Brett King is a Hong Kong-based financial services technology consultant, president of his own firm User Strategy, and a firm believer that American banks are behind the eight-ball when it comes to the innovation imperative.
BTN: What is Bank 2.0 about?
Brett King: Bank 2.0 looks at the intersection of the financial services sector with the customer, taking into account changing customer behavior as a result of technology adoption. In the book I talk about the three phases of disruption to retail banking: The first phase was the impact of Internet banking; the second shift is mobility; the third phase of disruption is mobile payments. The first part of the book examines the change in customer behavior. The second part looks at each channel within the bank-the branch, ATM, call center, IVR, ATM, Internet banking, mobile. It looks at each of those channels and shows how to fix issues within those channels today and where those channels are going from the perspective of the customer. The third part of the book is what happens next...the next five to 10 years in terms of where things are going and what that means from an organizational strategy perspective for banks.
BTN: So give us a preview, what's going to happen next?
BK: Banking models are broken because consumer behavior has changed so significantly that the traditional model doesn't work. ...What is happening as a result of customer behavior shift and these new phones and new Internet-enabled things like PayPal, social lending networks...all of these things are separating customers away from the bank. So companies like Apple are taking control of the customer and banks are just becoming just the wires-the network that enables transactions -but they're losing control of the customer interface because they're not innovating fast enough.
So either banks have to be extremely innovative and very aggressive from this point on, or they're just going to end up being the back-end service provider and the wires in the network that actually process transactions. And what's going to happen is other organizations are going to take control of the customer experience and take the value of the margin away from the engagement.
BTN: Banks talk about innovation a lot. Why don't we see more of it?
BK: When banks talk about innovation they talk about innovation from a proprietary trading or product point of view. So they get innovative at generating return or margin or revenue. That's not the same as customer innovation, where we're talking about innovating customer experience... What [banks] need to do is [recruit] young, aggressive staffers [with social media and mobile expertise] who can come in and [shake things up] a little bit. But that pill is hard to swallow for traditional retail banks, that's where the conflict or challenge is in terms of creating real innovation.
BTN: Looking specifically at U.S. banks, what mistakes are being made in the online channel?
BK: First, most banks still think of Internet banking as an alternative channel. Second, they see it as a transactional cost saving, shifting high cost from the branch to the Internet to save money. They don't see Internet banking as a tool for creating a dialogue with a customer or a real revenue channel, particularly within Net banking. So as a result you don't see very mature systems in place, particularly for leveraging an existing relationship with customers, in that very private, secure environment, where customers feel very happy engaging with the bank. You see very little leveraging of that for positioning products, positioning offers, and positioning solutions to customers.
BTN: Anyone who does it well?
BK: Wells Fargo is actually doing pretty decently with this. HSBC has a sales campaign manager built into Internet banking that enables them to put up individualized offers within the Internet banking experience, so tailored banners and so forth. Barclays in the UK doing some really good context-sensitive stuff.
BTN: What do you think US banks can learn from overseas banks in terms of innovation?
BK: In the mobile space they really have a lot to learn from Europe-places like Finland and Sweden-and Asia. If you look at markets like Japan and Korea in terms of contactless payments and mobile banking these guys are five years ahead of the U.S. in terms of engaging customers.
BTN: What do you foresee in the US market in the next 12-to-18 months when it comes to banking innovation?
BK: You're going to start to see this payments space quickly morph around the mobile device. The banks really just have to get on board with this, and give incentives and encourage customers to use this. They say, "Well, we're worried about security and all those sorts of things."
The reality is this is going to happen with or without them, so it's better to think about how to get this stuff done rather than say, "We prefer to stick with checks because that's what we're comfortable with."