Brett King

Posts Tagged ‘Y-Gen’

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.

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…


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!

Lessons from the failed Facebook exodus (HuffPost)

In Groundswell, Social Networking on June 2, 2010 at 07:41

See the original post on Huffington here…

The 1st of June was supposed to be “Quit Facebook Day” as a protest over Facebook’s privacy policies. But the 1st of June passed by and as far as I am aware, none of my friends quit facebook on Monday. It turned to be much ado about nothing…

Last month there was certainly a great deal of discussion about Facebook’s Privacy policies and Mark Zuckerberg’s lack of engagement with the social networking site’s community about the issue, including his apparent derision through IM messages (Business Insider). Indeed, Facebook’s Privacy Policy as released has more than 50 options and 170+ settings, make it longer and more complex than the US Constitution. The New York Times did a great infographic on the complexity of Facebook’s Privacy Policy to illustrate.

Here’s some of the highlights of the “Facebook Privacy” hullabaloo over the past few weeks:

SF Chronicle – May 6th
Facebook begs users not to Quit

AFP – May 6th
Privacy groups take Facebook to the Regulator

Business Insider – May 6th
10 reasons to delete your Facebook account

Huffington Post – May 7th
How Facebook’s privacy approach has changed over time – Interactive infographic

LA Times – May 13th
Reports Facebook staff scramble to respond to pressure on Privacy concerns

SearchEngineLand – May 13th
Claims Facebook’s Active User Growth has dropped 25-50% as a result of privacy concerns

FastCompany – May 14th
Says Facebook’s “Congress” on Privacy is an attempt to stave off disaster from disgruntled investors

The Register – May 14th
Criticism leveled at Zuckerberg over his approach to user concerns

CNN – May 25th
“How to delete, deactivate your Facebook account”

There was a bunch more too. So Facebook is now close to collapse after a mega rush by millions of users to abandon their facebook accounts? Well…not exactly.

It appears that approximately 30,000 Facebook Users joined the revolt and deleted their account. To put that in perspective that’s approximately 0.008% of the current Facebook population – hardly a threat to Facebook’s continued existence.

So what can we learn from this?

It’s Facebook – Not Internet Banking
Facebook is not exactly a mission critical cloud system for most users. It’s a fun distraction, a way of keeping in touch with friends on the move, and extending your social circle. If you post a message to your girlfriend on the site and your wife see’s it – then ok you are in trouble (see statistics re Facebook used as evidence in divorce cases), but generally speaking it’s not that big a deal.

Facebook doesn’t need heaps of security. If someone phishes your Facebook login details, about the worse thing they can do is SPAM your friends. Basically, it’s just not that big a deal.

The community helps itself
Additionally, Facebook is finding that users within communities help police such intrusions themselves – warning their friends of scams, and other such issues as they arise.

It’s the Internet stupid!
If you lose your job because you posted that you hate you boss, and you forgot you friended him last week – well that’s just stupid. Facebook can’t come up with a policy that won’t guarantee you aren’t stupid.

Y-Gen and Digital Natives don’t care
Y-Gen and Digital Natives are more relaxed about security and privacy issues. They’ve grown up in a more public forum where they’re just used to the fact that their profile, email, mobile phone number, dress size, and sexual orientation will appear on about a gazillion sites in the websphere and they are just not that fussed about it.

I saw a post on the UK Social Networking Site Ecademy last week entitled “Why are we letting a 26 year old decide what the Internet is?”. The fact is that it is 26-year olds like Zuckerberg and even younger kids who will determine how the internet of tomorrow works. We shouldn’t be fearful of such change, we should embrace it – it makes like alot more interesting in my opinion.

Interestingly, statistics show that users of Social Media are dominantly in the 35-44 age bracket for now, but clearly the innovative thinking is coming from those who don’t have hangups about traditional business approaches.

That’s why we have to get used to a different level of privacy, openness and communication. Social Media is here to stay, and with it new and exciting ways to interact, do business and share content and ideas. Sometimes it will be with friends, and sometimes with people we don’t know. We’ll need to understand that there’s privacy that matters, and then there’s participation – it’s a trade-off. In the end, it should pay dividends in all sorts of interesting ways.

What loss of trust really means for the banking sector…

In Media, Retail Banking, Social Networking, Strategy on May 21, 2010 at 03:05

This week we have some of the world’s biggest banks recording staggering, record profits – despite this there are serious challenges heading the banks way in the short-term; consumer trust is just the start of it. As early as July 2008 we started to hear serious grumblings from consumers groups, customer advocates and politicians on how banks had “lost their way”. This loss of confidence and consumer backlash forced politicians in the US, EU and elsewhere to look at mechanisms like the so-called “Robin Hood Tax” or punitive taxes aimed at bankers who took huge bonuses while leveraging off taxpayer funding. Undoubtedly, proprietary trading activity hedging the declining capital markets reeling from the GFC (financed off the back of cheap government money) created the opportunity for arbitrage profits and subsequently huge bonuses/profits. The theory that the bank bailouts would free up credit for the average man on the street was quickly lost as banks chose super risk-adverse customer lending policies. But now the banks face a quandary…

Savings suffering = Balance Sheet suffering
Increased regulation of the banking sector and the GFC fallout mean essentially that wholesale funding sources for banks are under some pressure, both from a ‘reform’ perspective and simply as a result of shortage of funds. Additionally, with the revelations around Goldman’s Proprietary Trading games and the role banks had to play in generating the Global Financial Crisis in the first place, regulators have come down heavily on proprietary trading practices. Some commentators have claimed that the net effect of this could be a reduction in profits for big players by up to 20% moving forward.

