Brett King

Posts Tagged ‘Cheques’

What’s your banking instinct?

In Customer Experience, Future of Banking, Strategy on November 18, 2011 at 12:43

Without thinking consciously about it, over time core behaviors change producing different instinctive reactions. When a phone rings today, we go to our pocket or purse, not running to a device on a desk or on the wall. When we are interacting with a mobile phone that is not our own or an ATM machine, we’ll instinctively touch the screen to navigate, even if it is not a touch screen device. When you go from reading on a Kindle or iPad to a real book, the pages are frustratingly manual to turn. When we need to take a photo with friends, increasingly we reach for our phone, even if we have a camera stuck somewhere in our bag.

What was our instinct in banking?

The earliest instincts around banking was a safe place to store your assets, and in many ways that is still the case. However, banking in its infancy didn’t necessarily involve a bank or money at all. The earliest forms of banking involved the deposit of commodities or valuables that were traded, and often they were deposited in temples or palaces, the safest physical locations. It wasn’t until the 16th and 17th centuries that organized banking started to emerge globally, particularly as the wealthy tried to keep their assets safe during the dark ages. Even then, banking was still exclusive. It really wasn’t until the 20th century that banking became more mainstream and people started considering storing their savings in a bank.

Since then banking has been an instinctive part of the lives of most people in the developed world.

It wasn’t long before it became instinctive to pull out our cheque book to pay for a large ticket item. Some would also use lay-away or lay-buy plans, but these largely disappeared over the last decade or so. Over time those instincts changed to use credit cards, and more recently debit cards at the point of sale.

In the past our instinct when we needed cash was to think about where the nearest branch was and figure out when we would need to go to withdraw cash. Over time that instinct changed to using an ATM machine, and we went from planning when we’d withdraw cash, to just picking the nearest ATM machine when the cash in our wallet was getting low.

In the past our instinct when paying a bill was to write a cheque and send it in the mail, or to go down to a post office or office of the utility company and pay the bill in person. Today, that instinct has changed to where we pay online in an instant.

It’s ironic that we think of banking as a slow and steady institution that doesn’t really change, but in reality the utility of our money means that our behavior in respect to banking has always been changing.

The future instincts of banking

So what will your instincts for banking be in the next decade?

Not a place you go, something you do…

Firstly, we won’t instinctively think of banking as a place you go. The concept that a branch is at the centre of our banking relationship has been central to retail banking for over 800 years. This is the primary instinctual shift that will occur in the next few years.

Instead of looking for a place to store your money, we’ll look for a trusted brand that is safe to store our money, but equally important will be a brand that offers strong utility and a seamless connection to the things we do with our money. A safe and trusted banking partner will be a bank that offers me access to my money and access to financial services when and where I need them. A bank that demands or prefers a physical interaction, will increasingly be avoided instinctively as too hard to work with, as irrelevant to my daily life, and as slow and unwieldy.

On rare occasions for the minority of us that have complex asset allocations, trust structures and so forth, we’ll look for a physical place to go where we aspire to get the high-touch service of a personal banker who recognizes our status as a special class of banking customer – but this will not be an overriding instinct day-to-day, it will be incidental to our general banking experience. The majority of the time, even for the high-net worth client, instinct will simply dictate a much more efficient engagement of the ‘bank’.

Move and Pay, Safely and Efficiently

When it comes to day-to-day interactions, the emphasis on the movement of our money will be speed and security. Inevitably in the short-term our instinct will be to pull out our phone at the point-of-sale to pay for goods and services. We’ll do this not only because it is much faster than using cash or a card, but because our money management will be articulated through this personal device – we’ll see our balance, what our monthly expenditure is, what upcoming expenses we have and be able to understand the context of this payment on our financial life in an instant. The same would have taken much more effort with cash, our cheque book or our card.

