Brett King

Archive for the ‘Future of Banking’ Category

Can you do banking without a banking license?

In Bank Innovation, Customer Experience, Future of Banking, Retail Banking, Strategy on June 4, 2012 at 08:59

Clearly, to be a deposit taking bank and offer products like Mortgages, loans, savings accounts and so forth, it would be easier to have a bank charter. However, today the lines between banks and non-banks offering financial services is blurring faster than speculative investors dumping shares for Facebook.

There are many types of ‘banks’ or organizations that use the word ‘bank’ to describe their business activities such as Photo Banks, Seed banks, Sperm Bank, DNA bank, Blood Bank. There are also organizations that use the word bank in their name for other reasons like the “Bank Restaurant” in Minneapolis, JoS. A. Bank Clothiers and others. JoS. A. Bank offers a Pre-paid Gift Card program for individuals and corporates that has the name “Bank” in it’s offering, but isn’t regulated by industry. Bank Freedom, from Irvine California, offers a pre-paid Mastercard Debit Card but isn’t regulated as a bank.

Despite some claims to the contrary, it isn’t actually illegal to call yourself a ‘bank’ or have ‘bank’ in a tradename. In some states in the US, you might have difficulty incorporating yourself as a “Bank” if you have bank in the name of your company and you’re intending on offering financial services. But then again CIticorp, JP Morgan Chase, HSBC and others don’t actually have “Bank” in their holding company name. You don’t need the name ‘bank’ in your name to be licensed as a bank, and having the name ‘bank’ doesn’t force you to be a chartered bank either.

Then there are the likes of iTunes, PayPal, Dwolla, Venmo, Walmart, Oyster card in the UK, Octopus in Hong Kong, and the myriad of telecoms companys who offer pre-paid contracts, who regularly take deposits without the requirement of a banking license. In some markets, this has resulted in a subsidiary ‘e-Money’ or basic deposit taking licensing structure, but these organizations do not have the restrictions, regulations or requirements faced by a chartered bank. For more than 7 million Americans, 11 million Chinese and many others, their basic day-to-day method of payment in the retail environment is a pre-paid Debit Card (sometimes called a “general purpose reloadable” card). The pre-paid market is expect to reach an incredible $791 billion in the US alone by 2014.

When a bank account is not offered by a bank
What’s the difference between a prep-paid debit card account in the US and a demand deposit account from a chartered bank? Both can be used online commerce and at the point-of-sale. Both can be used to withdraw cash from an ATM machine. Both allow cash deposits to be made at physical locations. Both can receive direct deposit payments like a salary payment from your employer. Often pre-paid debit cards can offer interest on savings also. So what can’t a pre-paid card do that a typical deposit account can?

Most prepaid cards don’t allow you to write cheques (or checks), deposit more than a few times a month, keep a balance in excess of $10,000, make transfers/payments that exceed $5,000 per day, and/or going into the red with an overdraft facility.

For many customers who use pre-paid debit cards, these are not restrictions at all – and thus the card represents an alternative to a typical bank account from a chartered bank. Behind the program managers of pre-paid cards there is an issuing bank with an FDIC license in the US, but the program manager is not regulated as a bank. That nuance may be lost on some, but for the customer they are generally completely unaware that there is a “bank” behind the card – they simply see the program manager as the ‘bank’ or the card as a ‘bank account’ based on the utility provided by the product.

Bank Freedom offers an alternative to a checking account, although not technically a bank

Today PayPal, Dwolla, Venmo and others offer the ability to transfer money via P2P technologies that mimic the likes of the ACH and Giro networks. I think it is fair to say that no one considers these organizations to be ‘banks’, but until recently (certainly prior to the Internet) we would have considered the activity of these businesses to be “banking”. Now you could argue that PayPal is more like a WesternUnion than a Bank of America, but the point is that these organizations are increasingly attacking traditional ‘bank’ functionality.

Then you have P2P lenders who in the US have offered more than $1 billion in loans since 2006, despite not having banking licenses.

