“The most disruptive thing about the market is not the technology but the customer,” said Tiffani Bova, a distinguished Gartner analyst. It is a defining statement for the digital era. We believe that a digital bank will need to move from ‘Product Provisioning’ towards ‘Need Servicing’ to be truly a part of the customer’s journey.
The belief that the banks pursue the ‘experience over product’ construct is also substantiated by the examples from the recently concluded EFMA-Accenture Innovation awards, where DenizBank in Turkey won the Global Innovator award for its digital banking model, which includes Facebook banking; Direct Message that accepts credit applications through Twitter; and its fastPay mobile wallet application. The core ‘credit’ product construct, though, remains majorly unchanged. Allied Irish bank won Customer Experience award for eMortgage, the first Irish market digitized end-to-end mortgage offering, enabling customers to complete applications, obtain loan approval and upload and sign documents on line. In this case, the entire mortgage acquisition experience has been digitally enabled for the end consumer.
In short term, banks addressing digital with ‘experience over product’ strategy will help meet business objectives. Also, it has been a long-standing need from an end customer perspective. But we believe that this will not be sufficient to differentiate and grow market share in a long term. The reason we bring forth this reality is that customer needs are evolving and also expectations. Apart from valuing convenience, the customer today seeks transparency and expects the best value for his money from their financial institution. This segment focused ‘need servicing’ opportunity currently not prioritized by the banks. It is being addressed by various FinTech players in the market who are making bold forays due to lack of legacy brand baggage.
As an example of what we call ‘Need Servicing’, we are yet to see a product offering equivalent to Affirm which is reinventing consumer credit by making credit contextual and available in the customer purchase journey of goods and services. Albeit, the lender of Affirm loans is a chartered bank based in NJ. Affirm is a phenomenal example of design thinking at work with the customer need for credit being fulfilled during an ecommerce checkout and promise of transparency it holds for the consumer with respect to fees and charges accompanying the credit. Yet to see a bank design with contextual product offering with ‘customer’ at the epicentre of the entire value proposition.
We hear all the time that at the back end of this, there is ultimately a bank. But any c-suite exec worth her cash flow will tell you that if you don’t own the customer in the digital world you are in a race to the bottom for profitability. Maybe, that is the future of banking. But we have interacted with several bankers across geographies who are far smarter and therefore believe that the future of banking is not to be the regulated money manager and lender, but it lies in the promise of wealth creation across customer segments. We believe that the banks can monetize this opportunity by leveraging design thinking to define and operationalize a model which is aligned to fulfilling customer needs.
Another great example of defying the traditional banking norms by elimination of product silos and fulfilling customer needs is the neobank Moven. Banking futurist & CEO of Moven, Brett King stated “Moven has taken the checking account, savings account, overdraft, credit card and fixed deposit or CD and we’ve made an app that provides savings, payments capability and credit in real-time, based on context”. Because Moven’s technology improves with usage, Brett has extended Moven’s capability by also making it a technology platform provider to the banks like TD Bank in Canada and Westpac in New Zealand who are at the forefront of being customer-driven in their design and not just in their interfaces. TD Bank and Westpac will be interesting case studies of change dissonance when ‘customer empathy’ meets operating silos & LOB specific revenue goals. The success of the implementation in our opinion will be determined by the ability of bank execs to move beyond traditional revenue measurement goals and look at business decisions with ‘customer empathy’ lens.
We believe that large banks across the globe are adopting a three pronged approach in their pursuit to design think their overall business strategy:
Given the fact that the hard metric on design is still elusive, Customer Life Time Value (CLTV) is the measure which most Chief Digital Officers, Chief Design Officers and Chief Innovation Officers use to measure themselves (or aim for) today . This metric’s definition finds its root in the ‘Product Provisioning’ rather than in the ‘Need Servicing’ mind set. While our work on design thinking, an alternative to CLTV is a subject of a different post. For starters we asked ourselves the question “What if the new CLTV would be the improvement in FICO score across the lifetime of the customer?”