and where you are, not force you to the branch or the bank’s website as the sole choice of applying for products or services. Banking will be something you do everyday, but not at a bank. Banks won’t be able to compete unless they can fulfill in real-time, as consumers need the product or service that is ‘banking’.

Regardless of what you think of the service proposition of a branch versus multi-channel technology, the fact is, it’s all going to be about context, relevance and delivery. Branch just won’t be able to compete long-term with such expectations driving the experience. Change will happen because you simply can’t defend traditional approaches that turn out to be inferior to the customer experiences that are emerging through technology.


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