If only ‘banks’ did banking…
Today banking is not restricted to those with banking licenses. Banks no longer have an exclusive on the business of banking. If they did PayPal, iTunes, Dwolla, and the myriad of prepaid debit cards would be illegal. They are not. If they did, you couldn’t deposit money on your prepaid telephone contract without visiting a bank branch. If they did, you couldn’t send money to a friend without a bank BSB, sort code or routing number.

The assumption that only banks can do banking is a dangerous one, why? Because often, like any other industry suffering from competitive disruption, the only thing that forces positive change on an industry mired in regulation and tradition are competitive forces. Sometimes those forces result in the complete disruption of the industry (see Telegraph versus Telecoms), other times it results in fragmentation.

Are there banks who don’t have banking licenses? There are hundreds of organizations today that are doing banking activities that don’t have bank charters or licenses. Can they call themselves a bank? Some do, but they obviously don’t need to in order to offer banking-type products and services, and those that do generally have a regulated bank charter behind them through a partner. Like Post Offices around the world that offer a place to pay your bills or deposit money on behalf of a regulated bank, this activity is not illegal, nor does it require regulation. Why? Because the partner bank who has a charter is responsible for ensuring their agents and partners stay compliant within the legal framework

The activity of ‘banking’ is going to become a lot less defined, owned or identifiable in the next few years as many non-banks start infringing on the traditional activities of banking, and as banks are forced to collaborate more and more to get their products and services into the hands of consumers. While we still have banks doing the heavy lifting, much of the basic day-to-day activities of banking will become purely functional and will be measured by consumers on the utility of that functionality, rather than the underlying regulation of the company or institution that provides it. Thus, customers won’t really care if a bank is at the front end or what it’s called; just that they can get access to banking safely, conveniently and securely.

What will regulators have to say about this? Well that’s an entirely different matter.

How to reduce your branch footprint in an orderly manner (Ron Shevlin version)

In Branch Strategy, Future of Banking on May 4, 2012 at 17:49

I guess with a title like Branch Today, Gone Tomorrow it’s no surprise that a lot of people think I’m anti-branch. I’m not anti-branch, I just don’t drink from the branch kool-aid fountain that goes something like “if only we could find the right formula we’d reverse this trend of not visiting the branch and customers would flock back to our physical space”. I think most Bankers and Credit Union executives, instinctively feel there is a change in the importance of the ‘channel mix’, but as often as I hear questions about how quickly this is going to occur, I hear executives talking about how customers used to behave.

Why customers think they want branches
There is some valid behavioral data at work here that comes out through qualitative research supporting the role of the branch for legacy customers. That is, that there are still plenty of customers who say they want a branch – that doesn’t mean they will visit it, but they like to have them around. In Branch Today I examined the data and reasons for the recent rapid decline in branch activity, both from a visitation and transactional measure, but the question is why some customers still say they want to visit a branch?

There’s really only three things that drive a customer to a physical branch:

  1. I need a physical distribution point to deposit cash (primarily for small retail businesses)
  2. I need advice or a recommendation for a product or need I don’t fully understand, or
  3. I have a humdinger of a problem that I couldn’t solve offline, so I’m coming into the branch to get relief.

Branch bankers hang on to #2 for dear life, hoping that this will somehow keep customers coming back, helping justify those massive budget line items dedicated to real-estate; sadly it just isn’t happening that way. And yet, when you ask customers what determines their choice of ‘bank’ relationship, often the convenience or availability of a local branch, remains a stalwart factor.

Since the mid-80s, branches the world over have generally been transformed into streamlined cost/profit centres. The industry has attempted to reduce cost and improve efficiency to optimum levels and in this light customers have been forced to trade off between either big bank efficiency and utility, or the personalized service of a high street, community banker interaction without all the bells and whistles.

