With Digital Banking, Consumers Must Come First

In response to The Great Digital Debate published in The Financial Brand, Andy McLean provides an additional perspective on the future opportunities for digital banking.

This week I came across The Great Digital Banking Debate where Jim Marous transcribed a discussion between Brett King, founder of Moven and Michal Panowicz, managing director of marketing and business development at mBank as they slugged it out online –it was a damned good twitter debate.

It was timely too, as I had been making a big fuss about there not enough debate about banking’s future. Credit goes to Chris Skinner for providing some of the context and to Nicole Sturgill from CEB TowerGroup for asking the question on Twitter. It was the rumble in the twitter jungle.

While Brett and Michal provided a great perspective on two of the paths digital banking may take, I think there is more that can be discussed. Here are some of my thoughts:

1. It’s not just about digital

I understand the need for digital banking services, but I don’t understand the obsession with it. Until the world is shot of paper currency, digital will be a secondary consideration to the physical manifestations of money.

Let’s take Indonesia, the world’s 4th most populous country. It is a cash economy and there is no likelihood of change any time soon because of its traditional industries. In Bali, a small island in Indonesia that has 50% of the nations visitors, the two largest business types are transport and warungs (small restaurants). Transactions are in cash, so there are no digital banking needs.

So where is digital relevant? It is directly relevant for folks that have no fixed location, address or phone number. Bali is one of the growing number of global locations for digital nomads, folks that literally live online.

People like Peter Levels, a Millennial who backpacks around the world while starting 12 companies in 12 months. Some of the startups seem pretty obvious, like Tubelytics which helps YouTubers track analytics on any and all of their YouTube channels –even if those channels belong to multiple accounts. Peter has no address, so he needs a digital one. Regular banks haven’t a clue how to deal with this, nor do they even try.

Then there is someone like me, a 39-year old with a good number of years left to run (hopefully!) to keep using banking services. My needs are super simple  – a place to borrow money from, store it and take it out.

I don’t have a massive need for digital services, because there’s always an ATM nearby (in London or Bali), though I wish that there had been a digital, no crap call-centre way to move my mortgage last year. That was a serious challenge.

What I am trying to illustrate here is that digital is being overplayed because it relevant only for a section of the world’s need for banking services.

2. I don’t see any digital banks

For all the digi hype, as yet I don’t see any digital bank on this planet  – I can’t speak for the other planets. Fidor Bank comes closest in the sense that it is an actual bank and its infrastructure is 100% digital, apart from where it houses its staff in Munich, Berlin and London. I don’t believe Fidor’s digitized them yet. Fidor customers can see their digital currency balances in their digital statement, but cash still exists in Germany so deposits require a walk to the local Deutsche Post shop.

Outside of the banks, there are plenty of ‘pure-play’ digital companies that are doing their best to make a basic utility sexy. Some are Simple, others are Nutmeg.

So, digital has found its way into banking services and, as I’ve said previously, the fact that Moven customers ‘play’ with their money 3–5 times a day on the app Brett’s team designed is pretty amazing. Like Apple with the iPhone, Moven seems to have created something we didn’t know we actually needed.

But, and it’s a big one for most banking customers, Moven doesn’t meet all basic needs. It can’t, for example, lend Millennials some cash when they finish their college education. Having a ‘safe to spend’ amount suddenly doesn’t feel so sexy.

As Brett alluded to in the debate, Moven is having success in the area where tech companies have always found big customers  – banks, those struggling to get out of analogue mode. Westpac in New Zealand has Moven’s money management tools integrated in its Westpac One online service. TD has also partnered with Moven and other banks are sure to follow.

3. Some ideas for digital

I may not be overly worried about having a fancy banking app, but I’m aware of how digital can help make big differences in banking. Here’s a list of the stuff I’ve thought of.

Using good tech that already exists 

The service at Permata Bank in Bali is the best I have seen, and they have the most helpful staff. I’ve opened an account there and made payments there, including one time when I got there as the doors were closing. ‘No problem’ said the security guard — here’s why.

He took me to the ATM and soon I was making a payment to someone else whose account was at a different Indonesian bank (can you imagine a regular security guard showing a customer how to use his employer’s tech?). As I punched in the account number, the payee’s name appeared on the screen. Magic.

Whether this is digital or not I’m not too fussed, but the tech is very cool. I knew for certain that the money was going to the right place without having to speak to someone. I also got a notification on my analogue phone just to round out the CX (to use that trendy acronym).

What if there was a way to use a combination of near-field tech/digital to allow customers to do this on their mobile device 24 hours a day. Think of all the ATMs on this planet  – is there an app for that?