Your instinct for payments is changing again

Security of our cash will be also a primary reason for the shift to digital money. Increasingly we’ll look to the technology of encryption, geo-location tagging, biometrics and active identity management to secure the flow of our funds. We won’t trust a piece of plastic or a piece of paper that can be easily corrupted or stolen, and the technology of ‘hacking’ our cash from a secure device will require a level of expertise and high-performance computing that make it far less frequent than the compromise of traditional physical ‘payment’ artifacts.

At the point that it is simply no longer safe to do things with cash and plastic, our instincts will quickly change to keep our finances safe once again. Being able to see what has been happening with our money over time, will also drive us to increasing digital management of our money.

Core instincts are at the heart of the change in bank modality

First and foremost our instinct for banking is keeping our money safe, secondly is the need for the utility of our money. Neither of these core instincts will lend us to continue to support the physical elements of banking and payments that we’ve been used to in the last 100 years. We will measure ‘safety’ in the trust of a brand, not in the bricks and mortar of branches. We will measure ‘utility’ in the seamless access to our cash, and the availability of the bank in our life when and where we need it.

Our instincts are rapidly changing. We don’t store grain and gold in Temples or Palaces anymore. Already most of the world doesn’t use cheques anymore. If you’re heavily invested in branches and the physical, you don’t understand the core instinct that banking is.

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6 things Banker’s shouldn’t be saying…

In Bank Innovation, Future of Banking, Strategy on March 17, 2011 at 23:20

Banking is changing forever. Organizations like Britannica, Blockbuster, Borders, and even Bank of America (hint: don’t start a business with ‘B’) all suffer from the same collective challenge. When your business is built around a specific distribution model, how can you adapt when that distribution model is no longer relevant?

The inertia behind existing processes and distribution systems is an almost impossible force to break. It takes real planning a foresight to be able to reform your business around these massively disruptive mechanisms, and in most cases it sees a complete sea change in respect to the dominant players. Who would have thought that one of the largest sellers of books in the world in 2011 would be Apple? This is not due to publishing or distribution capability, but a change in how books are read. It’s all about behavior.

In this context, when you hear stupid statements being made by bankers, it is because they are too embedded, too focused on the detail, and aren’t stepping back looking at the bigger picture of the behavioral shift.

Things bankers say that concern me…

# 1 – Branches are here to stay…

This is not actually the point. By arguing that branches are here to stay, you are essentially either trying to defend your existing business model, or you are discounting the value of other channels like mobile, the web and ATM.

Customers are simply looking for the most efficient way to do their banking, and they’re fiercely channel agnostic. When we evaluate potential branch locations, the primary consideration is convenience – if that location will generate the required traffic and custom to be profitable. At an average investment of US$1m plus, there is a fine art to ensuring a branch is able to generate real return. The only problem is, the branch is not the most convenient channel today. So when your primary metric for your physical network can’t be supported when measured against digital channels, you’ve got a problem. You need to start thinking differently. The branch is just one channel, not THE channel.

#2 – Checks (Cheques) will be here for a long time to come yet…

Really? Why? The data shows that in every developed economy where checks exist that they’re in rapid, permanent decline. It is just a matter of time. Some argue that we still might have 10-15 years before checks disappear in the US. The problem is, if this really is the case, then the US is even more screwed than we previously believed because not only are they behind the rest of the world in respect to payments, but they are resisting changes that promise efficiency gains, reduced costs and greater customer satisifaction.

In the UK this is how the Payments Council announced the closure of central cheque clearing in the UK.

“The Payments Council Board has agreed to set a target date of 31st October 2018 to close the central cheque clearing. Cheque use is in long-term, terminal decline. The Payments Council was faced with the choice of either managing the decline to ensure that personal and business cheque users have alternatives easily available to them; or to stand back and let the decline take its course.”
UK Payments Council, Dec 2009

If you are in banking, rather than arguing checks are here to stay, you should be looking at alternatives and making the transition as orderly as possible, not being faced with a critical issue in the near-term. For example, why are we still issuing checking accounts when we start a new customer?

