Banks worry about a super aggregator who takes away the customer, leaving them to compete on price while the value cream is taken up by the super aggregator. Enough has been written about who the possible super aggregators could be and quite a bit has been written about the potential ‘Uberization’ of banking. My belief is that the banking response could have more to do with Tesla than Uber.
Consider this: Tesla is the world’s most famous electric car (Prius, my apologies, but after Model 3, do you really want to debate this?), but it’s actually a little bit more than that. It’s a stylish, environment friendly mobility platform. Tesla has introduced constructs such as firmware and over-the-air software updates to the automobile lexicon, and the reason these are so popular is because now the car has been reimagined as a mobility platform. And before you think that this is about self-driving cars, it isn’t. In the short-term, this is just one of the exponentially improving capabilities a Tesla car has. The real experience of Tesla includes the value it’s trying to provide to the customer – of being connected. This value is delivered at the individual car and driver level, and the collective learning from all cars that Tesla sells. The Tesla cloud-in-the-making is the Apple iTunes and Google AlphaGo’s AI/learning engine rolled into one.
It is at once a platform that iteratively adds value to the core product while learning what it is that it can learn from the use of its vehicles. It’s things like this that would cause my old physics prof to go into raptures: “See the beauty, son, see the beauty.” In this sense, it’s a classic platform strategy. Create a demand-side market with a remarkable product, then get the consumer addicted to the value the platform around the product provides. The future of course is how the demand side and the supply side evolve, and this is anybody’s guess. I wouldn’t be doing what I do if I could read Elon Musk’s mind, but you can very well imagine it will be a customer-obsessed mobility ecosystem, and an environmentally friendly one at that.
The future of retail banking will be a financial wellness platform
So what does it mean for my favourite industry, banking, and its offshoot fintech? Tesla hits the nail on the head on several counts, but most importantly it promises to continuously be able to improve the customer’s experience by learning about the customer and its cars. Let’s digest this for a moment, and remember Tiffani Bova’s comment that it isn’t the technology, it’s the customer that’s the most disruptive thing in the market.
To me, there’s a paradox here, and this is the most remarkable thing. As a consumer, you are so open to being in a platform world that you see a car evolving into a platform as a privileged acquisition, but as a banker we find it difficult to recognise that the future of banking is similar.
What does this mean? Let’s look at a bank that has done the ‘Digital 1.0’ journey. They are APIfied (sic), reasonably Insightified (sic) and UXified (sic), and are now in the journey of learning about the customer. Having done the hard bit of legacy transformation into a digitally enabled bank (not a digital bank yet), the bank is available at every conceivable point of sale and is able to consume/integrate with not just the social platforms, but also the fintechs. It is at this point that the chief digital officer (CEO?) and the rest of the CXOs can smile – not with satisfaction, but with the tingling within them of what’s to come. The exponential function has merely begun.
One of the basic templates I use use while undertaking digital transformation assessment is to use the customer journey as the lighthouse towards which the value chain transformation ship comes to deliver superior customer experience. Post the digital readiness step, which is essentially ‘Digital 1.0 Banking’, the bank is ready for multi-dimensional learning. At its most basic, it’s about:
- Empathetic understanding of customer journeys (x axis in figure below) – including a deeper understanding of the customer journey for existing products, but more importantly opening themselves to how challengers are leveraging their deep uderstanding of customers’ unmet needs in order to deliver new value propositions and experiences.
- Reinvention of the value chain that services the customer journey (y axis in figure below) – truly remarkable organisations have restructured themselves around customer segments and have transfomed how the value chain delivers for the customer and the organisation. Post-Digital 1.0, the value chain includes an ever increasing ecosystem of partners and syndicated data systems that can potentially add hitherto inconceivable value to the customer journey.
As banks learn, and whatever the fintech-eating banks hype, there are a handful of banks in each geo who are learning, co-opting and co-creating as they move across four dimensions in the figure above.
- The customer learning dimension, by delivering newer and better experiences to the customer.
