Brett King

Posts Tagged ‘Social’

Private Banking 2.0

In Bank Innovation, Customer Experience, Future of Banking, Social Networking, Strategy on April 6, 2011 at 02:24

Since the emergence of online banking there has been a fundamental assertion from high-net-worth bankers that their clients aren’t digitally focused, they don’t use social media or mobile banking, and that they prefer to pick up the phone and engage their banker because the nature of their interactions is defined by their wealth – they want the highest-level of service that only comes from engagement through a personal banker.

Is this business immune to disruption, despite the rest of the retail bank being in an extremely disruptive state? It’s apparent that Private Banks are now seeing customers move more frequently to multi-bank relationships because the basic digital hygiene factors within the Private Bank are not taken care of. For a Private Bank to claim that they are the best of the best, but to be amongst the worst digitally is contradictory.  So the depth of the relationship and scale of AuM (Assets under Management) are suffering because of lack of web, mobile and social capability, and Private Bankers are seeing a fragmentation of service offerings as a result of service perceptions.

If we look at High-Net-Worth-Individuals (HNWI), the facts are that they are extremely service conscious and generally loath inefficiencies. Entrepreneurs and successful business people in the HNWI category were the first to get Blackberry’s, the first to get wireless broadband modems so they could work on their laptop in the limo from the airport to the office or sitting in the Maybach running around town, amongst the first to get the cool new iPad or the latest gadget. So right now, clients of private banks are asking – why can I login and do this day-to-day stuff through HSBC, Barclays or BofA, but I can’t through my Private Bank?

So where does technology fit, and can it provide real value? Is there a way that technology can deepen relationships with clients, or does it mean that relationships are less sticky because they are doing more interactions with the brand electronically?

The digital relationship

Recently a well known ex F1 driver and commentator was spotted on Twitter asking his Private Bank, Coutts of London, whether they had a local branch in Miami. The Coutts team respond within just a few minutes of seeing that enquiry come past the Twitter account and letting the F1 driver know that his Banker would be on the phone to him in a jiffy. Such a response is not the norm.

When presented with this sort of scenario, many Private Bankers scratch their heads and ask why a distinguished client like an ex-F1 champion would use Twitter to talk to his Private Banker instead of a simple phone call? That’s not the point – you can choose to approach every single client and ask them why on earth they would want to use Twitter, or you can simply understand that an emerging channel like Twitter needs support.

As the next generation of Private Banking clients start to take over from their parents, the last thing you want is to be identified as that stodgy, old, out-of-date bank that my father used.

Stereotypes that Private Banking clients don't do Digital are just wrong...

Maximizing the client interaction

Perhaps the biggest revolution is in the primary face-to-face asset allocation meeting with the client. Over time we have gradually increased complexity as a result of KYC and risk, for what used to be a simple chat between a client and his banker. Now we load up our client with forms, risk profile questionnaires, with brochures, technical data, etc. that doesn’t actually enhance the relationship – it just complicates it.

Soon we’ll be asking the client to do the risk profiling stuff at home online and we’ll verify this with the client face-to-face. We won’t ask the client to fill out the same compliance information on a paper form that we’ve already asked for 20 times before, because we’ll execute electronically using the data we already have stored.

When we sit with them in a planning session, we’ll use tablet based tools that allows us to show our clients what-if scenarios and adjusted asset allocations that work better for them, then we’ll give them a selection of product decisions which they can learn more about at home online or execute electronically from behind the login. Why?

The real revolution here is in simplicity of the interaction. By maximizing time with our client for discussing their needs, and shifting other activities to supporting channels, we improve service levels. Even the humble monthly statement will be digitized with interactive components explaining market movements, the client’s net position and short-term investment opportunities.

Social Scoring

In respect to client acquisition, the world of transparency through social media will increasingly start to impact banks in the coming 2-3 years. Brands and private bankers will be anonymously scored online as to their effectiveness. Just like dating services, social networks will be able to match bank’s relationship managers with clients based on their expertise, location, and their ranking amongst peers.

When we search for Private Banks on Google or YouTube, what results will we see? We won’t any longer see the most popular brands, but the most respected brands amongst our peer group based on your social score. Unless you have a strong connection digitally with your clients, your social score is going to hurt you on the acquisition side of the business. After all, Private Banking is first and foremost about trust in your advisor – if my friends don’t trust and recommend you, how can I trust you?

Conclusion

Once thought immune to the changes in multi-channel engagement, it turns out that perhaps the most important clients in the retail banking marketplace need to be highly connected, to provide the required service levels. For most private banks, this is an epiphany and hence, we’re seeing aggressive investment in this space today.

If you want to be the trusted advisor – it is clear you need to be connected and recommended. Engagement is no longer limited to a phone or face-to-face, the private banker must extend his reach to clients at every opportunity. A deeper relationship, depends on context and connection – not just a brand and asset management capability.