Helping banks get their act together

It’s been a couple of years since Nasir Zubairi asked me “why don’t you (Investec) have instant transfers between London and Johannesburg?”. “Ask Operations”, I responded before he outlined how messed up the global payments system is, even within the same company. And haven’t we heard about it since!

Digital is changing this and soon (with help from Ripple and others) it will mean that if I have two accounts with the same bank, a transfer should soon be free and near instant, irrespective if I’m moving funds to another country or to pay off my local credit card.

Helping the homeless

Going back to Peter Levels, how can he become a banking customer when he doesn’t have a place to call home? Digital must be able to solve that one, given that 90% of his time is spent online. Be it scanning his eyes, his thumb print or nose hair, digital can solve a real problem there.

There might not be a lot of (free) wifi in 1st world countries (it cost me $24 for 24 hours in the convict colony recently), but it’s ubiquitous in Asia. Banks love trends, so the digital nomad one should be an easy catch.

Sending money without friction

Facebook has had plenty of press coverage about its entry to e-money in Ireland. A year ago, the word was it was going to be shifting its/What’s App’s customers’ funds to all their mates around Europe and that would create a domino effect to end banking as we know it. It seems Facebook got stuck on Dublin’s Guinness brewery tour.

My question is why aren’t banks using digital technology to allow its customers to do the same thing. My bank has my phone number so surely it can’t be that hard for them to let me shoot a few quid to my mates.

Cutting fees when traveling

The amount of fees banks charge for foreign transactions is horrendous. To clarify, I don’t mean the rate of exchange. It’s the cost of the privilege of taking my own money out that I object to. It pisses me off and it feels so out of date.

There are some smart people in banking with lots of digital experiences as consumers in other domains. If digital is as powerful as it’s made out to be, then there must a way to sort this mess out.

If Azimo can shift my cash from London to Bali in just over 12 hours for a quid, my bank must be able to offer me something better. One idea I had was a digital version of my home currency for when I travel that I can swap with a traveller going in the other direction. It doesn’t seem that odd or unachievable, but I could be wrong.

All aspects of customer service

If I lose my card, want to put a stop on it, don’t want to receive letters or emails, want to change my address, my phone number, send in some information or any other ancillary matter at all, I should be able to do the lot in digital. Like good notifications of key money movement events (as is normal in Indonesia), banks still don’t offer this as a service.

4. Where digital is failing

Digital is failing banks, but not for solely for technical reasons. It has as much to do with those people in the banks themselves, especially those that built the banking system.

If I have spent my career learning customer experience working in a bank on a high street corner or a concession at Selfridges, is there really some magic wand that will make it digital? Just as I’ve never seen a tree with money leaves, I’ve not seen a core system with an instant digital skin.

The problem is that banks are trying to build digital processes on top of analogue processes which simply doesn’t work without serious investment. It’s why Commonwealth Bank of Australia spent a reported $2 billion on its digital transformation and why Lloyds Bank is similarly spending 10 figures.

The most telling example of this I know of is that of Standard Treasury, a West Coast tech company that has been working with UK high street banks to help ‘open up’ their APIs. It found ‘a cultural aversion to realizing that technology is [a bank’s] future’ that was so strong, along with a dog’s breakfast ‘under the hood’, that Standard Treasury decided to apply for a banking license and become another of the so-called challenger banks.

It is for this reason that Michal’s efforts and mBank’s transformation is quite remarkable. It’s also why I think that all the chat by frustrated bankers is a little bit pointless. I think Brett was right when he said in the debate “I only see 5 banks in the world that can do what mBank has done organizationally”.

With the odds against the age of all digital, it’s lucky it isn’t going to problem for quite some time yet.

5. What I would do next

Since Dan Kimerling put the analogue-digital dichotomy in terms that I could understand, I’ve formed the view that if I was a bank, I would start a second version of the bank that is focused on a few activities that can be done 100% digitally. I would focus on a particular type of customer that requires digital services and I’d aim to deliver them flawlessly.

The other thing I would do is make it transparent so the customer can see exactly what he or she is paying. If there is a margin, it should be disclosed visibly, not buried in the terms and conditions, as High Street banks are still doing. Digital allows banks to be ethical and that still remains the major challenge for the industry. All the tech talk is a bit hollow while banking behavior is still broken.

Lastly, I hope the moves in the Uk, Europe and elsewhere to make banks open up their data happen. The most annoying thing is having to ask the bank for my own data and then my last three months statements get lost in the mail.

Once I’m in control of my data in some digital form, the banks can start coming to me for business.

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