Despite this drive for efficiency there’s still a lingering psychology of safety in physical banking place and density, which stem from long memories over epidemic ‘runs’ on the banking system during the great depression. So what remains are two core psychologies that play to the need for physical places which reinforces the safety of a “bank” where they’re going to entrust their cash :

  1. I recognize that I visit the branch less and less for banking, but I’d like it to be there just in case I need to speak to someone face-to-face about my money or I have a problem, OR
  2. The more branches you have, the less likely you’ll go under in the case of a ‘run’ on the bank

But who is going to pay for the space?
The big problem with this, of course, is that as customers more commonly neglect the branch in favor of internet, mobile, ATM and the phone (call centre), the economics of the real estate and branch staff is no longer sustainable. So how do you have a space that still ensures the confidence of those customers that require the psychological ‘crutch’ of a space they might need to go to, but who aren’t willing to pay more for the privilege and won’t change their day-to-day banking habits back to the branch because the web and mobile are just so much more convenient?

The answer is two-fold.

The Flagship Store
If you need to instill confidence in the brand, then the best way is to build a new, large square footage space that screams new-age, tech-savvy branch banking with coffee and comfy chairs! Think the opulent Airline loyalty lounges that started to emerge in the late 80s. Think Virgin Megastores or the “Gold Class” cinemas of the 90s. Think Apple Stores today.

Brand spaces that inspire confidence. Enable a connection with your customers. Spaces that tell customers you’re all about service, advice and solving their banking problems – not about tellers and transactions.

Jeff Pilcher at FinancialBrand.com regularly covers the best of these new Flagship and Concept Stores, so head over there if you want some examples to work from. However, this is not exactly going to lower your bottom line around distribution. If anything it’s going the other way. Knowing that you’re going to have to downsize, the average FI will only be able to support a handful of Flagship stores in key, high-traffic, high-visibility location. So how do you equalize the ledger?

The Satellite Service Space
Supporting the Flagship stores at your secondary locations (i.e. anywhere that is not your best, most densely populated geography) will be very simple, cash-less brand presence stations. These will be small spaces in prime traffic locations like shopping malls, without any teller space, but the space to service the pants of a customer who needs that advice or help with a sticky problem. If they want cash, there will be an ATM. If they want to deposit notes or checks, the ATM can do that too, or you might incorporate a dedicated check deposit machine in the space too. In fact, the bank representative in the space could just use his iPad for that – although it’s better to move them to the ATM and go no transaction in the service space.

A good example of this sort of space would be the likes of smaller UPS franchise stores, or the BankShops of the TESCO variety in the UK. Small footprint of no more than 300-500 square feet, but enough space to represent your brand and tell customers they can still come and see if you if they need a solution.

UPS Franchise Stores

Spaces don’t need to be big to provide service

The ratio of flagship store to satellite spaces will probably be at least 10 to 1, if not greater. You don’t need every branch to be “big” in the new reality; to give your customers a level of comfort that you are safe enough to put your money with them. In fact, as the likes of UBank, ING Direct and Fidor show, for some customers you don’t need any spaces. But for those that still want a space ‘just-in-case’ then this strategy is a great transitional approach.

One day soon, within the next decade, we’ll need less than half the branches we have today. But as we make that transition, the need for a space to be available to provide service and support remains a key component of what we call financial SERVICES. It just doesn’t have to cost us the earth.

How to reduce your branch footprint in an orderly manner

In Branch Strategy, Customer Experience, Future of Banking on May 4, 2012 at 00:50

I guess with a title like Branch Today, Gone Tomorrow it’s no surprise that a lot of people think I’m anti-branch. I’m not anti-branch, I just don’t drink from the branch kool-aid fountain that goes something like “if only we could find the right formula we’d reverse this trend of not visiting the branch and customers would flock back to our physical space”. I think most Bankers and Credit Union executives, instinctively feel there is a change in the importance of the ‘channel mix’, but as often as I hear questions about how quickly this is going to occur, I hear executives talking about how customers used to behave. “But don’t customers need to come into a branch for lending products; to talk to a loan officer about more complex products?” This is a legitimate question in the old world, but it’s light on today in respect to the facts, which don’t actually indicate the branch is central to lending.

