Brett King

Posts Tagged ‘Wells Fargo’

Don’t worry – you don’t need to develop an iPhone banking app…

In Business Banking, Customer Experience, Engagement Banking, Mobile Banking, Retail Banking, Strategy on November 19, 2010 at 10:26

As of May this year, only 4% of US FDIC insured institutions in the United States had any sort of mobile play, a small subset of this group had iPhone apps, and an even smaller percentage had Android apps. We already know that mobile Internet based banking is the fastest growing interaction channel for banks today, so this level of commitment by the industry is quite concerning. So why so slow?

Why so slow?

The challenge is that iPhone came into being in 2007 and it wasn’t even on the radar of banks generally. Organizations like Bank of America (who launched their App in July 2007) were an exception. Wells Fargo, for example, was the last of the big 4 banks in the USA, and they didn’t launch their native iPhone App until May 2009. By 2008, when many banks were considering launching an iApp, the Global Financial Crisis was upon us and budgets were being slashed, so rather than cut Bonuses, we saw bankers cut discretionary spending in the areas of IT. Mobile was often the first to go, because the attitude was “we don’t have to worry about that yet…maybe in 10 years time”. 2009 the budget woes continued, and 2010 was about rebuilding trust so the focus was on keeping costs low so that improvement in net earnings could be demonstrated to shareholders. Thus, we approach the start of 2011 when many banks will be thinking about mobile for the first time realistically.

This is all woefully lagging the customer behavior curve, but good to finally see the majority of banks are starting to think of ways to enable customer behavior through the mobile device and now committing to not only iPhone, but Android platforms too.

The Future Mix

By 2015 the day-to-day interactions of the average retail customer will be very different. Driven by changing customer behaviors, increasing pressure on our time, increasing customer expectations around improved interactions and journeys, etc will drive a complete shift in channel priorities. By 2015 the #1 interacted channel (or by frequency if you prefer) will be mobile, #2 internet on the desktop and TV, #3 ATM, #4 Contact Centre, and #5 in the branch. Even #1 and #2 might tend to look a little the same; in that, as devices like the iPad become more capable the lines between ‘mobile’ and desktop blur, so the issue of the ‘journey’ or the interaction itself becomes very critical.

It’s not just one App that we will need either. There will be a bunch of interactions we’ll be managing in this space. Increasingly those journeys will become contextually integrated and delivered via HTML 5 no longer restricted to an “App” or browser-based, instead being based on a contextual trigger, event or service opportunity.

So obviously banks need to make a big P&L commitment to mobile as a channel and to journeys as a philosophy for serving the customer moving forward. So how is it that I advocate that you don’t need to worry about developing your App?

Lessons from VTB24 in Russia

Last week I visited with the multi-channel team at VTB24 in Russia. They are the second largest retail bank in Russia and have close to seven million customers. Given the growth in smartphone adoption and mobile usage in general in Russia, just like everywhere else in the world, there is an obvious urgency to investing in mobile platform development. This was the challenge presented to the VTB24 team.

VTB24 was strongly committed to a mobile App for the iPhone platform, but budget constraints being what they were, they didn’t expect to be able to invest in the development of the App until 2011. Some preliminary conceptual work had already been done, but the platform wouldn’t be mobilized till next year. They already had previously deployed WAP-based banking but this was looking tired compared with customers expectations for App-based mobile banking.

So in this environment, Daniel Gusev, who was tasked with developing the plan for development and launching the iPhone App, was very surprised to wake up one Saturday morning and find the following tweet:

“Great to see VTB24 finally has their iPhone app!” – Tweet (translated from Russian feed)

WHAT?!? This was Daniel’s immediate reaction. This can’t be right?! After all, he was the one tasked with developing the App, if someone else in VTB had been working on something, he would have known. So he logged on to the iTunes store in Russia and sure enough, there was the App for download.

The App as it appeared on the iTunes store

The immediate reaction was to suspect foul play. That someone had created an App to phish identity details from customers or use man-in-the-middle technology to conduct electronic theft. However, after requesting source code from Apple, VTB24 found that the App had no suspicious content, and in fact, had adapted the iPhone APIs around WAP commands to convert the mhtml-based commands of VTB’s to a workable iApp. An elegant, and workable solution.

