Banking UX

Can a bank build an Apple-like ecosystem?

Can a bank build an Apple-like ecosystem? Image: Vector Open Stock
Written by Paolo Barbesino

Should banks try to build ecosystems around their products, helping to deter consumers from leaving their brand? Story by Paolo Barbesino.

Cool consumer electronics brands are much more choosy than banks when it comes to their marketing strategies. Significantly more than any financial brand, they have a sense for spotting what will make consumers tick, and they build everything around it, keeping in mind that the world has long gone digital. For instance, try to buy a OnePlus 2 with your credit card, and think how heavily credit card brands have been marketing their m-commerce solution as the only way for banks to thrive in an increasingly mobilized ecommerce world. No way. After struggling a few weeks for an invite as a repeat buyer, I was once again allowed to make the purchase using only PayPal.

Will I switch to Android, putting aside my iPhone 6 Plus for the next 12 months?
Today, I got myself a brand new OnePlus 2. Designed and manufactured in Shenzhen, this is one of the best Android devices ever, for sure the coolest. Nicely packaged in a small, environmentally conscious red box, ready for an engaging unboxing experience. Will I switch to Android, putting aside my iPhone 6 Plus for the next 12 months, until the next product cycle is out on the shelf? Most likely not.

This answer is much easier than it is for most consumers to decide whether they will stay with their bank when they can get a better offer from the bank next click. Why? Because my iPhone is much more than one of the best smartphones on the market. It’s an entry door to an entire ecosystem that Apple is constantly building around its hardware, implementing the clear strategy and consistent design that the digital world demands. Switching would imply that I won’t be using my Apple Watch for quantifying myself, receiving subtle notifications during the endless meetings I attend every day, or sending my heartbeat to my significant other with the tap of my fingers. Nor will I be able to listen to my music on Apple Music, or remote control my Apple TV, or initiate a task on my MacBook and continue it on my iPhone.

Lock-in factors – building an ecosystem

Just like banking, in the increasingly commodified world of consumer electronics, in order for you to survive there are only two options: either you start competing on price, reducing your cost and more often than not your margins (Samsung knows how painful this can be), or you refuse commodification altogether, and change the rules of the game by creating a broader experience around your products. This is what Apple did so greatly. An experience isn’t about putting your product in a nice package, ready for the unboxing, eventually to be posted on YouTube. Creating experiences is about designing lock-in factors that will deter consumers from leaving your brand. It’s giving consumers a reason to stay with you, treasuring their time, and doing your best to gain a growing share of it, acting as an invisible companion throughout the day.

The banking industry is facing the same downward spiral that has disrupted the telecommunications industry in the last decade
Banks are facing the same dilemma, though it’s much easier to see those who stands on Samsung’s side than on Apple’s. Should banks compete on the reduced margins that low interest rates and regulatory pressures are imposing on their fees, or should they try to build ecosystems around their products? The banking industry is now facing the same downward spiral that has disrupted the telecommunication industry in the last decade, where cash cows such as roaming fees, long distance calls, and SMS are now a glorious memory of the past that harsh lobbying and uncompetitive practices didn’t succeed to protect. Today, only ‘over the top’ (OTT) players thrive. Netflix, WhatsApp, and Skype killed the telco stars.

Non-banks such as Moven in the US or Number26 in Europe are building on this strategy, crafting an experience that consumers find more compelling than what traditional banks have to offer. OTT players such as Facebook are playing with the idea of offering payment services as part of their experience just to reduce friction, and lock in their users. In the European Union, the law will create the precondition for this by ruling that banks should make available to third parties APIs granting access to account information and payment initiation. This is an inroad into financial services for OTTs. Competing on margins will then not be enough.

READ NEXT: Why Apple is the best ecosystem banking hope yet

Image: Vector Open Stock

About the author

Paolo Barbesino

Paolo Barbesino is a senior banking professional actively involved in crafting the digital strategy and experience for one of the Systemically Important Financial Institutions in Central & Eastern Europe. He works at the crossroads, where strategy, technology, and service design come together.

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