# 3 – NFC won’t get adopted for decades because the POS infrastructure isn’t there yet…

Apart from eliminating plastic, NFC has a bunch of other potential implications. Firstly, we’ll be able to integrate the retail experience a great deal more. For example, a customer will be able to use their phone to scan a product and get a real-time price, or see if there are competing offers from other retailers where he’s shopped before, and if his bank is prepared to offer a special low interest purchase plan or financing.

Individuals will be able to do seamless phone-to-phone transfers by just touching their phones together. This form of P2P will dramatically reduce the use of checks and cash just because it is so simple. Try selling me a checking account or a physical debit card when I can simply punch in how much I need to pay you into my phone and we touch phones. The behavior is the driver, and you won’t need POS infrastructure to do a bunch of this type of sexy NFC stuff.

What behavior will do though is raise expectations on the payment side very rapidly…

# 4 – I don’t get social media, where’s the ROI?

Wrong question. You might not get it, but billions of people are still using social media. The question is how should you be using it?

The issue with social media right now is not the ROI, but the hit you will likely take as a result of not being a part of the conversation. Right now today many of your customers are on social media talking about your brand, defining your brand image in a new way, and if you’re asking about ROI it means either you are looking at social media as purely a marketing channel or you can’t work out how to control the social media ecosystem. Both which show a core misunderstanding of the multi-modal nature of communications in the SM space.

The biggest risk to a FI today is reputational risk because you are not fully engaged with your customers in the social media space. Do you have a head of social media? You should do – and he needs to be a very senior resource.

#5 – Our customers don’t use mobile banking

I’m going to just say the obvious here. That’s probably because you don’t provide an App…

By 2015, the single most interacted channel for retail banking will be the mobile channel. Does your P&L reflect that reality? If you think you should wait until then to invest, then you’re in more trouble than we thought. I can use my phone as a boarding pass, but I can’t get my account balance or make payments because you don’t support it. My expectations of my phone in respect to utility is massive.

#6 – We have lots of time to get this right…don’t worry

If you aren’t worried, then don’t worry…you won’t have much to worry about in the very near future 🙂

BANK 2.0: SME Banking in the Cloud

In Customer Experience, Groundswell, Internet Banking, Retail Banking, Social Networking, Twitter on June 24, 2010 at 01:57

I met Friday with Mike Hirst, CEO of Bendigo and Adelaide Bank, one of the top banks in Australia today. As we discussed the need for community banks to get better at servicing SME business needs moving forward, we had a really interesting brainstorming session on where to go next. Mike is an easy going guy and I think he’s created a really positive, open culture at Bendigo that will pay dividends as they take market share away from the majors in Australia.

I guess it’s an obvious statement, but for small to medium size businesses, banks provide a logical partnership as an enabler for a range of bank services. Mike explained that Bendigo and Adelaide Bank has, in recent times, been providing a range of services to small businesses beyond the traditional merchant, trade finance and credit services including extended services such as cash flow and accounting analysis, SME advisory, website/minisite development, telecommunications deals as a reseller, and similar services. Recently ANZ launched The Small Business Hub, as a way of extending more services to their SME clients. American Express has gone one step further with their Open Forum platform as an attempt to engage the broader business community in actively sourcing solutions. Bendigo Bank has tried to facilitate community involvement through their PlanBig portal.

As Mike Hirst and I discussed Bendigo’s wish to provide a better platform for SMEs to grow their business, it occurred to me that almost all the services we were discussing were candidates for the cloud. Here are a few that came to mind:

Accounting, Cash Flow Modeling and Credit Services:
Plugged into an SME’s basic accounting package (think MYOB, etc) the ability to provide some intelligent tracking of cash flow, help businesses to think about aged receivables and rightsizing a credit or overdraft facility is a very valuable tool. A plethora of these are being introduced into Internet Banking facilities this morning, but extending a basic accounting facility with cash flow analysis tools that is an extension of your banking relationship is not a stretch. Ben May, MD of OnlineFactor, recently showed me a new tool they had been playing with called Imagineering Profit which allows users to plug in their basic financial statements and get some great analysis on break-even, cash flow, and various what-if scenarios.