Daniel then tracked down the developer and had a simple question? Why on earth would you do this?

The customer answered, “Well, I wanted iPhone banking and you guys didn’t have it, so I thought I would try to see if I could build it myself. When it worked, I figured other customers might use it too!”


So VTB24 have engaged with the developer. They now have a live iPhone App that was built by a developer for a fraction of the cost, in a fraction of the time that they would have taken to develop it. Yet, it works and works well, even at some point claiming a number 3 spot in Finance section of the Russian App Store (without any marketing support from the Bank)


There is a lesson here. Sometimes due to embedded politics and internal gaming, we want to control such ‘projects’ as the “iPhone App” internally. We might argue around compliance, risk, security, etc, but this approach shows that by thinking outside of the box, we could actually have much quicker innovation in the customer space than we currently do.

The moment we turn the “iPhone App” into an internal project, we are essentially guaranteeing a 3-9 month turn around time to implement and launch. By engaging a developer community, we could reduce this time, cut costs, and probably end up with some really creative solutions that we would not have thought of ourselves.

Take this on the road. Try to breakdown the barriers and IT silos in respect to production of new channel solutions. The end result may be better than anything we could do internally.

BANK 2.0: Are Banks too Big to Change?

In Customer Experience, Retail Banking, Strategy, Technology Innovation on June 11, 2010 at 13:18

Reformists and regulators in the US, in the EU and in other jurisdictions are grappling with the problem of massive banks and how their financial health is tied up with the very vitality of the economy. This happens because as the banks are so large and represent a major indicator of the health of the stock market, and thus the macro-economy, it is possible that one of them went under it would have deleterious effects on the economy at large.

In the US space JP MorganChase, Wells Fargo and Bank of America are all in the top 20 traded stocks by market capitalization, Citibank makes an appearance also in the top traded stocks by volume. If either of one of these 4 banks were to go under, the effect on the stock market and the economy would likely be devastating. This is the classic argument of those that support the ‘too big to fail’ position.

Entities are considered to be “Too big to fail” by those who believe those entities are so central to a macroeconomy that their failure will be disastrous to an economy, and as such believe they should become recipients of beneficial financial and economic policies from governments and/or central banks.

Source: Wikipedia

There is another factor at work here, however, these organizations are structural behemoths. Between these 4 organizations, they employee just under 1 million people in North America alone. Between Google, Microsoft and Apple these top tech firms manage only 150,000 employees. In a tough year financially, the big 4 banks struggled with collective profit of $21.4Bn, while the top 3 tech firms reached a whopping $29.3Bn in operating profits.

To put this in perspective employees of the top US banks contributed roughly $22,256 each to the profit of their employers, whereas top tech employees amassed an impressive $195,973 each as a contribution to the bottom line. This difference in core profitability comes from relative organizational efficiencies and the ability to generate new revenue streams through innovation.

As banks have grown, they appear to become less efficient at generating returns for shareholders. This is where the issue of proprietary trading comes in. Proprietary trading has been used by banks in recent years to generate arbitrage opportunities for profit taking where shrinking margins no longer allowed the same. However, proprietary trading turned out to be an extremely risky way of earning profits during the financial crisis with bets on CDOs going the wrong way and banks getting hammered as a result…

“Merrill Lynch lost nearly $20 billion… Morgan Stanley had a nearly $4 billion loss in proprietary trading in [Q4] of 2007. Goldman Sachs spent $3 billion to bail out one of its hedge funds… Citi lost big — as much as $15 billion, on the CDOs it decided to hold rather than sell off…”

Stephen Gandel, Is Proprietary Trading Too Wild for Wall Street?, Feb 5th, 2010

So in an environment where product margins are being squeezed, markets are struggling (further reducing margin on investments) and where prop trading is under the microscope, where are new revenue opportunities to come from?

There are a raft of innovations rapidly occurring the in financial services space at the moment, largely independent of the banks. Smartypig, as one example of a cooperative model with traditional players, has developed a platform that has put a unique web 2.0 approach to deposits. Since launching in April of 2008, Smartypig has already taken deposits of more than $400m and are well on the way to more.

