Brett King

Posts Tagged ‘usability’

Banks and Credit Card Issuers beware – Apple just stole your business

In Customer Experience, Mobile Banking, Retail Banking, Technology Innovation on October 17, 2010 at 23:01

200 individuals were the first to receive credit cards issued by Diners Club in 1950, the brainchild of Frank McNamara. It was the start of a completely new era in personal credit and payments. American Express entered the credit business with its own card in 1958, within five years had issued more than a million cards.

Today there are more than 1.6 Billion credit cards in circulation, and the US credit cards industry generates $2.8 Billion dollars a year in revenue. One in 12 households in London (or 8 per cent) have used credit cards to pay their mortgage or rent in the last 12 months and outstanding credit card balances stood at £63.5 billion in November 2009. By 2013, China’s consumer credit market—encompassing credit cards, mortgages, and other personal loans—will account for 14 percent of profits in the banking sector.

Growth in Contactless Technologies

In recent times we’ve seen the move to NFC or Near-Field Contactless credit cards. It is estimated that NFC enabled credit cards will reach the tipping point in 2011, with a total of 30 million British contactless bank cards alone being issued by then. The ease of use of an NFC-enabled card is obvious, no swiping, no inserting. Steve Perry from Visa Europe said that the rising popularity of contactless technology brings the promise of a cashless society where there is no longer any need for people to carry notes and coins around with them.

“Contactless is as revolutionary as the shift to internet payments was five years ago. It will mean having no notes and coins – it will certainly mean having no coins. It will move us almost to a cashless society.” – Steve Perry, Visa Europe

But as the modality shifts toward NFC, the reality is that the physical card itself does not represent a competitive advantage or differentiation for banks or issuers, not that it does today. Once the move to NFC-enabled POS terminals is ubiquitous, it’s probably easier just to carry your phone to make payments than a gaggle of credit and debit cards. That’s not going to happen overnight though right? Cards as a product are still too strong to be replaced by mobile quickly, so we have plenty of time right?

It will happen quick…

WRONG. We know that Apple is working on an NFC-enabled phone, and given their recent hires in the space, it is assumed that the iPhone 5 will be the platform for this change. So how will Apple’s NFC-enabled iPhone 5 work? We know a few things about the likely capability of the phone based on the patents issued by Apple. Firstly, the payment application will be a core app integrated into the phone, there will be a biometric strip (presumably enabling fingerprint authentication) and the phone will ostensibly work just like an EMV-chip credit card.

Some of the detail of Apple's NFC patent for the iPhone

The question you are probably asking is, how will the payment mechanism work? Here’s where it is largely speculation because Apple is being extremely tight lipped. We know that the primary payment app will work as an interface to your bank or credit card company as you need it to. However, it doesn’t take a rocket scientist to work out that Apple could use its current iTunes store platform to provide stored value for an effective debit card mechanism. If Apple was to use this mechanism as the underlying currency or stored value behind their core ‘debit card’ equivalent payment capability, they would effectively become a bank overnight, and one with perhaps an even stronger differentiation than any other debit card on the market today. Other handset manufacturers and mobile platform providers would be sure to follow as Apple’s payment capability quickly becomes ubiquitous. That is, if the payment networks talk to Apple’s iTunes store…

Competing with Apple, Google and Microsoft Mobile

So how will banks compete in such an environment? Well banks can’t issue their own mobile phones like Apple or Google’s partners can, and plastic cards and checks look downright archaic in comparison to such a payment paradigm. The only choice of Card issuers and banks would be to embrace the new technology and scramble to partner with the handset manufacturers and mobile OS owners. Visa has already deployed their Visa Paywave solution on the iPhone, but currently you need a cradle or sleeve that the iPhone sits in to do the sexy NFC bit, that simply won’t be necessary on the new device.

So the question for banks in this new environment would be how do we now issue cards to customers? Do they have to come into the branch for us to configure their phone? Given how easy it is to upload iTunes credit, this would be a huge competitive disadvantage, so the compliance procedures applied to the current physical process of card issuance become a millstone around the bank’s neck and result in rapid disintermediation. Within the space of 3-5 years, banks no longer have a credit card business. Sure, they might eek out a small business settling payments between Apple’s iTunes store and the bank, but compared with the size of the card business today this would be miniscule.

Challenges Ahead for Banks

What about if a customer could download a new “credit card” from the iTunes’ App store, or from Google’s Marketplace? Well how would you qualify for the card as a customer, are there different card apps for each bank, what is the onboarding and risk assessment process?