If this could be married with basic account information, accounts and invoicing data, etc – this could give SMEs a nice tool embedded within banking to start to look at a basic overdraft facility, factoring, inventory financing and a whole range of complementary services.

Easier Merchant and P2P Enablement
E-Invoicing is becoming increasingly important as part of the SME toolset for commercial banking. RBS recently has launched a range of services including e-Invoicing and electronic accounts receivables/payables management. HSBC Net for some time has offered Accounts Payable Integration which allows for e-Invoicing, better cash-flow projections and management, etc. The name of the game here is simplifying processing, improving the likelihood of rapid payment and better bank integration into your payments and receivables process.

By 31st October, 2018 the UK Payments Council has mandated that central cheque clearing will be phased out. The decline of cheque use in the UK has been widely documented. In 2000 cheques represented 25% of all non-cash transactions, but by 2008 they accounted for less than 10%, this year they will be less than 5%.

This is also where the mobile device and P2P platforms come into play. While debit cards have had big success in recent times, as credit and debit cards are integrated into your mobile phone for contactless payment capability, it is obvious that the use of cheques and cash will further decline. With the introduction of Square and Verifone PayWare it is becoming increasingly simple to provide merchant type services to accept payments.

But Person-2-Person is the big innovation for SMEs and businesses. In 2009, financial institutions including Bank of America (BAC), ING Direct and PNC Financial (PNC) rolled out so-called P2P technology that lets customers use the Web or a mobile phone to transfer money from their account to any other account. Within the next 3 years our phone will become the payment device of choice for paying SMEs who work in the service arena. This makes cloud services even more viable as SMEs will increasingly rely on virtual platforms to effect and receive payments. The ability to augment basic banking services to capture the need for virtual P2P and payments capability is a no-brainer.

SME Community Building
There are hundreds of thousands of groups currently active on LinkedIn, many dedicated to SME forums and the like. Ecademy is an social networking site based in the UK, but active globally with more than 17 million members. A survey by O2 in the UK showed that more than 600 SME businesses were joining Twitter everyday, and that 17% are already actively using Twitter to support their business.

SME community building is a great way to empower businesses and is a logical extension of the already powerful network that banks have with their customer base. Banks don’t use their community of clients to encourage interactions, but as a trusted intermediary it makes absolute sense for bankers to utilize their community to encourage internal business between their SME clients. The cloud and online communities such as LinkedIn, Ecademy and others seem like the perfect partner to kick this off.

Conclusions
The cloud is increasingly critical for SMEs not only for facilitating business, but also for enabling closer connections with partners, integrating shared services, improving payments and cash flow and marketing their services. Banks have a huge opportunity to be not just a trusted partner for banking services, but extending their platform to help SMEs build their business.

There’s one key problem with banks extending platform for SMEs. To illustrate, the current e-Invoicing and Accounts Payable Integration services banking provide today, a process designed ostensibly to reduce paperwork for an SME and improve cash-flow, is saddled with an antiquated, compliance heavy sign-up/application processes that mean the initial onboarding for such services is erroneous and time consuming. The benefits aren’t there for SMEs if the application process takes more effort than the benefits.

By better integrating customer learning and moving SME accounts management to the cloud, a bank could provide a range of great services that really help SMEs manage their businesses and cash-flow more economically, but to do so they are going to have to think differently about engagement.

Pervasive Banking or Irrelevance? You choose… (Huff Post)

In Mobile Banking, Retail Banking, Strategy, Technology Innovation on March 15, 2010 at 22:16

Why do we use cash? Why do we use banks? The basic premise is that banks are necessary to create a flow of cash and enable commerce, with built in protections. Secondly, they can hang on to our money securely, and although we don’t get much interest these days, we do generally have the protection of the FDIC or some other mechanism to ensure we never lose our deposit. However, these days when we deposit money it just generally sits on some computer as ones and zeros, we don’t physically (or vary rarely) go down the the bank and actually deposit cash over the counter. In fact, I can’t remember the last time I ever deposited or withdrew cash from a bank branch. I know I go to the ATM to get cash out, but all my deposits these days are generally electronic.

