Brett King

How Steve Jobs Killed the Branch…

In Customer Experience, Future of Banking on August 25, 2011 at 04:37

As the news of Steve Jobs’ resignation rocks the world today, it’s almost like we’re reading his obituary rather than the news that a Fortune 50 CEO has moved on. The impact of Steve’s resignation will be felt hard on Apple’s share price no doubt, and even potentially hit the very fragile US market at a time of uncertainty. Although Apple’s leader has had a question mark over his health for some time, the eventuality of the departure of such an iconic leader was always going to hurt.

When we look back at the amazing career of Jobs, the creation of Apple, his messianic return to Apple in 1997, the 200 patents filed under his name (although he has no formal engineering qualifications) and the meteoric rise of Apple Stock – from $7 a share in 2003 to around $400 today – we see the evidence of something amazing. But how has Steve Jobs influenced financial services, and how will his legacy continue to influence the sector?

The Graphical User Interface through to Multi-Touch

Although largely attributed to the team at Zerox PARC (Palo Alto Research Center), Apple was the first company to commercialize the Graphical User Interface. The GUI led to the modern computing interface, the creation of the mouse, and the concepts of human computer interaction and usability that are so widespread today. These are at the very core of our understanding of the way individuals interact with devices today.

For almost 10 years (1988-1997), Microsoft and Apple were locked in a legal battle over the apparent IP infringement of “Windows” in respect to the LISA and Apple Macintosh GUIs. Regardless of the eventual outcomes of this battle (which ended in a private settlment between MSFT and APPL in 97) the fact is Jobs’ team (that included much of the PARC team) were credited with the first mass market GUI implementation. Since then the GUI has been a basic element of our computing. The VT-220 green-screens of old have long ago disappeared, thankfully!

However, Apple totally upped the ante in 2007 with the introduction of multi-touch. Combined with Nintendo Wii launch in 2006, multi-touch saw the emergence of a range of direct input innovations. Microsoft followed soon after with Kinect, incorporating gesture based control. Multi-touch was the first incorporation of human control that was direct input, as opposed to a mouse and a keyboard. Even the Wii was an evolution of the input device – multi-touch eliminated an input device all together. This development has forever changed our expectations of device interaction.

Steve Jobs - Branch Killer, Innovator and Visionary (Photo Credit: Apple)

Of course, as banks we’re already massive deploying iPhone, iPad and Android Apps for mobile banking, but we’re also incorporating other direct input methods such as gesture recognition and biometrics into the experience. Recently bank branches have started deploying touch screens, media walls, Microsoft surface tables and even facial recognition in signage displays. Itau bank in Brazil has developed an ATM that uses gestures and 3D to control interactions. But the biggest change was not around input, but a shift in the value of the bank in our day to day life.

Detaching Banking from the Bank

This is not the sole legacy of Steve Jobs and the team at Apple, but when we look back on banking in 10-20 years time when branches have disappeared, we will attribute the destruction of the traditional value chain of banking to the death of the ‘store’. Not all stores are destroyed, of course, but where you have goods or services that can be easily digitized or where distribution does not absolutely require physicality, then the value chain is disrupted. The two big upsets in this evolution of the store were really Amazon’s destruction of the book store, and iTunes destruction of video and music stores.

iTunes was the more significant disruptor for banking, because the “App” has disrupted the retail financial services distribution platform by changing ownership of the customer experience. Today banks who want customers to have access to their banking through a mobile “App”, no longer have direct access to customers. Customers download the ‘bank’ from Apple or from Google, and banks need to meet the criteria of the ‘store’ before customers can get access to that functionality.

In the future the destruction of the physicality of banking from branches, cheques, cards and cash will all be attributed to the emergence of the iPhone. The smartphone with Apps, supported by an App store in the initial instance was the trigger for a whole evolution of interaction on-the-move. Then the mobile wallet and distributed, pervasive, engaged banking through a device that enables payments and connects customers with their bank everyday, will eliminate the need for “the bank”, but not banking products and services.

Gone, but not forgotten

When historians look back at the massive shift in banking and the rapid decline in branch activity, the death of cheques, plastic and cash – the inflection point will be the creation of the App Phone. This is perhaps Steve Jobs’ greatest legacy for banking today.

He has changed the way our customers behave, he’s changed the way we think, and the way we demand service. Thanks to Steve Jobs’ vision – banking of the future will be about banking embedded everyday into our life, a true utility, and no longer a place you go.

In the end when the dust settles, there will still be banks at the backend owning the wires, payments networks and carrying the risk, but they won’t own the customer. The customer will hardly notice banking embedded in their daily life as they go shopping with their phone, as they buy a new car or home, or as they travel overseas or send their kids off to college. It will just be a part of our everyday life, and my kids won’t even remember the days when you used to have to go to a building before you could do this stuff.

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  1. Brett

    Sorry. As you know, we share our thoughts on banking, but here I have to object.

    Steve Jobs, in my eyes, is not a killer; he is a re-inventor of branches. At a time, when everyone declared branches for death, he opened up the Apple Stores and built another of Apples success story. People are crowding in front of the stores, when new products are arriving.

    The point is: most banks do not look close enough to such stories. They should learn. Or do you have seen people laughingly crowded in front of a bank branch?

    In my Bank Blog, I published a story with the title “What banks could learn from apple” http://bit.ly/hDFLB3 It is written in German, but there is a translation service build in.

    Kind regards from Germany

    Hansjörg

  2. Dr. Hansjörg,

    I appreciate the power of jobs’ transformation of Apple Stores and the creation of a whole demand approach. In fact, I often ask bankers when was the last time you saw your customers camping out or coming out of the store celebrating their new product.

    The concern I have is that the success of Apple stores have been based on very tangible, desirable ‘real’ products – the problem for banks is that their products are non-tangible and can be totally digitized. At the end of the day, there’s no absolute requirement for you to visit a branch to get a banking product.

    That’s the risk to the ‘store’.

    A great store won’t save you if people don’t see the need to go to that store because it is more convenient to do remotely.

    I do think that the branch will take some time to dwindle, so in that period, you are absolutely right that the use of motivated staff, open space, genius bars, etc can stimulate a connection with customers and the brand. Long term, however, there’s just not enough tangibility in banking products that make branches absolute.

    Brett King
    Bank 2.0

  3. Brett

    you are right. The advantage of a bank branch is not the product. It might be the people, if they are well trained to serve customers needs in a way, that results in an added value for the customer compared to the internet.

    Kind regards and enjoy the weekend

    Hansjörg

  4. Brett,

    While I think the branch model today will go away, I have to disagree with the notion that the branch itself will go away completely. You will always have a need to go to the branch as there are some services/products not buyable online. Also, the skills of the people will be broader; you see this happening today. Finally, technology, that popularized by apple and others like video conferencing, will get into the branch to reach specialists more broadly.

    Thanks for starting the interesting discussion though.

    Best,

    Bill

    • Hi, everyone!

      I am a conservative banker and think that the main function of the bank branch lies in KYC – not just in terms of compliance and AML but in a broader sense. How can you grant a loan without seeing face-to-face your client? How can you judge about her/his creditworthiness without tracing payment habits, regular income, etc.

      We have already seen the rise of the New Bank (no branches, no long-term relationship, financing from the markets, securitisation of assets) – Northern Rock being the best example.

      Mobile and online banking are welcome but banks should not give up controlling their risks and I think that in this respect technical innovation may not replace human judgment!

      Istvan

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