A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors
At the risk of ticking off or alienating any of my friends (like I have any) or other people that I have a great deal of respect for, I have a confession to make:
I am sick and tired of hearing people warn banks that if they don’t [innovate/use social media/etc.] they’re going to disappear, or be disrupted, or whatever.
Sorry to be blunt, but any idiot can come up with that claim. And plenty of idiots do. Sadly, a lot of smart people make these claims, and that’s what ticks me off.
What banks (and credit unions) need is good advice, not apocalyptic warnings.
I may or may not be able to provide valuable advice (after all, I didn’t say I wasn’t an idiot). But what I do think I can provide is a little more focus on the problem than simply spouting dire admonitions.
The question that banks need to answer is simple (not that there is a simple answer):
Where in the mobile customer experience do banks add value?
Take a look at the picture below. Many thanks to Jaime Punishill who I stole this picture from.
In this picture, Kelly is out shopping, when she sees a pair of shoes that she wants.
A number of questions immediately pop into her head: How much do these shoes cost? Can I get them cheaper somewhere else? Do any of my friends have these shoes, and what do they think of them? Possibly — but not necessarily — Kelly might also ask: Can I afford them?
In the old world of shopping, Kelly would had to have gone into the store to check the price, then go home, and search other retailers’ sites to see if they carried the shoes and what they sold them for (in the OLD old world of shopping, she couldn’t even have done that), and call around to her friends to get their opinions.
What I’m not sure a lot of banks understand just yet is that mobile shopping is more important than mobile banking or mobile payments.
In the new world of mobile shopping, banks must figure out how to add value in this process beyond “checking balances” prior to the transaction, and being the “payment mechanism (mobile device or not) at the culmination of the transaction.
The potential areas to add value, as I see it, lie in answering questions like:
- Can Kelly afford it?
- What will this do to Kelly’s budget if she buys this?
- Which payment method should Kelly use?
- Which payment method(s) do FIs want Kelly to use?
Answering the first question is fairly straightforward. Does Kelly have the money in her account or not?
Answering the second question is a little more tricky. It presumes that Kelly has used the FI’s PFM offering to set up a budget, and/or categorizes her expenses to enable the FI to provide some analysis. Although many FIs are moving in the direction of making their PFM offering mobile-enabled, answering this question — at the point of sale — is not that easy.
The third question is where the realm of possibilities leapfrogs what is currently available. With a mobile wallet that stores multiple payment methods, conceivably an FI could make recommendations on which account (e.g., checking account, credit card, or other account) would be best to use based on the account balance, rewards, and other criteria.
But even more value can be added if FIs could compete, in real time, for Kelly’s business. Perhaps American Express would offer Kelly an additional 5% discount if she uses her Amex card instead of her debit card. Perhaps her bank would offer her 50% off the cost of the purchase if she applies for a credit card (and is approved, of course).
There are probably many more questions that could be addressed. But my advice (helpful or not) to banks and credit unions is this:
The mobile challenge in front of you is determining where you add value in the mobile shopping experience.
Many mobile banking functions are just the porting of existing capabilities to the new channel. And success in mobile payments is dependent on adding value to the mobile shopping experience.
I hope this is a little more specific than “banks are going to disappear if they don’t innovate!” And I apologize to those of you who have said that. I know you know who you are.