- The value ecosystem integration dimension, to mesh internal and external ecosystems, creating new value propositions for the customer.
My belief is that these two are but stepping stones to a journey that eventually leads to two additional dimensions:
- Customer advisory value propisition.
- Experimentation with platform constructs.
If you ask a typical banker, the customer journey definition will entail the bank being able to trace the customer across all its channels; the old-new seamless omni-channel interaction challenge. This is a product-value-proposition-centric view. And yes, banks need to solve this, but it isn’t the customer-obsessed view.
There is one assumption that I hold dear about platforms in general, and it’s that a successful platform is customer-obsessed. What’s the difference between being customer-obsessed and customer-centricity? The difference is the chasm between provisioning a product conveniently versus satisfying needs. Continuously. Successful platforms have realised that this is the only mechanism for continuous relevance. An example of this would be Facebook’s obsession with ensuring that every social interaction is enabled through its platform. It’s trying to cover a person’s social interaction 360º – the ‘wall’ is 2007, virtual reality is 2016.
A journey towards financial well-being
For a bank, this view comes when the bank elevates itself out of the product and views the customer journey as a journey towards financial well-being. It’s a lifetime view. I did say that this is about customer obsession and not centricity! This is how large the difference between banks’ and customers’ views of the customer journey is. CLTV is about customer obsession, not just customer-centricity.
Several gurus have explained how banks can traverse this journey, and I’m adding my two cents here. In addition to the framework above, I would humbly add the following: banks need to innovate their core product offerings such that the moment the bank adds a customer for its product, its platform value kicks in. This should include manifesting the following:
- Understanding the customer personas behind the segment, remembering all the time that the persona is displayed during the act of purchase of the product or service that the bank is enabling. This is typically very different from the financial persona.
- The next best action isn’t the next product to plug – it’s the next best goal to achieve for the customer. This is a mindset thing before it becomes an experience, analytics thing.
- Identifying wellness markers for the customer. This is dependent on the financial personas, and some remarkable work is being done here by nonprofit and for-profit teams.
- Creating goals that focus not on the long-term but on the immediate next step in the journey towards long-term financial wellness.
- Above all, a platform is a service culture and not a product culture – perhaps the hardest reinvention challenge yet for banks.
These changes are not for a 12-month run. Rather, this evolution will occur over time and along with the customer. The bank of the future will have a stake in my goal achievement. How this comes about is what I call ‘digital imagineering’. By extension, this will open opportunities for the bank platform to provide multiple products and services on the supply side. Multiple studies have proved that brands are losing out to relationships. The success will depend on the degree to which the bank platform is customer-obsessed and solves real problems, because this is what will help the bank build a relationship. And regulators will need proof of fair play, ensuring that the interests of the customer are protected.
The banks as a platform will have the following foundational capabilities (at a minimum):
- Identity: including legal, financial wellness, and some goal-linked personas as well.
- Advisory: financial planning and wellness assistance.
- Security: for worry-free, seamless consumption and transfer of value.
- Learning ability: exponentially improving its understanding of the customer and her needs.
If you refer back to the digital transformation framework, the ‘Y’ is called a value ecosystem. This is for a reason. It’s not feasible or viable (and perhaps even necessary) for a bank to provision every product or service that a customer may need, but it can very well be the channel through which the product is provisioned by another party. This is why the leading FIs are opening up and providing APIs for third parties to develop newer innovations. Platforms will be about ‘coopetition’ as much as they are about competition.
The structural changes that digital transformation has wrought are but interim steps. I wouldn’t be surprised if the chief digital officer of today ends up evolving into the chief platform officer of tomorrow, while the LoB heads become the chief product officers (which they already should be).
The reality is that ‘banking’ plays a critical role in the customer wellness journey. I can’t say the same about any bank in particular. Banking is a means to an end, and it’s up to banks to be the train, or fight for being the most UXifieid-APIfied-Insightified one at the train stations.