My friend and fellow financial industry veteran and blogger at New Control consulting, Jim Marous, posed the following question to banking and technology insiders for an upcoming post for his Bank Marketing Strategy blog:
As banks begin planning for 2014, I believe these are the two most important strategic priorities that banks/credit unions should focus on:
Here was my response to Jim on those two topics (this is the expanded edition).
“Generating ideas isn’t the issue, focus is the issue.”
Neff Hudson, Head of Emerging Channels, USAA
American Banker Mobile Banking Conference #MCS2013
Partnerships and Iterative Development
The banking industry is changing rapidly. Well established trends are eroding our traditional ability to profit from financial credit and payment transactions. Fee income is changing, payment income is eroding, credit is becoming more and more competitive. The banking industry must consider partnering/investing in the very companies that are disrupting our business model. We need to really look at where we can gain efficiency from partners, by simplifying, by pairing back services, and focusing on what’s relevant for the future. Where’s a good place to start?
Attending conferences like Finovate exposes us to the very heart of financial disruption. There are hundreds (if not thousands) of companies like the ones we see at Finovate across the globe. Some will succeed, many will fail – others will be acquired or copied before they have a chance to scale. What lessons should we gather from these innovators, both big and small, that we should we take into our planning season? How do we see these external companies – are they partners or threats?
I would argue that many of these companies are potential partners for the bank, not outside disruptors. They force us to look at ourselves, the way we do everything. We need to look at industry’s culture, our banking processes. How are we addressing external changes to the banking model within our own organizations? Are we able to provide sandboxes where innovation can even take place? Are we able to iterate, truly test and learn from external application developments? Are we developing agile or lean processes within our institutions? Are we able to step back and look at ways to simplify our customer journeys and truly address long standing pain points within our financial service offerings? While the banking industry thrives on areas of friction – it is where we make our profit – the disruptors know that the future of financial services will be won by removing areas of friction and rapidly embracing the shift in consumer and business behavior than our creaky infrastructure currently allows – thereby reducing banking processes to that of utility.
We just need to focus on reducing this friction at every step of our processes.
My focus in 2014 will be on mobile.
Moving Beyond Mobile Banking 1.0
While 2013 has been a watershed year for more robust financial application development, much of the innovations in the digital space have come from non-bank disruptors. Barely half of financial institutions have some form of dedicated mobile transactional capability, and these applications often reflect a limited subset of the functionality seen in their online counterparts (and many more suffer from overall user experience and design challenges). There is simply no excuse for this. We need to develop a mobile first mindset in regard to application development, marketing, service, and transactional functionality and invest accordingly. Whether through internal development or partnered solution, next year is when your bank or credit union’s culture and budget needs to truly flip the mobile paradigm.
At the NetFinance conference in May, I proposed the idea that the concept of Primary Financial Institution (PFI) was dead and that it’s being replaced by the concept of Primary Financial Application (PFA). Our banking relationship is no longer about where we bank, it’s about which is the primary application we use, the experience we choose to interact with our finances first. It’s a shift that is real, and one I strongly believe in.
Our focus in 2014 then should be to re-invent our processes to embrace the changes in consumer behavior by building more simplified journeys, primarily through mobile. Mobile experiences are being developed from companies like Moven, Simple, Bluebird, Venmo and GoBank that are offering simple solutions to more complex financial moments. The best banking example of digital innovation is probably USAA – they are thinking several steps ahead of even the national banks and should be looked at as a model for future innovation. From transactional delivery through voice to digital cross sell to virtual service, USAA demonstrates their understanding of this shift toward mobility. We need to challenge our own internal development process, the type of partnerships we are engaged in, or be prepared to re-think our business model as our institutions wither. Our we prepared for the new mobile?
What’s your take on your top two 2014 priorities at your bank or credit union? After today’s news about Intuit selling its financial services division, I think I’ll be re-tooling some of our bank’s long term roadmap to reflect our new reality. I look forward to the challenge, and look forward to interacting with the fintech community as we move forward.