Brett King

Posts Tagged ‘point-of-impact’

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…

Open Source Banking – the solution to lagging innovation (Huff Post)

In Media, Mobile Banking, Retail Banking, Social Networking, Strategy, Technology Innovation on March 14, 2010 at 07:13

See the original entry on Huffington Post

Since writing BANK 2.0 I’ve been meeting constantly with banks who either have such huge organizational barriers to rapid innovation or conceptually still don’t appreciate the need for rapid change around customer. In fact, this is a global problem. Banks know how to run banks, but as they are pushed more to be something more akin to software houses, design houses, and integrators, their organizations are just not built for new priorities.

Think of it this way, when Amazon first launched on the scene, other booksellers like Barnes and Noble were extremely resistant to the concept of online book sales because they were so heavily invested in a physical distribution model. So much so that B&N attempted to acquire the biggest wholesaler of books that Amazon used to put a halt to their success. The FTC and pressure from other independent booksellers scuttled that deal, and thus B&N were somewhat forced to attempt to mimic Amazon’s approach online to prevent further loss of market share. Having said that, today only 13% of B&N’s revenue comes from the online arena.

In many ways the physical distribution model is even more embedded within most banks, dominating not only the organization structure, but even the way the manufacturer and positioning of product is carried out. With time to market for new products measured in months or years, and with a dominance of metrics still based around channel silos and their revenue performance, it’s going to be even tougher for most banks to adapt to a psyche of continuous customer experience innovation around the internet, mobile phones, new media, branch automation, and P2P payments. Thus, despite the shroud of regulatory protection that is afforded by a banking license, we see third-parties whose innovation threatens to disintermediate banks quicker than ever.

Take PayPal’s success. PayPal’s commercial launch in late 1999/early 2000 went largely unnoticed by banks. Bank’s believed that customers were unlikely to put in their credit card details for a non-bank online company due to the risk of fraud and abuse, but today PayPal accounts for between 27 per cent and 50 per cent of online payments. No bank would attempt to argue today that PayPal is not a competitor in the payments space, but card issuers and banks failed to garner the sort of momentum in innovating the payments

The need for innovation is rapidly speeding up, and to be fair some banks are scrambling to respond to interest in mobile banking and social networking, but most are finding the reality of innovation difficult to master. The key stumbling blocks to innovation in the customer experience remain the long-held metrics for business unit performance being based around channel silos and revenue gains within those silos, along with organizational structures that still favor ‘retail distribution’ over ‘alternative channels’. Are banks doomed to fail?

For banks, the key must be to utilize their unique platform for transactional capability, and to extend their products to be as pervasive as possible. However, banks just don’t have the bandwidth to be everywhere they need to be as quickly as they need to be. Is there a way banks can extend their reach, but not be solely reliant on their own organization.

Let’s talk about Apple. Apple iPhone launched in 2007, but already it has over 180,000 applications available, they’ve sold over 36 million units in the last 2 years and have more than 1 billion downloads annually from their iTunes platform. Yet Apple develops just a very small fraction of the Apps available for the iPhone – the developer community does by far the majority of app development.

In respect to channel innovation, why can’t banks take the same approach? If banks created APIs (Application Program Interfaces) to hook into their transaction and product sales platforms, as long as their APIs looked after the security and compliance requirements, then third-parties could actually create the new interfaces, applications, bundled product and cross-sell opportunities that banks need to create for their customers.

As so much of the interaction between customers and the bank these days is done through electronic interfaces, let’s open up the development of these interfaces to innovative developers and the community. Let’s build collaborative social networking sites that allow customers to define product parameters and benefits, but where the bank executes the actual product application through their back-office. Let retailers of big ticket items integrate personal loans directly into their sale experience, airlines integrate travel insurance into their booking engine, and real estate companies integrate mortgage product into their property search engines.

Developing point-of-impact opportunities where bank product or services are integrated into customer experience is going to take more than an innovative bank. It’s going to take an open capability, a library of APIs, automated credit risk assessment and straight through processing. Once in place, however, these tools will enable almost unlimited innovation of the customer experience without the constraints of a bank organization chart, channel silos or outdated financial metrics.