Increasing deposits and savings from the retail consumer base, therefore, will be critical for the bank balance sheet in the next few years. But with consumer confidence at an all time low – the savings industry is already suffering. Banks are facing a potential earnings crunch moving forward because they just can’t rebuild their deposit base in the current environment. As a result banks like Westpac in Australia are seeing share prices decline, despite record profits.

Branding doesn’t equal Trust
What we’ve seen in effect is the perfect storm for building and maintaining trust, but interestingly most bankers don’t have a clue as to why this decline in trust has been so ‘harsh’. These factors also explains why organizations like Goldman Sachs and others have performed so badly in public recently. The perfect storm was not just the Global Financial Crisis, but also shifting consumer behaviors and in particular the role of social media in forming public opinion. In April of 2009 a Nielsen survey showed that social media had already become the most dominant force in creating brand perception around ‘trust’. More recent surveys not only reinforce these trends but show that no amount of traditional advertising can match social media in it’s ability to create or destroy brand perception.

The problem for banks is that they generally aren’t participating in social media. Thus, their brands have been hijacked by customers who just aren’t happy. If I’m 3-7 times more likely to listen to what my friends say about your brand through social media, it doesn’t matter how much advertising you are doing – you’ve already lost me unless you demonstrate a reason for me to trust you…

Non-bank FIs don’t look so risky
Remember the saying that Banks are “as safe as houses”? Well it turns out thanks to Banks and CDOs that neither banks nor houses are particularly safe anymore! As a result, consumers have had to adjust their risk radar or doppler. In recent times we’ve seen the advent of some pretty interesting alternative savings mechanisms. Back during the dotcom phenomenon, Save Daily started experimenting with different ways of savings, but in recent times social lending networks like Prosper, Lending Club, Zopa, SmartyPig and others have burst onto the scene to offer an alternative to ‘greedy banks’.

We might have thought of these non-bank financial institutions as risky in the past, but with what we know about bank practices leading up to the GFC, coupled with how our portfolios, pension and superannuation funds have performed in recent times, such a new approach doesn’t look so risky. Undoubtedly there are some Banker’s sitting reading this right now scoffing at my suggestion saying “it will never happen”. So I’ll just say two words (well sort of one word) to give you a precedent in respect to the reality of consumer adoption of these new trends and approaches…


I’m not my parents
The Y-Gen and so-called “Digital Natives” don’t have the same intellectual capital invested in ‘banking’ per se, that their parents did. These uber-connected, demanding and savvy consumers don’t think of banks as a safe place to put your money – they think of banks as service providers, a means to an end goal. In that respect, most banks suck.

Digital Natives are used to much more diverse ‘currency’ than simply cash or savings as well. My kids talk about credits on iTunes, PayPal, online gifting, Facebook credits, Linden Dollars, QQ coins, collective buying power, etc. It’s as if they don’t even conceptualize hard currency in many ways. As payments options in the P2P space accelerate and your phone becomes your debit/credit/payments card – this marginalization of ‘hard cash’ as a concept will intensify. It will be harder to get these segments to save until they get to a point in their consumption cycle where they start to get aspirational about real ‘asset-based’ wealth. In the short-term, the effect is simply that banks will no longer be a consideration in their day-to-day savings strategy unless they create outcomes.

The loss of trust in banks is accentuated by the social media effect, the lack of real responsiveness to the GFC back lash in respect to transparency and bank policy, and changing consumer behavior. The next effect of this loss of trust will be that banks have a much harder time in encourage deposits and improving savings participation – something that is essential for bank profitability moving forward as proprietary trading goes under the regulator’s microscope and as wholesale funding sources dry up.

What banks need to do right now is start honestly thinking about how to engage collaboratively with customers. It’s not just transparency, but a fundamental shift from the internal philosophy that if consumers want to be a customer of our bank they have to play by our rules…

As of today, if you’re a bank – you have to play by my rules!

Bank CEOs, It’s Time for Social Media (InternetEvolution)

In Blogs, Groundswell, Media, Retail Banking, Social Networking, Strategy, Twitter on February 23, 2010 at 14:05

As posted on Internet Evolution (

Internet Evolution Blog

I’m dealing with two of the largest banks in the world right now, engaging them in discussions about customer experience innovation. One of the things that invariably comes up is the phenomenon of social media. To some banks, this is just one of those newfangled Internet “thingies” that comes along from time to time and gets people all excited — but banking doesn’t really change… does it?

What is unique about the social media movement at the moment is that everything you might expect it would be about — it’s not about. Firstly, you might assume that it’s a medium that is used by “Generation Y” (those born from the mid-1970s through the 90s) almost exclusively to trade photos, videos, and witty anecdotes about what they are doing right now.

It might surprise you that by a long margin, the Baby Boomers and “Generation X” (those born after the postwar Baby Boom but before the Y-Gen) are far more into social media than the Y-Gen. In fact, the Y-Gen will probably skip the current generation of social media and go totally to some sort of mobile-based social media and mapping over the next few years, but that’s another story.

Getting back to the banks: These two banks I’m talking about, household brands, don’t have a single senior executive responsible for social media. There are pockets of innovation or customer experience teams trying to do something, but there is no senior manager that has social media in his job title, and there is no high-level sponsor to mobilize around this. Is that such a bad thing?

Continue reading my blog posting on InternetEvolution…