Brett King

Posts Tagged ‘Technology’

What does it mean if the Internet is your bank? (The Finanser)

In Retail Banking on April 7, 2010 at 23:41

Read my guest blog on

In a quick straw poll recently conducted via Linked In we had a set of responses that confirms pretty much all the other data we are seeing in relation to channel adoption and utilization. The key issue is that despite the obvious data and conclusions, Internet is still seen as either the poor cousin of Branch banking, a necessary ‘burden’ or normally as a transaction channel for cost reduction – rather than what it is today…a customer channel.

The question we asked in the LinkedIn poll was very simple. Which Channel is the most important for your day-to-day banking needs?. The answer was clearly Internet banking.

Poll Results - Which channel is the most important for your day-to-day banking?

Now, the conservative bankers amongst us might think that asking for people to participate in an Internet survey guarantees results skewed towards the ‘internet’ and to be honest this is not a rigorous piece of multi-variate research. However, even if you factor in that in most developed economies Internet Penetration is at 65-75%, that Internet Banking is hovering around 40-50% of the populatio and that the highest demographic of users of social media online are the coveted 35-44 year old age bracket, why would you bother arguing that Internet is not a significant channel for retail banking today?

Let us use some very simple logic. Even in the US where Internet Penetration looks as if it has started to flatten out in the last few years around the 75% mark, is it reasonable to think that Internet Banking is likely to decline in usage in the near future, or is it likely that as more people shift to internet banking via mobile phone that it will continue to increase?

Patrick Chew, Head of Delivery from OCBC in Singapore, was reported in the Straits Times this week saying

“Mobile banking customers are no longer only professionals, the technologically savvy or those who are better educated…these customers now come from all walks of life.”
Patrick Chew, Head of Delivery, OCBC Bank Singapore

In Singapore already OCBC has the majority of it’s customers on Internet Banking and expect within 2 years that approximately half of their customers will have migrated to mobile banking. Daniel Li, Director of E-Business at Citibank in Singapore, indicated similar plans, saying that one in 10 of their customers will be on Mobile Banking by the end of the year. Bank of America has had phenomenal growth in Internet banking with their user base now approaching 4 million users. A recent survey by mBlox showed that already mobile internet banking has surpassed both branch banking and traditional telephone banking in terms of usage. Internet Banking surpassed branch in respect to transaction volumes back in 2003, so that battle is long over.

But do banks really know what they are doing online? Do they understand the value proposition given that Internet is now the primary channel for the majority of customers? It appears not.

Look at the table below. It illustrates number of page updates made to the primary domain of major retail bank websites in 2005 compared with 2008. In every case, mysteriously, the major retail banks have scaled back on their commitment to Internet since 2005 reducing the number of updates they have made by about 50-75%. This is a worrying trend – it most likely signifies two things. Firstly, banks are over the initial ‘buzz’ around internet, further reinforcing the perception that it is actually mainstream. Secondly, that they don’t know what else to do, all the initial experimentation, etc has been done – what new tools do we have in the toolbox to deploy?

Internet Banking updates from 2005-8

What happened? Reduction in web banking spend has been universal...

Branch expansion is once again slowing too in the US, UK and many other markets (see FDIC:Quarterly). This is argued to be a function of cost reduction and the effects of the recession, but we can’t discount behavioral shift as a key element of this development. Yet, traffic of each of these sites has increased significantly in the same period with Internet Banking usage doubling globally in the period 2004-2009.

One global bank I met with in the last few weeks told me in confidence that they have budgeted US$800m for branch related costs this year, but less than US$8m for web, internet banking, social media, web marketing and mobile banking. What was the business case for spending 100 times more on digital versus branches – it is a function of existing infrastructure. The same bank realizes that today the Internet contributes as much revenue as the branch, and does 300-600% more transaction volume. But can’t conceptualize that Internet and mobile is underfunded.

So let’s get this straight. The web is now the dominant channel for customers. Internet and Mobile banking are growing at significantly higher rates than branch banking, branch growth is leveling off and yet we are not leveraging non-branch channels for revenue. In fact, Bans are reducing spend on non-branch because of the financial crisis.

There is something seriously wrong with this picture. First of all, banks need to realize that 80-90% of the daily traffic that comes to their site goes straight for the login button and that a great deal of time and effort needs to be spent on understanding how to sell behind the login to existing customers. I would argue as much time and money needs to be spent on cross-sell and up-sell within Internet Banking as we currently do training staff for the very same within branches – at least as much, if not more. Secondly, Banks need to better understand what customers actually want to do through internet banking and mobile internet banking. Let’s not assume it’s just checking account balances, paying bills and doing transfers. Let’s think about which products suit these channels and would make the lives of our customers easier.

Remember the two key drivers for Internet usage are convenience and price. The key driver for mobile internet banking is still convenience, but increasingly mobility itself.