The fastest growing lending institutions in the country right now aren’t the big banks, community banks or even credit unions. The fastest growing lenders certainly aren’t mortgage brokers. The fastest growing lenders in the United States at the moment are actually peer-to-peer social networks, namely Prosper and Lending Club (thanks to @netbanker for this gem). In terms of percentage growth of loan book, you’ll be hard pressed to find any FDIC insured institution doing better. In fact, I’d wager that a 375% increase in Loan Originations in the last 18 months, coming off the back of the Great Recession as the global financial crisis is being called, is one of the most impressive new FI growth stories you’re likely to hear globally.

Lending Club growth thru April 2012

Last time I checked, neither Prosper, Lending Club or Zopa had any branches…

Why customers think they want branches
Now my point here is not to argue that P2P Lending is better, it is to argue that the perception that to sell a complex product you require bricks and mortar, just isn’t supported by the data. To be fair, however, there is actually some valid behavioral data at work here that comes out through qualitative research supporting the role of the branch for legacy customers. That is, that there are still plenty of customers who say they want a branch – that doesn’t mean they will visit it, but they like to have them around. In Branch Today I examined the data and reasons for the recent rapid decline in branch activity, both from a visitation and transactional measure, but the question is why some customers still say they want to visit a branch?

There’s really only three things that drive a customer to a physical branch:

  1. I need a physical distribution point to deposit cash (primarily for small retail businesses)
  2. I need advice or a recommendation for a product or need I don’t fully understand, or
  3. I have a humdinger of a problem that I couldn’t solve offline, so I’m coming into the branch to get relief.

Branch bankers hang on to #2 for dear life, hoping that this will somehow keep customers coming back, helping justify those massive budget line items dedicated to real-estate; sadly it just isn’t happening that way. And yet, when you ask customers what determines their choice of ‘bank’ relationship, often the convenience or availability of a local branch, remains a stalwart factor.

Since the mid-80s, branches the world over have generally been transformed into streamlined cost/profit centres. The industry has attempted to reduce cost and improve efficiency to optimum levels and in this light customers have been forced to trade off between either big bank efficiency and utility, or the personalized service of a high street, community banker interaction without all the bells and whistles.

Despite this drive for efficiency there’s still a lingering psychology of safety in physical banking place and density, which stem from long memories over epidemic ‘runs’ on the banking system during the great depression. So what remains are two core psychologies that play to the need for physical places which reinforces the safety of a “bank” where they’re going to entrust their cash :

  1. I recognize that I visit the branch less and less for banking, but I’d like it to be there just in case I need to speak to someone face-to-face about my money or I have a problem, OR
  2. The more branches you have, the less likely you’ll go under in the case of a ‘run’ on the bank

But who is going to pay for the space?
The big problem with this, of course, is that as customers more commonly neglect the branch in favor of internet, mobile, ATM and the phone (call centre), the economics of the real estate and branch staff is no longer sustainable. So how do you have a space that still ensures the confidence of those customers that require the psychological ‘crutch’ of a space they might need to go to, but who aren’t willing to pay more for the privilege and won’t change their day-to-day banking habits back to the branch because the web and mobile are just so much more convenient?

The answer is two-fold.

The Flagship Store
If you need to instill confidence in the brand, then the best way is to build a new, large square footage space that screams new-age, tech-savvy branch banking with coffee and comfy chairs! Think the opulent Airline loyalty lounges that started to emerge in the late 80s. Think Virgin Megastores or the “Gold Class” cinemas of the 90s. Think Apple Stores today.

Brand spaces that inspire confidence. Enable a connection with your customers. Spaces that tell customers you’re all about service, advice and solving their banking problems – not about tellers and transactions.

Jeff Pilcher at FinancialBrand.com regularly covers the best of these new Flagship and Concept Stores, so head over there if you want some examples to work from. However, this is not exactly going to lower your bottom line around distribution. If anything it’s going the other way. Knowing that you’re going to have to downsize, the average FI will only be able to support a handful of Flagship stores in key, high-traffic, high-visibility location. So how do you equalize the ledger?

