Why banking is changing for good
The way we manage money is about to change beyond recognition. Banks who fail to embrace this are in for a rough ride, predicts Steve Bertamini, CEO of Consumer Banking at Standard Chartered
Imagine having instant and total control of your money. To spend, save, invest and pay whenever you need to just by tapping your finger or saying the word.
Today, by and large, you still have to come to your financial service provider, be it online, on a mobile phone or in the branch. But mobile device sophistication, network speed and innovation are converging to place banking straight into your hands.
Contactless payments via smartphone will become ubiquitous, meaning you won’t have to carry cash in your wallet. Virtual agents, enabled through Artificial Intelligence, will be able to fulfill your every banking need around the clock. Mobile technology will allow you do more and more banking on the go using features such as speech recognition.
For consumers these developments are good news as they will have greater control of their money than ever before. For banks, however, they represent one of the biggest and most fundamental shifts in the rules of engagement that we have seen in a lifetime. In the future the basis of competition for banks will not be products or channels, but how well they understand the needs of their customers. It will be about how much value they can add to people’s lives.
We live differently now. Together, technology and customer demand are driving a complete transformation of how banking is done. There is a growing global tribe of consumers who want anytime anywhere access to services and banking is no exception. These consumers are looking for personalised experiences and they want to be treated as individuals, not aggregated together.
The implication of this is that banks cannot continue as before and expect business to stay the same. To put it bluntly, the industry has to start thinking less like banks and more like Apple, Google or Facebook. Banks have to become not only innovators, but also proactive in coming up with solutions that meet customers’ needs, predicting those needs before customers know they have them. This means banks have to transform from utilities into service organisations that offer a great lifestyle experience.
Design and usability is no longer a nice to have in financial services, but a core requirement. This doesn’t just apply to the digital channels – though these are set to dominate banking in the next decade – but to the entire distribution chain. Branches, too, must offer an experience similar to those on offer in the retail industry, not just function and efficiency.
Plenty of new players are lining up to offer what banks will not or cannot provide. The core of consumer banking – lending, wealth management and protection – is still heavily regulated with strong barriers to entry for new competitors. However, in areas such as cash transactions and the user interface, there is no denying that banks are confronted by increased competition. Look at Africa where telecommunication companies such as Airtel and Safaricom have by-passed the need for bank accounts or Internet connections to provide mobile wallets for millions in the space of just a few years. Airtel money for example – for which Standard Chartered has held funds in trust since 2008 – is now used by over 20 million people to make or receive payments in real time.
I believe that banks now face a choice. Either to continue as they are and see new competitors infringe upon their core business – or innovate and become market disruptive, expanding those same boundaries to take banking into new territory. There is real scope in the next few years for banking to evolve beyond the basics of savings and lending to a much broader set of services. One obvious example is unlocking data in order to offer customers personalised, value-added services – alerting them to nearby deals or new and better ways to grow their wealth.
There is no point pretending a transformation on this scale is going to be easy. Banks are large and complex organisations not traditionally focused on innovation or speed-to-market. Today, many face issues getting the right technology for their customers. It is a long leap from there to the brave new world of banking. In the future, banks will have to become serial innovators, move with the urgency of start-ups and look for ideas everywhere. The task is not only to meet customers’ needs but to capture their imagination. It is a challenge but – in an increasingly digitised world – not one exclusively faced by banks. Other sectors have gone through similar transformations, a very good example being the electronics industry where companies such as Samsung have led the way.
For banks, this means changing their approach to innovation, recognising that the best ideas won’t necessarily come from the top or even from bankers. At Standard Chartered our mobile banking platform Breeze was developed bottom-up by a small staff team of mobile and social media enthusiasts – not by senior executives or people with a long experience in banking.
It also means changing the approach to the customer, offering financial services in ways that matter to people’s lives. When we developed Wishlist, a savings feature for Breeze, we integrated it with Facebook and bulk discount aggregators to let people share their saving goals with friends and get great deals on what they are saving for, be it a new pair of shoes or a trip around the world. You don’t even have to be a customer of the bank to benefit.
Some of our most recent innovations let us engage broadly with consumers in ways that aren’t just about banking. Breeze Living, for example, is an augmented reality Smartphone application that we developed to let people capture and share merchant discounts on the move.
The point is innovation now is about adding value to customers’ lives, not about what products we can offer. Going forward, the industry has to pay more attention to how banking fits into different contexts – what it lets people do. In many ways, we have only just scratched the surface of how banking is going to change. As the boundaries of consumer banking become increasingly blurred, banks will need to forge new partnerships to meet customer demand. Banks need to study not so much each other, but other industries more adept at engaging and inspiring consumers. They will need to be prepared to form strategic alliances outside of the traditional confines of banking to reach people in the spaces where life is now led.
As I see it the changes now underway in technology and consumer demand represent not so much a threat but a great opportunity for banks to move to an unprecedented level of closeness with the customer. If we embrace it now, more than ever, we have the chance to make banking a true enabler in people’s lives, helping to change the industry for good.
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