Don’t be tempted to think that the protection of existing payments networks or a bank license will protect your existing business from such innovation. If Apple does launch their NFC phone and announces collaboration through Visa and Mastercard’s payment network, do you honestly think with millions of iPhone 5’s going out the door that the regulator is going to call a halt to payments from a phone?

Seriously, if you are a bank, it’s likely that in just 8-9 months you’ll be faced with competition from non-banks who can do the whole NFC-enabled phone payments thing much faster, easier and more compelling than you ever could by issuing a plastic debit or credit card. And guess what?

If you’re the CEO of a bank, you probably don’t even have someone appointed to work on mobile credit card onboarding yet, so what’s the likelihood you’ll be ready to compete?

Let’s try plan B – let’s go to the regulators and see if we can stop mobile phone payments as a mechanism shall we?

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Consumers shun bank marketing in preference for online research

In Customer Experience, Media, Retail Banking on September 13, 2010 at 10:14

At their annual ThinkBanking event last Thursday (Sept 9th) in Sydney, the Google Financial Services Team released their latest behavioral research supported by Global Reviews’ Customer Experience Benchmarking. The results are a shock to those expecting traditional marketing methods to strongly influence customer behavior in respect to product selection in the financial services space. Barney Pierce, the Head of Industry – Finance for Google in Australia articulated that the research “shows a fundamental shift toward the online channel dominating research for financial products and services. A large part of which is search related activity.”

Greg Muller and his team at Global Reviews who assisted with collecting the research explained that the research was conducted across Australia with a sample size of over 900 people from all walks of life – it was directed at all users of financial services products. In the research customers were simply asked to find ether a deposit product, a credit card, or a mortgage and report back on the process they used to find and select a product.

88% of customers research online

Staggeringly when it comes to financial products, 88% of customers today start their journey online. For deposits and credit cards, 78% of time spent researching options overall is done in the digital space for an average of 3 hours and 20 minutes. (that’s up from 58% in 2008) For mortgages and home loans, 62% of their overall research is done online spending upwards of 11 hours and 25 minutes before settling on a product. 77% of those surveyed said that they didn’t know about the product they finally chose before when they started the task.

The data shows a significant shift in behaviour when it comes to the selection process. Traditional marketing theory suggests that brand marketing and campaign marketing are strong influencers of behaviour when customers are selecting products, but this most recent data flies in the face of accepted theory. 51% of customers had a preferred brand when they started, but of those that used search to attack the task, 58% didn’t search for their preferred brand. Of those that started with a preferred brand 1/3rd (31%) ended up selecting a different brand.

What about the branch?

So what about the role of branch, call centre and other channels in the actual application process? 68% of those surveyed prefer to apply online, compared with just 29% who prefer the branch experience. However, 89% of people said they are open to applying online in the future if bank’s and FI’s get their approval processes up to scratch.

The research shows that for poor usability was the primary reason that customers would abandon a website and pick a competitors brand online. The highest % of customers who stay with online throughout are the $100k+ p.a income bracket, in fact, 82% of High Income customers total research is done online today and 74% of these indicate they would prefer to apply online for deposits & credit cards.

Google Finance research shows a big shift to online for finance products

Conclusions

The data indicates the following shift has taken place in the last couple of years:

  1. Consumer behavior has radically shifted in respect to financial products with brand and search being the top 2 mechanisms for product selection/choice these days,
  2. Financial Institutions need to invest big time in Search Engine Optimization, Search Engine Marketing, Social Media Support, and
  3. Financial Institutions need to streamline and produce highly usable web experiences so they don’t lose customers looking for their products.

Based on this data, if you are a FI and you aren’t spending at least half your marketing budget in the online space, you are going to have severe problems with acquisitions moving forward.

Social Media and Bank Compliance Departments – Eternal Enemies?

In Retail Banking, Social Networking, Strategy, Technology Innovation on July 6, 2010 at 22:50

A consistent theme keeps popping up as I discuss social media innovations with bankers these days. It is increasingly frustrating for innovators who want to use mobile, social media, the web and other such tools to get these past hyper-risk-adverse compliance specialists. It seems as if many of the banker’s I’m meeting are saying that the favorite word of the compliance officer of today is simply “No”.

That needs to change…

Compliance holding up social media adoption

In a recent American Banker’s Association survey they reported that 74% of participating banks confirmed that all ‘social media efforts were to be vetted by compliance first’. In an environment where minutes matter, and the response is key, such a logjam to social media participation is a frustrating mismatch with the realities of dealing with customers in todays uber-connected world.