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Banks still don’t get mobile, but neither do researchers…

In Customer Experience, Engagement Banking, Mobile Banking, Retail Banking, Social Networking on January 4, 2011 at 01:04

I read with interest a post pointed out to me by @JenRBoyd posted on Mobile Commerce Daily highlighting a recent Celent report comparing US and EU investment in multi-channel. The problem here is that the conclusions of the report are correct, but even the report itself suffers from an old-school view of the banking arena, that is, we are still asking the wrong questions…

Celent/Oliver Wyman - Channel Priorities EU vs US

The Generational Gap in Management
If you’ve read my posts previously, or my book BANK 2.0, you’ll know that I’m particularly critical of the branch-centric organization structures that dominate retail banking still today. The shift to ‘multi-channel’ has been a long and hard road, and is far from over at this stage.

The problem intellectually is that it is fundamentally, virtually impossible to get a banker of 30-40 years experience to think in truly innovative ways about reinventing the way we engage customers in banking. We see this embedded in banking from terminology, to metrics, to budgets, to organization structure, to philosophy. Many banks still call their multi-channel practice “Alternative Channels” – indicative of the fact that most bankers still view multi-channel as an alternative to the branch, i.e. the ‘real’ bank. The problem with that strategy is customers just don’t think like that.

If you had a Y-Gen or Millennial on the board of the bank today, his or her first three priorities in channel investments would be in the arena of mobile payments, social media and mobile banking. In Celent’s report (link above) indicative of the generational gap, even prevalent in the research, is that we aren’t even asking the right questions yet. Celent’s report doesn’t even include the areas of mobile payments and social media engagement as ‘channel priorities’.

Re-imagining the organization
So in an ideal bank of today, what would the channel priorities and organization chart look like?

Here’s a few key elements:

1. Complete Channel Agnostic Approach
The first thing that needs to happen is losing the bias in the organizational structure toward branch, from a budget perspective, from a leadership perspective, and from a philosophical view. It would help to create a Head of Channels that manages branch, internet, mobile, self-service (ATM, etc), and other channels together. There should be an acceptance that all channels are created equal in respect to their ability to engage customers from a revenue and service perspective.

2. Seed strategy teams with Y-Gen/Millennials
You can’t change the way that old banker’s think. Remember the joke…

Old Banker’s never die – they just lose interest.

Seriously, we need aggressive new thinking, and we aren’t going to get that from those who’ve been brought up on a staple diet of traditional approaches to banking. We need to create energy for new initiatives. Most commonly when I propose this to banker’s they say “But, we need people with banking experience!” I cringe at that…you can’t inject new blood and thinking into the system if you insist on only using those who are already preconditioned to the world of banking.

If you must, use the kids and grandkids of the board members themselves so you can keep it in the family. But get some new thinking into the organization ASAP.

3. Customer Dynamics and Engagement Banking
We need to start thinking about re-inventing the role of banking in the lives of our customers. This is not just building new Apps, new websites, or sticking up a page on Facebook – this is thinking about the contextual use of banking, and how to reduce friction for our customers.

Realistically if we think about the way banking works today, usually it is a ‘wait for the customer to come to you’ scenario. We assume that when a customer needs a loan, a new bank account, or to invest some money, that he’ll come to the bank. If we understand the context of those products or services, we’d see that if we could take those elements to the customer, and better engage them, that banking would truly become a service, instead of just a function. The organization chart of the future will have a customer engagement team that dominates the marketing and product functions of the bank, both from a retail and wholesale banking perspective. This is because we are going to have to reinvent the way we engage customers with our products or services, taking banking to the customer.

Conclusions
We have to start asking the right questions. Those questions start with how is the behavior of our customers changing, how can we better engage them, and how and when does that engagement occur? Patently, the use of mobile, social media, contactless payment technology built into the handset, geo-location capability, targeted 1-to-1 marketing offer management (beyond groupon), and other such capabilities should be an absolute priority for bankers today – but we aren’t even talking about that stuff properly yet…

Online Fraud and Privacy is not that big a deal…eventually

In Retail Banking on August 4, 2010 at 20:34

I hear a lot of individuals in the financial services space expressing concerns about the risk of conducting business online, the lack of privacy in social media, the issues of identity theft and so forth. I’m not sure what these proponents of the ‘high-risk involvement’ model hope to accomplish, but if they realistically think that flagging concerns about privacy and online fraud will make ANY sort of dent in the progress of digital engagement through online, mobile, or social media – their mental health may need to be assessed. The best they can hope for is increased awareness of the issues.

Dealing with the digital landscape as far as payments and identity is inevitable. The issue becomes how to manage your online presence moving forward, and not if you should be conducting commerce digitally or participating in social networks.

