Banks worry about a super aggregator who takes away the customer leaving them to compete on price while the value cream is taken up by the super aggregator. Enough has been written about who the possible super aggregators could be and quite a bit has also been written about the potential Uberization of banking.
My belief is that the banking response could have more to do with Tesla than Uber.
Consider this: Tesla is the world’s most famous electric car (Prius, my apologies but after Model 3 do you really want to debate this?). It is actually a little bit more than that; it is a stylish, environment- friendly and a mobility platform.
Tesla has introduced constructs like firmware and over-the-air software updates to automobile lexicon and the reason these are so popular is because now the car has been re-imagined as a mobility platform. And before you think that this is about self-driving cars, it isn’t. That is just one of the exponentially improving capabilities a Tesla car has. The real experience of Tesla includes the value it is trying to provide to the customer – that is of being connected. This value is delivered both at the individual car and driver level and also at the collective learning from all cars that Tesla sells. The Tesla cloud in the making is the Apple iTunes and Google’s AlphaGo’s AI / learning engine rolled into one.
It is at once a platform that iteratively adds value to the core product while learning what it is that it can learn from the usage of its vehicles. It is things like this that would cause my old physics prof. to go into raptures “See the beauty, ‘bete’, see the beauty”. ‘Bete’ is an endearing Hindi term used for youngsters in this context.
In this sense, it is a classic ‘platform’ strategy. Create a demand side market with a remarkable product. Get the consumer addicted to the value the platform around the product provides. The future, of course, is how the demand side and the supply side evolve and is any body’s guess. I won’t be doing what I do if I could read @elonmusk’s mind! But if you have followed my train of thought you can very well imagine, it will be a customer obsessed mobility ecosystem and an environment- friendly one at that.
So what does it mean for my favourite industry – Banking and its offshoot FinTech? Tesla hits the nail on the head on several counts but most importantly it promises to continuously be able to improve the customer’s experience by learning about the customer and its cars. Let’s digest this for a moment. And remember @Tiffani_Bova’s comment that it isn’t the technology, it the customer that is causing disruption.
The remarkable thing about this is the ease by which customers have adopted this model. A car that updates itself! The paradox here is this: as a consumer you are so open to being in a ‘platform’ world that you see a car evolving into a platform as a privileged acquisition but as a banker you don’t recognize that the future of banking is similar.
My assertion is this: The future of banking will be a ‘Financial Wellness Platform’.
What does this mean? For the purpose of this post, we will ignore banks who haven’t yet undertaken the digitalization journey. And at an architecture level, I mean they aren’t mining customer data, exposing APIs, using machine learning algorithms or being generally design thinkers. The focus of this post is on the banks that have done digital 1.0 and are now in the journey of learning about the customer.
By having done the hard bit of legacy transformation into a digitally enabled bank (not a digital bank yet), the bank is available at every conceivable point of sale and is able to consume / integrate with not just the social platforms but also the FinTechs where the FinTech have been able to acquire customers. It is at this point that the Chief Digital Officer and the rest of the CXOs can smile not with satisfaction but with the tingling within them of what is to come. The exponential function has merely begun.
There is one assumption that I hold dear about platforms in general and that is that a successful platform is customer-obsessed. What is the difference between being customer obsession and customer centricity? The difference is that one is providing convenience while the other is satisfying a need. Case in point is Facebook’s obsession with ensuring that every social interaction is enabled through its platform. It is trying to cover a person’s social interaction 360 degrees; the Wall is 2007; VR is 2016.
Back to banks and platforms. One of the core templates I use while undertaking digital transformation assessment is to use the customer journey as the lighthouse around which value chain transformation ship comes to deliver the superior customer experience ship load. Post the digital readiness step, which is essentially Digital 1.0 Banking, banks look at some form of innovation center that is protected from the rest of the organization. The scope includes:
- New valuable customer journeys
- Additional ecosystem players who can add hitherto inconceivable value
- A combination of both
The end state of this for banks is to emerge as a platform.
If you ask a typical banker, the customer journey definition will entail the bank being able to trace the customer across all its channels. This is a product-centric view. And yes, banks need to solve this. But it isn’t the customer-obsessed view.
That view comes when the bank elevates itself out of the product and views the customer journey as a journey towards financial well-being. It is a life-time view. I did say this is about customer obsession and not centricity. This is how large the difference between banks and customers view of the customer journey is. CLTV is about customer obsession, it isn’t just about customer centricity.
Several gurus have explained how banks can traverse this journey. IMHO I would add the following: banks need to innovate their core product offerings such that the moment the bank adds a customer for its product, its platform value kicks in. This should include manifesting the following:
- Understanding the customer personas behind the segment
- The next best action isn’t the next product to plug, it is the next best goal to achieve for the customer
- Identifying wellness markers for the customer
- Creating goals that the customer could seek to improve financial wellness
- But above all a platform is a service culture and not a product culture. Perhaps, the hardest reinvention challenge yet
These changes are not for a 12-month run rather this evolution will occur over time.
Bank statements in the future won’t just tell me my account balance but will also have wellness scores and goal progress dashboards. This is achievable through a platform play. The bank will have a stake in my goal achievement. By extension, this will open opportunities for the bank platform to provide multiple products on the supply side. The success will depend on the degree to which the bank is customer-obsessed. Regulators will need a proof of fair play in advising.
The banks as a platform will have the following foundational capabilities (at a minimum):
- Identity:Including legal, financial, wellness and some goal linked personas as well
- Advisory:Financial planning and wellness assistance
- Security:For seamless consumption and transfer of value
If you refer back to digital transformation framework, the ‘Y’ is called a value ecosystem. This is for a reason. It is not feasible or viable for a bank to provision every product that a customer might need but it can very well be the channel through which the product gets provisioned by another party. Platforms are about coopetition as much as they are about competition.
The structural changes that digital transformation has wrought are but an interim step. I wouldn’t be surprised if the Chief Digital Officer of today ends up evolving into the Chief Platform Officer of tomorrow while the LoB heads become the Chief Product Officers (which they already should be).
To summarize, the reality is that ‘banking’ plays a critical role in the customer wellness journey. I can’t say the same about any bank in particular. Banking is a means to an end and it is up to banks to be the train or fight for being the most UXifieid-APIfied-Insightified one at the train stops.