Banks are getting this wrong because they are measuring the wrong things internally. They are busy measuring how much revenue increased channel by channel, product by product, and they aren’t looking at the big picture nearly anywhere near as effectively as they should. They are still thinking like the bank of the 1990s when branches continued to be the primary channel because customers had no choice. Today we have a choice!


Customer’s tell banks “We don’t believe you anymore…” (HuffPost Blog)

In Blogs, Groundswell, Media, Retail Banking, Social Networking, Strategy, Twitter on February 11, 2010 at 14:21

Brand reputation the key to banks leveraging social media.
Check out the original entry on Huffington Post…

Recently I posted on how shifts in consumer behavior and technology adoption is significantly changing the marketing dynamic for banks. Essentially my message was that for marketing to continue to be effective in measurable ways, that a large portion of effort needed to be redirected to optimizing the mechanisms for reaching and enabling customers, rather than just reinforcing brand recall and directing campaigns. I have had some brand marketers bristle at this suggestion and asking me how brands themselves would get started or get known it it wasn’t for the fundamentals of brand marketing.

First of all, I don’t believe that brand marketing will disappear, however, I think it is far to say that social media brings a transparency and honesty that means that despite the best brand marketing money can buy, if you screw up your customer relationships it won’t matter – social media will punish you. Google was able to build its brand entirely online, so some might argue that the need for traditional brand marketing is no longer a given either. However, for banks right now, they need all the help they can get, so it can’t hurt.

Brand marketing is useful for telling us as consumers the core brand values of these organizations who want our business. Banks have long held up their brands as bastions of stability, trust and understanding. They kept telling us that they were safe places to hold our hard earned savings, and that when they loaned us money we should be eternally grateful, because it was only out of their gracious generosity that we were able to afford to buy that new home, car or trip to the Caymans. We could trust banks because they were ‘as safe as houses’! Well, guess what…thanks to banks even houses aren’t safe anymore.

The side-effect of the global financial crisis, and the huge botch up that leading financial brands like Bank of America, Citi, Merrill, JP Morgan, Goldman Sachs, RBS and others have made with their bonuses and lack of prudence, is that trust for banks is at an all time low. Brand marketing is not going to save the banks in this environment.

Right now if you go and do a twitter feed search on say… Bank of America you’ll find a plethora of negativity out there in cyberspace. Now to be fair BofA has a twitter feed (@BofA_Help) and they have a Blogsite ( – although it should be pointed out that their blog has no content as yet…

The key issue is that although Bank of America has a brand built over more than a century, their brand presence across the USA is pervasive, and their marketing capability staggering, they face an uphill battle. None of that capability really can help them in the current environment where they lack transparency on fees, are generally seen as out of touch with customers and are struggling in the war on customer word of mouth impact. Brand marketing is not enough to win in the 21st Century – the BANK 2.0 paradigm. Bank’s need to rebuild their brand reputation – and telling us how fantastic they are won’t cut it anymore. We just don’t trust those messages anymore.

What customers long to see is banks that care. Banks that reward you for the more business you do with them. Banks that are prepared occasionally to waive fees because you are a good customer. Banks that try to make it easier to work with them, instead of the endless compliance hoops we have to jump through because the banks find it to much trouble to change their internal processes.

We want the banks to build their brand reputation by restoring their reputation with us – the customer.

Social media is empowering customers – giving them a voice. It’s time major brands took the time to listen and adapt. Most banks spend millions on focus groups, customer satisfaction surveys and mystery shopping exercises each year to find out what they can learn for free just by listening to their customers on social networks and blogs. It’s not rocket science – but it is good branding.

The Three Phases of Customer Behaviour-led Disruption

In Book Excerpt on November 1, 2009 at 15:55

Excerpt from Chapter 1 – What the Internet and ‘crackberry’ have taught customers

There are three stages or phases to the disruption occurring within retail financial services. Each stage is disruptive enough to be a ‘game changer’. However, by the time the third phase impacts retail banking around 2015 (or perhaps earlier) the changes will be complete and irreversible.

The first phase occurred with the arrival of the internet. While many banks denied it at the time of the dot com bubble, the internet changed forever the way customers accessed their bank and their money. As we discussed in the psychology of customer behaviour, this gave them control and choice that was not available previously. Suddenly, customers were thrust into an environment where they could access their money as they wished, when they wished. As internet banking capability improved, the drive to visit the branch started to diminish and customers began to rely on the new channel as their primary access point with the bank for day-to-day transactions. Within just 10 short years, we’d gone from 50-60% of transactions either over-the-counter at the branch, through ATM or cash and cheques, to 90% of transactions through Internet, Call Centre and ATM. Game changing…

Embedded into this initial phase of disruption was also the emergence of social media and collective curation. As users started to participate in social networks, customers realized that these platforms had huge potential for empowering groups with common interests, or causes. No longer were brands protected by the corporation’s branding and controlled marketing communications, brands could be built up or obliterated at warp speed as a result of very public community opinion expressed through social media networks. While being a massive opportunity for banks, to-date very few have monetized social media because it is in conflict with the long-held philosophy that “if we want customers to have an opinion about our bank, we’ll give it to them”. That horse has already bolted.