On Sunday I enjoyed brunch with Matt Dooley who heads up Direct Customer Experience for HSBC’s Commercial team in Asia, and his wife Maria Sit who runs Heath Wallace’s Asia division. Over lunch the issue of culture, compliance, philosophy and the reluctance to experiment to broadly with social media, mobile engagement and other such issues came up.

Matt used a brilliant illustration to identify the problematic compliance hurdles we face today as bank innovators. He asked me whether or not a compliance department of a major financial institution would approve “snail mail” as a new initiative if it was proposed today? Let me explain. If snail mail did not exist today, what would your average compliance officer think if you came along and explained you wanted to use this great new technology for distribution of bank material like statements, new credit cards, PIN #’s, etc. You’d have your PowerPoint deck ready to go explain the process where you stuff an envelope, hand it on to someone you don’t know in the bank (likely a very junior staff member), he then puts it in a bag which is picked up by a truck with another person you don’t know, they take it to a large warehouse and sort it according to Geography, etc, etc…

There just ain’t no way that snail mail would make it through the compliance check list of today’s modern financial institution. The compliance officers would no doubt quote scenarios like this to justify why it would be absolutely impossible for the bank to consider using this new ‘snail mail’ technology.

This is the dilemma. Today there are those of us trying to improve customer experience, knowing full well that compliance departments are citing risk mitigation, regulations and laws, bank policy and procedures, and other such issues as reasons why innovators can’t release a new mobile app, engage in social media conversations in real-time with customers, and so forth. In the meantime, there are existing processes, procedures and systems that are far more riskier than things like social media, but they are immune to the compliance department’s gaze because they are already in place.

Is it riskier to do nothing?

Let’s take Twitter as an example. Today it’s rudimentary to do a Twitter search on major FI brands to see topics trending that in the old days if they were carried by mainstream media would turn a banker’s hair on end. In many cases, however, such interactions are simply ignored because there are no dedicated resources listening and responding to such social media conversations. The processes internally around getting compliance approval for a formal response simply make any such response useless by the time it is approved.

But aren’t social media free form responses risky?

Take for example the very public Twitter faux pas recently committed by a Westpac employee who stated “Oh so very over it today…”. Honestly, this is probably about the worst that it could get on Twitter – and it just isn’t that bad. I hear Compliance departments the world over rejoicing and justifying their stance at the next Social Media strategy review meetings – saying, ‘See, see – we told you so!”. The reality is, that this particular faux pas actually ended up humanizing the Westpac team and probably won them new supporters more than anything else…

It is far more likely that a serious breach of customer trust, a poor service or policy decision, or some other very public social media trending topic could do far worse brand damage if left unanswered out in the social media conversation.

Classic examples are those of Ann Minch with Bank of America and Citibank with the Fabulis debacle. In observing the Facebook and Twitter effect of such PR nightmares, the lack of timely response by the bank across the social media landscape made these issues far more impactful and damaging than they needed to be. So the real risk is in not responding quickly enough.

The reality is that banks are increasingly likely to face a major PR disaster and have it escalated more rapidly than they can every imagine through social media networks. Take the example of BP and the recent Gulf Oil Spill – their lack of maturity in handling PR issues over social media has absolutely punished their brand. The spill is bad enough, but BP’s response to the social media conversation has simply made it much worse than it had to be.

No amount of brand advertising and traditional PR can ever undo the sort of reputation damage that is possible to your brand in the social media landscape.

Compliance as an enabler

Compliance needs to understand the negative risk of increasing workload on the frontline in respect of customer service perception, and decreasing the ability of the organization to respond to social media events in real time. They need to start thinking about their function as an enabler of the core business with customers, rather than just risk mitigation. They can also be lobbying regulators to help regulators adapt and make their processes more user-friendly, while retaining security of identity and the assets of the customer.

Customer experience is being hampered by compliance heavy processes that look to reduce risk, but make the engagement unnecessarily complex. Translating the Terms and Conditions from a paper application form onto the first 7 pages of a web-based application process might seem legally sound, but is quite ridiculous from a Usability and Customer Experience perspective.

Compliance departments need to learn to stop saying no, and be embedded within social media, customer advocacy and customer experience teams so they understand the implications of ‘risk’ and ‘legal’ decisions that actually hamper the organizations ability to respond to customer needs.