The Satellite Service Space
Supporting the Flagship stores at your secondary locations (i.e. anywhere that is not your best, most densely populated geography) will be very simple, cash-less brand presence stations. These will be small spaces in prime traffic locations like shopping malls, without any teller space, but the space to service the pants of a customer who needs that advice or help with a sticky problem. If they want cash, there will be an ATM. If they want to deposit notes or checks, the ATM can do that too, or you might incorporate a dedicated check deposit machine in the space too. In fact, the bank representative in the space could just use his iPad for that – although it’s better to move them to the ATM and go no transaction in the service space.

A good example of this sort of space would be the likes of smaller UPS franchise stores, or the BankShops of the TESCO variety in the UK. Small footprint of no more than 300-500 square feet, but enough space to represent your brand and tell customers they can still come and see if you if they need a solution.

UPS Franchise Stores

Spaces don't need to be big to provide service

The ratio of flagship store to satellite spaces will probably be at least 10 to 1, if not greater. You don’t need every branch to be “big” in the new reality; to give your customers a level of comfort that you are safe enough to put your money with them. In fact, as the likes of UBank, ING Direct and Fidor show, for some customers you don’t need any spaces. But for those that still want a space ‘just-in-case’ then this strategy is a great transitional approach.

One day soon, within the next decade, we’ll need less than half the branches we have today. But as we make that transition, the need for a space to be an available component of service and support remains a key component of what we call financial SERVICES. It just doesn’t have to cost us the earth.

Beyond the Branch – New Distribution Mechanisms

In Bank Innovation, Engagement Banking, Future of Banking on February 1, 2012 at 15:40

There’s a great deal of discussion and debate around what will ultimately happen to banking as a result of the massive changes in connectivity, utility, mobility and customer experience taking place right now. One thing is for sure, the world is changing.

We see PayPal owning online payments, with others like Stripe hot on their tails.

Square is attempting to disrupt the POS and circumvent the existing payments rails by going cardless.

Simple and Movenbank are vying for the new definition of the ‘bank account’.

Telcos like Rogers applying for banking licenses, and ISYS pitching head-to-head with banks for mobile wallet dominance in North America.

We also see Facebook and Twitter becoming increasingly dominant channels for customer dialog.

New Disruptors Abound!

Intermediate or Disintermediate?

So will banks get disintermediated in all this? Well, yes and no. In economics,disintermediation is generally defined as the removal of intermediaries in a supply chain: “cutting out the middleman”. So there’s not too many middlemen in the typical retail banking distribution chain. To some extent in financial services this is already happening with the decline in stock brokers, insurance agents, etc in favor of direct. However, conversely, a bunch of newer aggregators and intermediaries are popping up as the interface to the bank or payments providers.

New intermediary plays in the last couple of years include Square, iTunes, Simple, Mint, and others. Probably the most interesting new intermediary to emerge in the last year or so is Google Wallet (or Google, or THE Google wallet – not like THE facebook though…) If you doubt the veracity of my statement, here’s proof – after just over 18 months of operation, Square supports 1/8th of all US merchants. They didn’t exist 2 years ago.

So we’re likely to see more variations on a theme in banking and payments, where new players are coming into the ecosystem and offering value beyond the traditional methods of distribution. In its purest form, this will be simply a challenge to the branch-led distribution model. How so? Ultimately, with mobile banking and payments, the branch and resultant paperwork processes becomes a convenience “penalty” for transactional and basic onboarding. This friction is a target for disruptors.

Disruption and Disenfranchising

The disruption that is occuring in the customer experience is all about removing friction in outmoded or outdated processes for customers. Whenever you tell a customer he needs to fill out manual paperwork, or visit a physical location today, you’re going to increasingly get kickback from a segment of the market. While many will argue passionately for the role of a face-to-face interaction and the “richness” of the branch experience, the reality is that there are two reasons why most customers will balk at that.