Banking’s biggest challenge – Marketing 2.0 (HuffPost Blog)

In Blogs, Media, Retail Banking, Social Networking, Strategy, Technology Innovation, Twitter on February 11, 2010 at 13:09

See the original entry on Huffington Post

Point-of-impact MMS offer

A location-based offer at the retail point-of-sale is 550% more effective than Direct Mail 3 weeks before

There are some massive changes occurring in the banking space today, but none so dramatic as what is happening in marketing and advertising.

Direct mail offerings have been declining rapidly since 2006. In 2009, less direct mail was sent by banks than in the year 2000. Direct mail has declined 32 per cent since 2007 alone.

In 2008 the Internet surpassed all media except television as the primary source for national and international news; this has taken its toll. In March 2009, the Seattle Post-Intelligencier or the “PI” as it was known, a 146-year old newspaper, closed down, citing rising costs, falling revenues and declining circulation. Since just January 2008, at last count, 55 regional newspapers in Britain have folded. Of the top 25 newspapers in the U.S. in 1990 (the year newspaper employment peaked), 20 of those newspapers have seen declines (on average reporting circulation down by more than 30per cent), and two have been closed down or declared bankrupt. New York Times reported a 30 per cent fall in advertising revenue, resulting in a $35.6 million loss for the 2009 third quarter alone.

In 2009 TV advertising revenues in Australia fell by more than 12.6 per cent in the first half of the year. In the first quarter of 2009, the U.S. recorded losses of more than 14 per cent in TV ad revenues in normally stable locations such as the Bay Area and New York, and is expected to suffer a total decline of 22 per cent for the year. Declines of 27 per cent and more were recorded in radio ad spend for the U.S. for the first half, even worse than the decline in TVCs. Yet, in a recent report commissioned by UK’s OFCOM forecast the value of TV ads in the U.K. could fall from £3.16bn in 2007 to just £520m in 12 years’ time. That’s an 83 per cent decline.

Bank’s are finding their brands are no longer able to just get by with brand marketing, after all BofA and Citibank have great brand marketing, but are being hammered by customers on Twitter, YouTube and elsewhere. Thus I find it amusing that ‘digital’ or interactive marketing still makes up only a fraction of marketing budgets for banks in 2010. The very fact that banks separate ‘digital’ in respect to budget or spend, signifies the challenges of changing a culture that is so dependent on direct mail, print, radio and TV – all broadcast mechanisms.

Let’s play Devil’s advocate for a moment. What will the advertising space look like in 5-10 years? It’s more than likely that TVCs will be gone – with declines in revenue we’ll have to find another way to pay for TV either through subscription or download, but there is no business model that indicates Free-to-air TV can survive with out Ad revenue. Direct Mail will be relegated to very specific segments, and then only for loyalty promotions. Newspapers will be on iThingys with paywalls – we’ll subscribe to newspapers and virtually every newspaper will be digital. Billboards will be all digital, but not based on TVCs – they have to be even more efficient. Physical magazines will be a luxury item, most magazines will be digital. In this space nearly ALL advertising will be digital within 10 years..

TiVo already strips out TVCs. SPAM filters on our phones and email ensure the eDM ain’t going to work. We need something more. In my book BANK 2.0 I call this “Point-of-Impact” marketing. Banks need to insert their ‘value’ message into the transaction where it will have an effect, not send out millions of messages hoping for ‘brand recall’. Brand marketing will still exist, but campaign marketing needs to shift to point-of-impact. To illustrate, when you are on BA.com, United.com or CathayPacific.com and I’m booking a flight, that is where you need to sell me travel insurance. When I’m on a real-estate website, that is where you can target me with mortgage deals. When I walk into Bloomingdales, Marks and Spencer, or Armani Exchange send me a location-based MMS coupon on my mobile offering me a discount using a specific card. Get me when I’m interested, when I need it.

But this requires a complete rethink of the structure of the marketing department, and a complete new set of tools. This is the biggest fundamental change to the marketing department of the bank…well ever. I’m not surprised that quite a few of the banks I’m talking to are not sure how to make this transition, but that doesn’t make it any less likely.