It’s easier to commit fraud offline

While we hear lots about online fraud, the fact is that when it comes to things like credit card fraud, it is still far, far easier to commit fraud when a physical card or physical process is involved. Recently I was in London launching BANK 2.0, and at every restaurant where I presented my card, the waiter would come to the table with a wireless POS terminal to present my card. This is undoubtedly because of the simple risk associated with letting my credit card out of my sight. It takes just seconds to run a card through a mag reader and replicate that card physically. Even with CHIP and PIN, which is common throughout the EU, it would not be that hard to shoulder surf your PIN number if I really wanted to.

I used a foreign credit card in the UK, however, so I am not afforded the protection of PIN when I’m visiting the UK. In most instances I was actually asked to show my card to verify the signature, but in reality if someone had duplicated my card, then the signature they’d be using would be one they had created in any case. In the US , there is not even the protection of CHIP and PIN, and the physical processes allow for easy access to copy a credit or debit card.

The fact is, the weakest link when it comes to fraud is always the physical medium. Granted, phishing attacks designed to glean your account number and password for Internet banking is today a major issue, but again the weakest link is not the technology but the customer who willing submits his information to a fraudulent site.

Many markets have already solved this problem through two-factor authentication (TFA). The markets who have moved slower on this innovation, are obviously now reaping the reward for their lack of innovation. It is, in fact, not that fraud is easier online, it is that card issuers, retailers, banks and regulators simply are not keeping up with the behavioral shift to digital and have not leveraged the quite simple technologies that actually make digital more secure.

The US is only now moving to new POS infrastructures around contactless cards, and the fact that the EU still has yet to broadly adopted TFA are just examples of lack of innovation in fraud management. Customers move with innovations in the digital space, banker’s don’t and fraudsters exploit the gaps while they can.

Increasing digital interactions are inevitable – deal with it.

I find it amusing that those that are strongest in vocalizing the risks in online privacy are often those that in reality have the most to gain. For example, while check (or cheque) fraud is less frequent today, the fact is that the check in itself is an outmoded payment mechanism. It is not an efficient way to pay in almost any measure that makes sense today. Checks are cumbersome to carry, error prone, easily corrupted, costly and are increasingly difficult to handle, especially if you are trying to cash a check issued cross-border for example.

I’ve heard bankers argue till they’re blue in the face that checks are here to stay, and yet in the same breath they admit that they don’t know how they are going to continue to afford to process checks and admit data increasingly shows that in developed markets checks are in terminal decline.

So why aren’t banks rushing to embrace person-to-person payment capabilities, improving interbank connectivity, and trying to integrate better, simpler security mechanisms into electronic interactions? The only thing I can figure is that there is so much organizational inertia around traditional mechanisms like checks and TT’s that is often just seen as too hard to change.

The fact is today that no government, no bank, no threat on the planet, could viably stop the adoption of social media, mobile phones, payment technologies like P2P and other such innovations. It is simply a question of how soon – not if.

How digital will be far safer

Commercial interactions in the digital realm are instantaneous, completely auditable, measurable and can occur anytime, anywhere without the requirement of any specific physical instrument, except a browser or mobile phone. The fact that I can pay you in real-time, without any special process or instrument is ultimately the big draw-card.

So how do we make it safe. Embedding payments into the phone is the first step. The combination of the phone SIM, the ownership of the physical platform (handset) and the payment process will be safer than today’s credit card process. However, the simple incorporation of biometrics, the most promising being fingerprint, voice or facial recognition, will make such transactions magnitudes safer than current physical payment processes, including cash.

The likelihood is that Apple, Google or the handset manufacturers will likely be the ones to lead with these technologies, rather than banks working to incorporate such into the platforms. But the patents are already out there, we’re just waiting for the commercialization.

Biometrics are the ultimate solution to digital privacy

What about privacy?

The reality is, I don’t know of one individual who has stopped using Facebook, Twitter, email or their mobile phone as a result of privacy concerns. That doesn’t mean as individuals we should be complacent. The fact is, that we’ll probably end up with two distinct personas when it comes to the digital space.

  1. Our public persona, where we accept a compromised privacy level in respect to our personal details (email, profile, date of birth, etc), and
  2. A secure persona, which we will protect fiercely because of the financial implications or risk.

The biggest risk to our secure persona today is identity theft. Recent twitter hacks, facebook scams, hotmail account takeovers and other examples occur because it is still relatively easy to get someone’s credentials through an App, phishing site, or other such methods. Again, the answer here is that our secure persona needs to be linked to biometrics and not weak mechanisms around an ID and password. I don’t see anyone working on this as yet, but it is the obvious answer and the core technology is pretty much there. We just need one of the big Social Media networks like FB or say Apple with their iPhone/iPad to embed it and it will become ubiquitous fast.

But one thing that won’t happen is a mass exodus away from digital innovations through privacy concerns.