Firstly, they don’t have the time or they perceive it is faster to go an alternative route – convenience was always a key driver for disruptors like Amazon and iTunes. Secondly, we’re being trained that you can open pretty much any non-bank relationship completely digitally today – so KYC (Know-Your-Customer) issues aside, the push is for rapid digital onboarding of customers. In usability terms we call the later a design pattern and it ends up driving consumer’s expectations becuase it is a entrenced behavioral expectation.

Digital natives won’t be able to figure out why you can sign up for Facebook, iTunes, PayPal and other relationships completely electronically, but your bank still requires a signature. It defies logic for the modern consumer, and no amount of arguing regulation will overcome that basic expectation.

The end result of this is that banks being the slow, calculated and risk adverse organizations that they are, will likely allow disruptors the opportunity to come into the space between the bank and the consumer as a ‘friction’ eliminator.

Secondly, geo-location and contextuality of banking products and services, will mean a marketing and engagement layer that is built on either event or location triggers to recognize the need for a financial services product and the capability to stimulate an engagement or journey in real-time.

The mobile, wallet and tablet are all key components in this shift, as is social media and the cloud to some extent.

The outcome?

In the end banks will, for basic products, no longer exclusively own the end consumer. They’ll simply be the underpinning bank manufacturer that supplies the product to a new distribution channel or channel partner.

So will banks be disintermediated? Not really, but they will be disenfranchised, losing direct relationships with customers as banks adapt to becoming pervasive providers of bank products and services, when and where you need them. A split between the distribution and manufacturing of retail FI products will be the core outcome.

Banks can not possibly own the telcos, mobile operating systems, marketing companies, retailers, locations and other elements that will drive the delivery of banking products and services in the near future. This is where the customer will live – this is where they’ll engage. I won’t come to your branch, download your “App” or even visit your website to directly engage the bank if someone else can deliver me that product as I need it

How many jobs will digital kill off in banking?

In Bank Innovation, Economics, Future of Banking, Social Networking, Strategy, Technology Innovation on January 16, 2012 at 08:35

I’m starting to hear of some very significant digital and multi-channel budgets being put in place by many of the leading retail banking brands in 2012. It’s about time!

While I won’t name names or budgets, I’ve heard of mid-sized banks dedicating more than $50m to Internet, mobile and social-media this year, and large banks in the range of many hundreds of millions. It’s obvious from some of the outcomes in 2012 that major brands like Citibank, BBVA, CommBank, and Amex, for example, are putting some major spend into various initiatives on the digital engagement side. Key to these activities is some groundwork around platform development, staying competitive on the customer interface side, exploring the mobile wallet and new forms of loyalty around payments, and of course, big social media plans.

2011 was a tough year for many bank brands

As earnings reports have been coming in this quarter, it’s no surprise that 2011 was a tough year for the big banks. Of course, I’ve also heard of major brands in the space whose budgets are woefully thin and spell major problems for them on a competitive front this year, some of these banks are already hurting. How can I argue that budgets for digital are too thin in the current environment? Well, when a major global brand in the space spends less on social media globally than the cost of deploying one branch in central London or New York, and they are yet to have any type of coherent social media strategy (no real Twitter presence as an example), that is a budget out of kilter with the reality of customer behavior and acquisition/retention mechanics.

The Intertia Problem

While I’m sure I’ll hear the justification that the economy and particularly the ongoing Euro crisis is the primary cause, there must be a recognition that banks are simply carrying a lot of redundant capacity, based on the old paradigms of the way banks should operate, and are under-invested in the new platforms and skills that will help them grow their business out of the current economic malaise. This appears to be forcing banks to try new fee structures to cover the costs of legacy business operations, rather than adapting the organization and thus cost structures. I could call out legacy branch infrastructure again, but I won’t beat a dead horse, as they say – the economics of that are becoming glaringly obvious to most. So let’s take two other simple examples where the organizational behavior is skewed by inertia:

Account Opening and Administration
With average account acquisition costs being in the range of $250-350, you would think that someone would have connected the dots between the need for a signature card (and related physical handling) at account opening, with the cost of acquisition. The easiest way to reduce acquisition costs is get rid of the paper. Which brings us to annual costs for checking accounts too. With an average checking account costing around $350 a year, sending paper statements, printing checkbooks that are never used, charging big fees for wire transfers so that you prop-up your dying legacy check business, all smacks of a business driven by inertia.