P2P lending, derided by traditional players as risky and unregulated, has started to generate some serious looking results. In May the Lending Club, a P2P collaborative social lending network, passed more than $10million a month in Loan Originations. Zopa, another social lending network based in the UK, is approaching half a million users who are happy to lend and borrow to each other.

In the payments arena, there is a plethora of competitors to the mainstream card issuers Visa and MasterCard. There’s PayPal, who continue to go from strength to strength. There’s Square, founded by Jack Dorsey of Twitter fame. More recently Facebook has entered the P2P payments space too.

The thing is – all of these really interesting innovations in financial services are being driven not by banks, but by start-ups, technology innovators and much more agile organizations. Why aren’t the banks at the forefront of these improvements?

Innovation is tough

Innovation is very difficult in traditional institutional structures

The issue lies in two core hurdles. The first is organizational inertia, the fact that for a very long time banks have focused on an organizational structure that is built around the branch as the core of the customer relationship. Products are manufactured around the branch, and marketing is limited to either branding or campaigns of the month. The most senior bankers in the organization are generally those from the ‘distribution’ side of the business. It all works like a grandfather clock.

The second issue is that banks have a metrics and financial system that is fundamentally flawed. Today bank strategy is reinforced by line item budgets that were built during the branch era, and management teams dominated by bankers with 30 years of traditional banking pedigree heavily invested in their real-estate.

These two hurdles are leaving third-parties to innovate the customer experience, and evidently this is where the intersection of changing consumer behavior and business models is creating real opportunities for improved revenue and profitability.

Banks need to hive off a portion of their best people, along with some new aggressive Y-Gen and digital native thinkers, to start thinking out of the box in an independent, cashed-up tiger team. This can’t be under the traditional organization structure because it will otherwise die a slow and agonizing death. This has to be about incubating very different approaches to an otherwise very traditional business, and it can’t happen within the current structures or environment.

Future EPS depends on it!

Innovating the customer experience pays dividends – literally

In Customer Experience, Retail Banking, Technology Innovation on May 31, 2010 at 03:07

No one can deny that banks have had a tough time of it when it comes to stock market valuations over the last couple of years. The global financial crisis, massive debt and NPL issues along with punishing public opinion led to a massive collapse in banking stocks and company valuations in recent times. It would be simple to blame the sub-prime and global financial crisis as the sole cause of all the ills of the banking sector, but I have a different theory which explains a large part of the picture.

In the last 5 years the S&P 500 has experienced incredible volatility. On October 9, 2007 the S&P 500 hit its all time record of 1,565.15, but it was followed by the biggest annual loss in the S&P’s history, losing 37% in 2008 (the previous record being -22% in 2002 at the end of the dot com boom). As a result you’d expect any participants in the US market to have suffered similarly, and they have. Volatility, or the range/spread of buy and sell trades in the US markets is at an all time high and according to many analysts this volatility is here to stay. The certainty in the market has largely disappeared, and with it, the status quo in respect to valuations.

In the last 5 or 6 years, however, a new component has come into valuation metrics for listed companies. We still have revenue, we still have market share, branding and so forth, but innovation is clearly an increasingly significant part of the story. Let me illustrate:

Comparative Performance – S&P 500, Tech and Banking Stocks

Below is a graph (source: Yahoo FinanceBloomberg) showing the comparative performance of a selection of key stocks from the US market, the S&P500 Index being the dotted yellow line.

Innovation is being rewarded like never before in market valuations

Clearly Apple and Google have differentiated themselves. What has made the difference? Why have Google and Apple performed so much better over the last 5 years in market terms? Let’s examine the facts and see what conclusions we can draw.

Is it revenue?

Microsoft’s Revenue in 2005 exceeded Apple’s by more than 300%, and Google’s by almost 600%. In the last 5 years Microsoft’s Revenue has increased from$39B in 2005 to close to $60B in 2009, certainly not a bad performance. Google’s revenue certainly has increased, but in the years 2007-2009 it has only jumped from $16.5B to $23.7B. Since 2005 Apple has increased their revenue from $13.9B (2005) to $36.5(2009). Apple has certainly benefited from the popularity of the iPhone (Released June 29th, 2007) and more recently the iPad (Released April, 2010).