Banking is just not in your face anymore, it’s simply a utility we make use of day to day. The banks are the wires, the FED is the generator, and while the banks have traditionally owned the ‘meter’ (e.g. the branch, ATM) we’re seeing a rapid disintermediation of banks from the retail coal face. We are about to see the end of

Today I downloaded the new Bump enabled PayPal application for my iPhone. The app was launched at the SXSW event (South by Southwest) and on the iTunes platform yesterday, and it is a retail banking killer! We knew this was in the pipeline, but the launch of the app is something that we’ll look back on as one of those defining moments of this decade.

When PayPal launched none of the banks really took it seriously. In fact, most banks to this day don’t really interface with PayPal at all. Yet, for sites like eBay and Amazon approximately half of the payments made are done through PayPal today. Banks totally missed out on the opportunity to capture the online payments space, as did Visa, Mastercard and Amex largely – they took their time worrying about security, fraud prevention, and such things and in the meantime PayPal took truckloads of market share off them.

The same thing is happening in the mobile payments space right now. PayPal, POPMoney, Square, Verifone and others are making a play for the mobile payments space in earnest. Apple has a patent for integration of NFC (Near-Field Contactless or Near-Field Communications) payments into their next generation or 4G iPhone. Bankers are sitting back wondering what all the fuss is about…

Bump your phone to pay with PayPal

When PayPal came along bankers I knew said “no one would trust these guys enough to use them for online payments…” – they were so wrong. Now with mobile payments being discussed I’m hearing “no one will abandon cash for mobile payments, that’s not realistic…”. I’m not saying it will happen in the space of a few months, but over the next 5-7 years in developed economies I expect this to have a huge impact on the viability of ATM networks.

The problem with pervasive mobile payments is that the value proposition for my bank just got cut in half. In a very short period of time, I may never even have to use my bank’s ATM at all. I certainly won’t be using checks. In fact, the last check I wrote was more than a year ago – so I won’t miss them.

My phone becomes my debit and credit card. I can pay the plumber who comes to my house by just bumping phones with him. I can pay at McDonalds, Bloombingdales, Sears, Wall Mart or Marks and Spencer by swiping my phone across the top of a point-of-sale unit. When exactly would I need cash? Taxi cabs maybe? Nope, I can already pay for those with my contactless debit card – so my phone will work with that too. Buses and trains? Nope, in cities like Hong Kong, London and elsewhere I just use a contactless card (in HK it’s the Octopus, and London the Oyster). I’m guessing my NFC will work with those conventions too.

So where is the value of my bank in this equation? Remember the electricity network analogy? It’s not in the meter because banks aren’t pervasive enough. Banks have let card issuers (Visa, Mastercard, Amex, etc) become pervasive at the point-of-sale, and they’ve relied on branches and ATMs to be pervasive. But branches and ATMs are based on our need to physically deal in cash or checks. Those days are quickly disappearing.

The only solution for banks is to become more pervasive with their solutions and services. I won’t be going down to the branch to apply for a personal loan or a mortgage, you need to be ready as a bank to provide me that product when and where I need it. Point-of-impact is what I call this concept. When I’m online booking my next holiday, offer me a great personal travel loan built into the online experience. When I am walking into my favorite retailer offer me a cheap line of credit instead of me using my credit card, or offer me a discount for using your bank’s debit card – you could use location based messaging or point-of-sale technology to deliver the message. Put bankers out on the road at property shows with the ability to sign me up for a mortgage there on the spot, instant approval.

Go where I need you – don’t wait for me to come to you. Chances are, I’ll bump you off…

New Did You Know – BANK 2.0 Video uploaded

In Retail Banking on January 14, 2010 at 12:42

Check out the draft of the new promo video for the book which looks at some of the changes in banking, disruptive technologies, and some interesting facts you might not be aware of!

Stay tuned for more of BANK 2.0 very soon…