The bank’s overt role in consumers’ daily lives is fast eroding. Once the primary go-to for financial support, banks now face being relegated to the position of passive utility-like service providers.
Take buying a car as an example. No longer do I need a car loan from a bank to buy a new car; I can go direct to the dealer and get a lease plan. I could even subscribe to a car sharing service like Zipcar. The financial connection is still present, but the interaction is disintermediated.
Similarly, if I want to buy something online, I don’t need my credit card when I can use PayPal instead. Wholesale banking is still in the loop, but the consumer bank no longer needs to be.
Some years ago, I was involved in a project for a large global bank to aid digital inclusion. We looked at the role of self-service in branches and the value of shifting certain customers and services to lower cost channels, both to preserve the investments the bank had made in its physical locations and to ensure it was serving its customers in the best possible way. For them this was a real challenge of commercial focus versus corporate responsibility. But we quickly discovered a means for them to achieve both goals without disrupting the social structures that existed around people physically congregating at bank branches around pay day.
When I came back to the UK it struck me how much our interactions with banks have changed. In the 1990s, we shifted from the branch to the telephone as our primary means of communication, and in the 2000s this changed again in favor of online channels. As customers we wanted it; we wanted a 24-hour bank. But in the quest for convenience, the personal connection we once had has now been lost. Many of our accounts still bear the high street code of our local branch, but the care we receive is often offered from afar; our social contract is lost.
It’s time for banks to bring that sense of personal connection back.
A new reality
At Microsoft, we recently carried out research to determine what it’s like to be a banking customer today. To bring our findings to life, we have developed a story to demonstrate some of the ways in which banks can play a much more active role in our financial decision-making processes and remain relevant in our connected digital lives. Our aim is to show you some of the opportunities available to banks to not only fulfill the service needs of their customers, but to develop their brand into an invaluable information service – a service that connects with customers in their daily activities and helps them navigate the milestones in their lives.
Watch the video to find out more.
Here is some of the thinking behind our story.
My mobile, my digital identity
By 2020, there will potentially be seven devices per person on the planet. With the number of digital signals exploding, new ecosystems of value have already arrived. For financial institutions this is an opportunity to help transform existing businesses and build new digital ecosystems.
So rather than simply providing banking apps or payment services for these devices, banks can use them to better connect with their customers and gain context to personalize at scale.
For example, if you tag a location marker with a payment transaction, you have the ability to understand the behavior and patterns of movement for that customer. If there’s a deviation from a common pattern, you can highlight it and investigate it.
Understanding consumers’ digital signals in context with a physical presence creates more opportunities for accurate inference and opportunities to deliver great contextual services for them.
As a consumer if you’re paying for electric on a meter, why can’t we help you manage consumption with cash flow?
There’s an API in happiness
When a customer makes a purchase, this isn’t the end goal. The goal is to make use of the goods or services they have bought.
At a time when alternative financial transactions are replacing traditional payment models, banks can look to enrich the payments services they provide. For example, if a bank’s payments API not only processed the payment transaction but provided a prompt service following the payment, businesses would be able to have a signal on when a customer has started using or consuming their service. They would be able to use this as a cue to engage with the customer in post purchase follow up.
Kids don’t dream of digital pigs
For a digitally native generation, being able to orchestrate and harness different digital components is just a way of life. To stay relevant, businesses are now finding that they need to offer their customers more than digital communication channels; they need to create new digital economies.
Consider the ‘vlogging’ generation. Around 300,000 people on average tune into UK blogger Essie Button’s weekly YouTube videos on fashion and beauty. In addition to the revenues they pull in from ad content alongside their videos, vloggers often get free products to try out and have deals with retailers and brands. For a bank serving a vlogger today, they would engage with them like any other salaried customer. However a new generation are building a lifestyle they want in a variety of different ways without necessarily relying on a conventional salary; we’re now seeing the rise of a barter economy built on new value levers.
Rather than standing by and watching these new economies surface, banks can actually use their infrastructure, assets and experience to provide the capabilities to support businesses – and individuals – in their endeavors. Not only would this provide a testbed for innovation in payments, but it would also deliver insight into consumer behavior at an unprecedented scale and open up new revenue streams.
A catalyst for economic growth
Currently, payments are a utility concern and a price-sensitive cost of business. But if banks offered additional services alongside payments, which are aligned with companies’ and individuals’ needs and goals, they’re immediately adding value.
For example, if a local florist wanted to set up a subscription ordering service for regular weekly flower deliveries for customers, it would look to alternative payment providers to help it set up the payment instructions, as well as to orchestrate and manage that service. There is, however, no reason why a bank couldn’t offer that capability instead; they already have the foundations in place
Ultimately, we believe that if banks improve their understanding of people’s digital lives, they have the opportunity to find the right time, context and place to mediate new connections and develop a truly relevant story and valuable engagement.
Be part of the moments that matter most to your customers.
Fred is with Microsoft’s Connected Digital Services team. Focused on delivering societal or market moving change. Fred is a pioneer in the research, conception, design and implementation of practical interactions, new digital products, insightful services and novel business models that have enabled companies to leapfrog their competition and create new sustainable market space through creativity and by design.
Fred works with leading organizations helping them connect a future potential to immediate value to realize competitive advantage on the global stage. Currently Fred is leading the exploration and design of next generation experiences for native digital storytelling.