But if we compare the top 4 US banks we see that their revenue makes the tech companies look fairly ordinary. If revenue was the key driver, then we’d expect to see that the banks would have better comparative valuations. Given that Microsoft’s revenue is still close to double that of Apple’s revenue, and more than double that of Google – if the answer was that ‘tech’ revenue was valued at a premium then we’d expect Microsoft to be fairing better.

2009 data Assets ($B) Revenue ($B)
Bank of America (BAC) $2,300 $113
J P Morgan Chase (JPM) $2,000 $101
Citigroup (C) $1,800 $106
Wells Fargo (WFC) $1,200 $51.7

On this basis, revenue, while a critical component of a company’s valuation, would seem to not correlate cleanly with the exceptional performance of Apple and Google recently. Well before the GFC started to impact company valuations, they were already being hurt by something…

So is it future revenue potential?

P/E Ratios show somewhat the expectation of the market in respect to future revenue potential. For the ‘blue chip’ performers like Microsoft, JP Morgan Chase, Wells Fargo – P/E Ratio (Price/Earnings Ratio) are all performing in the range of 15-17, whereas Apple and Google are at 21.8 and 22.1 respectively. Certainly expectations are that Google and Apple have not yet hit their peak in earnings capability because their valuations show a higher multiple. Indeed, the S&P 500 typically tracks at around 15 – so Google’s and Apple’s performances are something special.

Future earnings might account for a higher valuation today, but this is not necessarily the sole factor in their comparative performance which, over the last 5 years, has been much better than Microsoft, the top banks and industrials. In fact, you have to look very hard globally to find better performing stocks in respect to either new or established companies in terms of growth in both revenue and share price over the last 5 years.

So future revenue is a factor, but not the sole factor. If it was, then you’d expect Microsoft would get some of the joy too as part of the ‘tech’ clique, but they’ve not received as much optimism as their tech buddies have.

What differentiates Apple and Google’s revenue from the rest of the pack?

You might attribute Apple’s success in respect to valuations from their great products. But if you compare market share both Google and Apple really still are minority players when compared with Microsoft, purely from a product perspective. While Google’s Android and Apple’s OS-X are taking some share of the mobile market, Windows is still a force to be reckoned with.

So where is the differentiation? Google’s strength to date, and Apple’s more recent success with great new device technologies has centered around one key area. Their ability to create great, but simple and intuitive, propositions. as a search engine is the perfect representation of search (at least for now). When Google launched their search engine in 1997, there was really no one that could touch them in terms of simplicity of experience and validity of results, and today, although many have attempted to copy Google’s formula, (read we still see Google maintaining a 65.6% market share of the SE space. What Google bought to the table, their foundation or core, was innovating the customer experience and making technology really simple to use.

The simplicity and user experience differentiate Apple devices

Apple has done the same. User Experience is at the heart of why the iPod, iPhone and iPad have captured not only the imagination of the consumer market, but why Apple and its products are increasingly part of the common vernacular. Sure Apple’s stuff looks great, cool and is about as aspirational as branded products get in the Y-Gen/Digital Natives space today. But this stuff just works.

Innovating the customer experience is the ‘secret sauce’

Innovating the customer experience is at the heart of why Apple and Google are outperforming the market today. It’s also at the heart of why traditional banks are suffering. As market analysts, consumers and as media commentators we just see more of the same.

While there has been pressure on the banking market, bankers seem content to ‘wait it out’ until more sane, normal times return. Banking is an old and traditional industry and it doesn’t take kindly to change. But that is problematic – because right now their lack of adaptability is hurting bank valuations significantly. There’s nowhere for banks to go from here if they can’t innovate around the customer. The lack of innovation means less future revenue and earnings potential.

In fact, as of today it’s more likely that a Google, Apple, PayPal or new start up like Square will innovate the customer experience in banking, rather than banks themselves. This is where banks need to take a good hard look at themselves. The lack of capability to innovate the customer experience is costing them, and it’s only going to get worse.

Banks – get your website right first, before you worry about an iPad App!