What’s my account balance?
This is the number one requested piece of information from the bank today, and while we provide internet banking access to this piece of information, the dominant method of a customer getting this is still through an ATM or through the call centre. A far simpler mechanism would be sending the account balance via text message when a major transaction occurs, at set intervals (say weekly) or as defined by the customer. The cost of sending a text of your balance to a customer 10 times a month, is less than the cost of one call to the call centre for the same information, and less than two ATM balance enquiries (based on current channel cost estimates). The deployment of mobile wallets will massive reduce these ongoing costs as well.

Investment prioritization

In terms of size of budget, here is my rough take on where the investment prioritization is occurring across the board:

  1. Mobile
    Clearly, whether it is deploying new mobile apps, iPad apps, playing with mobile wallets, or geo-location features and offers, Mobile is the big play in 2012 and everyone wants a part of the action.
  2. Social Media
    From deploying monitoring stations, building service paths organization-wide to cope with social media requests and incidents, building new loyalty programs powered by social platforms, or trying to tap-in to friends, likes and advocacy, social media is a big play this year.
  3. Acquisition/JVs/New Appointments
    Acquisitions are a tough one because it is only the larger organizations who are looking at this, but there’s an effort to acquire key skills, technology and business practices emerging though acquisition, and significant dedicated funds for exploring new lines of business. With CapitalOne’s acquisition of INGDirect, and other moves, we’re going to start to see this being a sizeable component of global plays in the space as the bigger players try to acquire core capability. We’ve seen banks like Comm Bank in Australia start to make strategic investments in core skills at the top, such as the appointment of Andy Lark, along with major changes in their budgets internally around digital. While Andy is billed as the Chief Marketing Officer, he bares little resemblance to the marketing officers of most banks traditionally.
  4. Core Systems replacement to cope with channel mix
    I think this one is obvious
  5. PFM, Big Data and Analytics
    I’ve put all these in one bucket, which isn’t really fair, but for many organizations the start to collating their big data into useful information only occurs through the move to PFM (Personal Financial Management) tools behind the login. The need to connect people to their money, to target cross-sell and up-sell messages and otherwise monetize account activity and data, is a big priority.
  6. Engagement Marketing and Collaboration
    Increasingly we’re seeing dedicated efforts at partnerships, API layers, new marketing initiatives across broader platforms and other such mechanisms. We’re starting to see a new slew of ‘business development’ and ‘partnership’ resources emerge as banks look beyond their own walls for growth opportunities. Expect this to grow significantly over the next 3 years as we see more JV, incubation and acquisition budgets emerge as well.

The downside to the shift

Clearly these changes are all good for staying relevant to consumers, changing business practices to adapt to new behaviors, and better aligning costs with operations as they shift. However, the downside is that as you move away from legacy operations there’s a lot of dead wood.

AUSTRALIA is on the cusp of a white-collar recession with insiders warning that thousands of jobs are at risk in the finance sector, after it emerged yesterday that ANZ planned to cut 700 jobs.

While many banks used the global financial crisis to ‘downsize’, the reality is that there are going to continue to be significant job cuts in the sector as a result of re-tasking the organization for the new reality. In fact, my estimates are that we’ll lose many more jobs to the ‘shift’ than we did in the global financial crisis. Sure, there will be new hires as well, but the reality is as we downsize branch staff, manual operations and traditional marketers, we simply don’t need the volume of skills to replace them on the digital front. Even in-branch we’ll be using technology to avoid queues, speed up transactions, and hence reduce branch staff footprints.

Joshua Persky, an unemployed banker, on the job trail

It’s inevitable in the shift to digital within finance, that some humans will be replaced by technology efficiency gains. As we really start to see digital making progress, those legacy skills sets will become glaringly obvious on the balance sheet. Unfortunately, it’s either lose legacy operations staff or lose customers and profitability.