The Uberization of the banking industry

All brands would love to be loved. Banks have always been low-differentiation and low-engagement brands, but given the financial crash and the metronomic regularity of financial scandals, love is probably not an option.

But new technologies, new business models, rapidly changing customer expectations and tighter regulations mean that banks, like many other categories, are struggling to align with a rapidly transforming world.

Some people are asking, for the first time in four millennia: “What are banks actually for?” Are banks, like car dealerships, a historical aggregation of propositions, most of which could be done better, cheaper and more conveniently by others, through different channels, using new models? Moven, LendingTree, Fincite and thousands of others think so.

In this flurry of change, banks would dearly love to use the opportunity to improve their relationship with customers, which, while not love, might hold more positive emotion. In a future where the premise underpinning banks is unraveling and for the first time there are real alternatives, building emotional bonds with customers increasingly looks like a strategic imperative. To not do so will be to lose on the clicks and be left with the bricks.

Banks, fully aware of the problem, are responding to the challenge and are undergoing significant change programs — currently 90 percent of consulting spend goes in this direction. But do the current change programs play any significant role in building a bond with customers? Typically:

Digitization

• Is often driven by the need to play “app catch up” to deliver parity with competitors and add a channel rather than rethinking the opportunity
• Is disjointed and does not rethink proposition, experience, relationship and economics as a codependent ecosystem; it just adds a channel
• Creates noncoherence in the customer experience because the businesses are siloed

Customer journey optimization

• Nods to customer needs, but the programs are primarily focused on driving down costs
• Focuses on pain points, experiential net promoter scores and smoothing out the experience bumps in the road, and in doing so tends to drive convergence rather than difference or delight
• Doesn’t have a long-term vision for the proposition and experience based on what the customer of the future will need and how to best fit in their lives

If the above is a fair summary of the customer-facing change programs in banks, then, despite the professed purpose of most banks to add value, we should conclude that they are not doing enough to build the emotional connections with customers that would help protect their businesses in a transforming world. They are making change at the edges of a product-centric concept, not changing the role of the bank in customers’ lives.

To pursue this thought further, let’s look at Uber. In only five years it has become the generic synonym for disruption. Perhaps now a tired cliché, there are still lessons within it.

Most commentary about Uber and its ilk — and we could equally talk about Spotifyization or Amazonization — puts the focus on the digital (the means) or the disruption (the consequence). But to see digital as the problem and the required response is to miss an important point. As users, many of us have become so used to the many benefits of Uber that we have forgotten how astonishing the leap over the traditional provider really is.

Uber, overtly or by degree, has expanded the role it wants to play. Unlike most brands, it does not put all its efforts into building a relationship directly with users. Instead, it focuses on understanding and delivering solutions for a set of wider functional and emotional needs in their lives. It adds a life role to its transport role.

That is a different kind of relationship.

Perhaps the best way forward for banks is to maximize their usefulness to customers’ whole financial lives, across the whole of their lifetime, on customers’ terms. But given all the legacy systems and culture, inertia and challenges within banks, how would one even start? The answer surely is to just begin.

1. Know your customers on a whole new level

• Radically change the focus of understanding, from understanding people through the lens of products, to getting deeply involved in their lives in order to establish how and where you could be more useful
• Vastly increase exploration of the customer of the future and the world he will live in so as to provide a target to aim for, albeit a moving one
• Leverage the bank’s unique data advantage to help customers and use this data to humanize, not digitize, their experience

2. Equip the organization to innovate

• Rethink the human/tech roles and ratios
• Operate an agile lab for exploring, creating, testing

3. Repurpose the organization

• Develop a purpose that is “usefulness” not CSR-centered. Bring it out of the strategic stratosphere and back down to earth by developing firm, implementable, day-to-day commitments to customers based on this purpose
• Begin shifting culture to one based on addressing customers’ lives, not bank products
• Quantitatively report internally and externally the progress on the purpose and commitments (introduce the quadruple bottom line [4BL])

We are moving into a world of frenetic excitement, against which banks are seen as low-interest, low-differentiation and low-touch brands. The question is: Can they escape this position and begin to build emotional bonds that are crucial to their future, or are they dinosaurs that haven’t died yet?

As technology drives ever more change, it is probable that we will each have a small core of brands that have earned the right — through their commitment to understanding and helping us with our wider lives — to our affection, loyalty and advocacy … our companion brands. And what of those that have not earned this right? Loveless relationships have very little future.

Article originally published on Banking Technology on December 20, 2016.