In Internet Banking, Offer Management, Retail Banking on May 27, 2010 at 12:49

There’s a lot of excitement about Apple’s new iPad. This week it was reported in various news sources that two banks in Australia were releasing an iPad app to capitalize on the iPad fever. Now… you’d normally find one of the first to jump in and hail such an announcement as an indication of real progress in the fight to innovate the retail banking space. But on this occasion, well I’m not jumping…

The two banks in question in this instance are NAB (The bank formerly known as National Australia Bank) and St George (now part of the Westpac group). The problem I have with this whole announcement is not that it isn’t a positive move, because it is, the problem I have is that they still don’t have the fundamentals right on their existing websites and they’re fooling around with the iPad! Get real people!!!

NAB's Dedicated iPad App looks cool! But they've got bigger problems...

If you go to NAB, St George, Wells Fargo, Citibank, Bank of America – well just about any banking website today – the customer experience is pretty poor. When you get behind the login, which is where 70-90% of the traffic goes when it hits the homepage, things get even worse.

For over 10 years most of the banks that I work with have been collecting information about me. They know my spending habits through my credit card usage. They know the mobile phone operators I work with in the countries where I live and work. They know my average spend on things like my Apple iPhone, iPad, Laptop, Flat Screen TV, etc. They know which business accounts I transfer my salary from. They know the relationships I have with various investment partners where I make regular contributions to savings plans or lump sum payments to my managed funds. They know which stocks I favor and hold in my portfolio. The also know the name of children, how long I’ve been married and the last three residences I’ve had. The reason I know they know all this is that either it is something they’ve asked me as part of their KYC (Know Your Customer) procedures, or something that appears on the statements they send me for my credit card or various accounts. They have the potential to know me and my financial savings and consumption habits, probably better than I know myself. But…you wouldn’t know it.

The thing is…when I visit their website or login to internet banking – they appear to have absolutely no idea of who I am.

In the late 90s I remember that there was a huge push for ‘personalization’ and CMS’. But what have we really learned about forming the appropriate message and content on our homepages in that time? Pretty much nothing. Let’s look at an organization that has learned about the value of the homepage:

“Yahoo is a company that is very strong in content. It’s moving towards the web of one. We have 32,000 variations on our front page module. We serve a million of those a day. It’s all customized. Our click-through rate went up twice since we started customizing this.”
Carol Bartz, CEO of Yahoo, TechCrunch Disrupt, May 24, 2010

So why is it that banks have no idea how to engage me? Here’s a simple test. Take two products that are fairly popular when you review search engine keywords related to banks – mortgages and student loans. When I go to any of the sites mentioned above, finding information on these two products is generally not that difficult. However, when I’m doing research on these products, studies show that I will probably come back a few times to my bank’s website before I decide to apply (if I can apply online at all that is). It is the easiest thing in the world when I return to the bank’s homepage for me to be presented with an offer for a mortgage or a student loan up front, based on what I looked at on my last visit. By prioritizing this content up front, simply through the use of cookies, I dramatically improve the likelihood I’ll get where I need to. The bank already knows I’m interested in this product, so why bother slamming me with the offer of the month or telling me about the bank’s social corporate responsibility program. Give me something relevant!

The fact is, pretty much every bank you visit online these days forgets you as soon as you close the tab or window on the browser. That’s why, with many bank websites, were still presented with commercial banking information, investor news and even the dreaded press releases when 99% of the traffic is focused on retail banking related services and products.

With the amount of data bank’s have on their customers and the amount of data they have on traffic, product enquiries, applications and transaction history – building a platform to allow customization of the homepage should be a snap. There is no offer management, no active sales engagement either through the homepage or the secure internet banking portal – it’s just like walking into my branch and feeling like nobody knows me.

A word to the wise – you should know me well enough to serve me better through these basic platforms. Get those right before you start worrying about your iPad app!

Bank 2.0: Who gets it right with Internet Banking?