The second phase is occurring right now. The emergence of the smart device such as the iPhone and Google Android enabled phones, is a driver for portable or mobile banking. While many banks may argue about security and the limitations of the screen or device itself, the fact is we heard exactly the same arguments about internet banking from those resistant to change within the bank. Already many banks are deploying what amounts to a cashless ATM on a mobile application platform – yes, you can do everything on a mobile phone you can do on an ATM except withdraw or deposit cash.

Here are a few statistics that support the second phase disruptive model:

  • 93% of U.S. population owns a mobile phone, and 27% of U.S. households are now mobile only
  • New mobile banking customers at Bank of America (BofA) during July-Sep 09: 150,000 (Sep); 210,000 (Aug); 220,000 (July) (Doug Brown, BofA)
  • 99% of mobile users view balances, 90% view transaction detail, about $10 billion of funds have been moved via mobile transfers/bill pay; 15 million location-based searches being performed (annual run rate)
  • More than 50% of iPhone users have used mobile banking in past 30 days (Javelin Strategy)
  • 33% of mobile banking users monitor accounts daily, 80% weekly (Javelin Strategy)

So if you didn’t need physical cash, what would happen then? This is the third phase― when we move to mobile payments on a broad scale – NFC-based (Near-Field Contactless) mobile wallets and stored value card micropayments are already here, but more is to come. The third phase also involves the convergence of your mobile phone and your credit/debit card, which is a logical technical step in the next five years. When these changes occur, our need for cash will reduce rapidly, then the disruption will be far-reaching…

Now, I can hear the proponents of cash already saying that cash will never die and that such an evolution in customer experience will just add to the complexity. To some extent I agree. However, the key to this is not whether cash will survive, but to what extent it will survive. If the majority of micropayments are all done via an electronic wallet or debit card based on a mobile device (or separate for that matter) and if larger transactions are all done electronically through internet banking or through mobile banking – what’s left?

In the UK 43 per cent of payments are done by Debit Card, and 23 per cent by Credit Card. Cash still makes up 32 per cent of payments, but as a percentage of the whole, it continues to reduce. Cheques make up just over 2 per cent of payments these days, so it is not hard to see these disappear entirely. If the growth of Debit card transactions accelerates further (not hard to imagine if contactless payment capability is built into your mobile) and other mobile payments like person-to-person (P2P) are enabled on your phone, this will further reduce legacy payment methods. It is not unimaginable to see a split of 85 per cent of UK payments done by mobile/card, and 15 per cent by cash in the next five years. In markets such as Japan, Korea, and Hong Kong the requirement for cash may be even less compared with mobile payments.

Changes expected in UK Retail Payments 2006-2015

There are the great unbanked who don’t yet have a bank account who currently rely heavily on cash, but as we will see with M-PESA and G-Money (Chapter 6) this is hardly a hurdle for mobile cash and payments. Success of the Octopus card in Hong Kong, T-Money in Korea and other such locations already proves the concept. We are only talking about the need for ubiquity to make it mainstream. What would quickly kill cash is a technical standard for mobile money that could be widely adopted globally by network operators and device manufacturers.

Even if only 50 per cent of cash transactions are replaced by electronic stored value cards, debit cards and mobile wallets in the next five to ten years, the current ATM and Branch infrastructure that supports cash becomes almost untenable from a cost burden perspective. If you no longer need to go to the ATM to withdraw physical cash or currency, then everything you do on the ATM today can be done on your mobile App phone. If branches no longer need to deal with cash, then a large part of the reason for their existence disappears. HSBC in the United Kingdom has recently announced its intention to stop support cheques, because usage has declined and there is no ongoing business case to support them. The Payments Council Board in the UK has agreed to set a target date of 31st October 2018 to close the central cheque clearing system. If cheques decline to the point where banks can no longer afford to support them and regulators no longer require the banks to provide support for them…

“There will be a critical review in 2016 when the Payments Council will decide whether sufficient change has occurred against agreed published criteria, to press ahead to do away with the cheque in 2018. There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement.[1]
– Paul Smee, Chief Executive of the UK Payments Council

Just like internet and mobile device disruption, this are not the inane ramblings of a technovangelist – this is an inevitable conclusion based on technologies already in place that are on their way to becoming the dominant channel of choice or mechanism of engagement. The behavioural adaption of consumers to the Internet and smart devices already indicates that this will likely take hold within the next three to five years.

Adoption rates are speeding up. Technology innovation is speeding up. Customers are adapting to these new changes quicker and quicker. Banks need to too.

Let’s just say by the time Phase Three hits – if the retail banks have not adapted, they will be clinically dead. Banks can either own the transaction and payment platform, integrate the technology, OR protest with their last dying gasp of breath that things are not really going to change. “The Branch is Back”, “Cash is King”, “Cheques will bounce back” – yeah, ok. You just keep telling yourself that and see how that works out for you.

[1] Source: Payments Council Press Release –