In Retail Banking, Social Networking, Strategy, Technology Innovation on May 2, 2010 at 09:04

Take a look at your retail or consumer banking website or homepage. I can 100% guarantee that regardless of who you are, and in what market you are in that I know exactly which part of the site is clicked on most. Contact us? Nope. Press Releases – definitely not. The biggest Ad banner on the homepage? Nope…

Figured it out. Well the headline gives it away. It is the login button. In developed economies click-thru rate from the bank homepage can be as high as 97% of traffic that visits the homepage, and in developing markets it still hovers around 70-75% generally.

The thing is that in most cases banks spend a considerable amount of money each year trying to entice new customers to apply online or to send in their details so someone in the mortgages team, call centre, preferred banking or private banking team can reach out to them. Acquisition must be a key metric of any direct channel team today. However, in most cases the visitors to your homepage are existing customers. Thus, 70-95% of daily traffic is being channelled immediately from the homepage to the secure internet banking website behind the login.

So let’s get this straight. Your bank marketing team has just spent US$1m upgrading your site and putting offers all over 3rd party properties to direct traffic to your website and trigger acquisitions, but still 95% of visitors are clicking through to Internet Banking. How much product are you selling behind the login? Well, if you are most banks – virtually zero. Why? Because most managers see Internet Banking as a transaction platform designed to lower the cost of operations by transferring low-margin or costly transactions to a direct channel with a lower cost than a branch or call centre.

While the logic is sound on cost savings and channel migration from a transactional point of view there are huge advantages in utilizing your Internet Banking portal for targeted cross-sell and up-sell to existing, valued customers. Those advantages include:

1. Better closure rates because of the ability to accurately target
2. Low KYC and Compliance workload for bank/customer because of the existing relationship
3. Much higher impressions than ‘public website’ homepage and 3rd party acquisition attempts
4. Lower cost of acquisition, and
5. Improvements in service perceptions

I know of only a few banks in the world that have targeted, focused customer cross-sell initiatives behind the login – certainly less than a dozen banks have figured this out! This shows a complete and utter lack of understanding of customer engagement through the online channel by bank marketing teams, and a core lack of offer management skill set based on customer behavioural analytics. If you know of anymore let me know…

The first bank that is on my Best Internet Banking sales effort list is HSBC. In 2006 in Hong Kong they invested heavily in a second-generation Personal Internet Banking portal that included advanced Sales Campaign Management capabilities. This was new, no one had even really thought of selling beyond banner ads within Internet Banking, and their clever use of the behind-the-login space to position specific offers for segments of customers was the first initiative I know of where someone connected the dots between homepage traffic and i-Bank potential.

HSBC Internet Banking Portal

HSBC integrates targeted sales messages into their Internet Banking experience

The One HSBC project, which commenced in 2008, is the next iteration in this story and is due to be largely complete by the end of this year according to early press. Not only will the affectionately named “OneH” give customers an integrated sales and service platform within their Internet banking space, but the customer experience will be consistent from one channel to the next through an enhanced single customer view. Branch staff, call centre staff, personal financial advisors and the customer’s own view through internet banking will be consistent. Customers who move from one country to another will also find a consistent Internet banking and service experience across the brand. With targeted cross-sell and up-sell messages at each point of your journey, regardless of which channel you come to.

Wells Fargo in the US takes an embedded hyperlink approach to offer management by serving up contextual cross-sell and up-sell offers next to your accounts in your account summary screen. So as you are looking at your outstanding credit card balance you might see a hyperlink for “Upgrade to Platinum” or “Increase Credit Limit” appearing contextually within the page.

Barclays uses a combination of the two with their “At a glance” feature helping customers find better ways of saving money, improving their utilization of Internet Banking and linking or bundling products – like mortgages and home insurance for example. Barclay’s also lists credit products like personal loans, credit cards, etc that you are already pre-approved for. So before you even have to ask, Barclay’s can tell you what they are likely to lend you based on your relationship and credit history. That’s progress…

And that’s about it.

All these banks the world over using Internet Banking and almost none of them are making any effort to effectively position targeted, personalized cross-sell and up-sell offers to existing customers. The overwhelmingly dominant visitors to your homepage are probably being ignored from a sales perspective because your marketers stop at the public website.

If you are in a bank have a look at why your marketing team isn’t crafting better offers for customers behind the login – it is a massive source of hidden revenue opportunities.