7 Key Takeaways from NetFinance 2015

1. Tech-savvy firms are disrupting traditional ways of doing business (financial industry included)

Digitally-savvy firms have been ‘disruptors’ in traditional industries. Enter Uber.
Uber is the biggest taxi company in the world, yet it owns zero taxis. It’s also valued at $41.5B, which is more than Delta Airlines, FedEx, or Viacom1. Or look at Airbnb, one of the largest hotel reservation companies in the world that owns zero hotels. More than 425,000 people worldwide use Airbnb every night, and in 8 years it has amassed a company value approximately half of Hilton hotel chain (by comparison, Hilton has been in business for 96 years). In the financial services industry, Lending Club is a multi-billion dollar loan company that underwrites zero loans, has only has 850 employees, and has successfully taken $7.6B of loans out of the banking system.

These companies have been so successful because they do a much better job than their competitors at rapidly matching customer needs with products and services being offered in the marketplace.

Question for FIs to consider: How and where can your bank improve at matching your customers’ exact needs to the products and services you offer, in a timelier manner, while reducing friction in the process?

2. Takeaway: Digital is not a ‘one-time, one-year’ channel investment

According to Chris Skinner, Chairman of Financial Services Club, “… digital is a fundamental new way to deliver services to customers in today’s economy.” The fact of the matter is that today’s consumers readily traverse across multiple digital mediums (browser, tablet, mobile) as well as physical mediums (stores, branches) while shopping for a single product or service. Furthermore, they expect to receive a seamless experience – regardless of the combination or order of channels they traverse – while interacting with a business in any industry. Thus FIs need to realize that digital can and will be a multi-year journey – with a multi-year investment of time, resources and capital – in order to adapt their services to support doing business in the digital age.

BBVA Bank Chairman, Francisco Gonzalez says “BBVA will be a software company in the future. In addition to traditional banks, the new competitor landscape from BBVA’s view consists of Apple, Google, Samsung and Amazon. Currently, only 3% of BBVA Bank Employees are focused on digital banking. By 2020, this number is estimated to be nearly 50%.”2

FIs used to fuel growth through buying other FIs. That’s changing as well. Now, FIs are now fueling growth by buying or investing in FinTech and/or digital creative firms. For example, CapitalOne bought Creative Firm Adaptive Path, BBVA bought digital bank Simple and Wells Fargo invested in peer-to-peer lending broker LendingClub.com

Question for FIs to consider: How much are you investing (time, energy, capital) in your digital future to re-think traditional and or outdated ways of conducting business?

3. Takeaway: A FI’s digital ‘properties’ should be given as much (or more) care as a FI’s physical branch properties

In 2014 the amount of mobile devices exceeded the amount of people on the planet. According to Citibank, “Customers come onto our digital properties [via their digital devices] all of the time. [And] reviewing activity and statements through the digital channel accounts for two thirds of our customers banking activity.” For US Bank, mobile and online own the lion’s share of overall banking activity. And, Bank of America has described it as “People effectively carry a branch in their pocket.”3 Customers expect to have the same level of services they can get at a branch on their phone and banks are being expected to maintain their digital properties in the same if not better manner as they would their physical branch (high accessibility, full service, well organized, and easy for a customer to be served).

Question for Financial Institutions (FIs) to consider: What is the gap of products and services that your physical branch property can offer vs. what your digital (mobile, online, tablet) property can offer? What can be done to close this gap to keep your customers satisfied, engaging with you, and loyal to your brand?

4. Takeaway: Customer-centric digital design will lead to better results for FIs

The industry perspective seems to be that a better customer experience will lead to a better outcome for financial institutions. However, if that first digital experience is bad, then the relationship may stagnate. A seamless user experience is more important than ever. Bank of the West understands the shift occurring. “The old way of thinking at our bank is that ‘everyone’s job is compliance.’ The new way of thinking for our bank: ‘Everyone’s job is user experience, even compliance.’” PFM tools and robo-advisors and other examples of ways in which FIs are looking to enhance the user experience, and provide differentiating value to drive better customer engagement.

Question for FIs to consider: How customer-centric is your digital design? What is missing from it to better put customer’s needs first and make it easier to satisfy them?

5. Takeaway: Digital gaining critical mass as the desired interaction point to originate new customer and account openings

New vendors are emerging with baseline digital account opening solutions. Companies like Zoot, Malauzai, Top Image Systems (TIS) and Mitek are demonstrating some early-entrant solutions that help drive and streamline customer and account origination. “The checking account – the foundational bank account that Americans have long established face-to-face at a branch – is at a tipping point with 70% of likely applicants saying they would prefer to submit a digital application in 2015.”4 IBM commented that digital account opening is one of the top areas of strategic opportunity in the financial services industry. For digital banks like Simple, Moven, GoBank and BankMobile, they’ve optimized their digital account opening for ease of access with fewer barriers to entry.

Question for FI to consider: Where is your FI in terms of re-thinking the account opening process to remove friction, paper requirements, etc.?

6. Agile delivery starting to truly take root in FIs historically steeped in traditional waterfall-based software delivery

Many FIs have been migrating from waterfall methodologies to agile methodologies over the last 2-3 years. While there has been evidence of growing pains in larger institutions, a number of these banks have successfully been able to execute digital-based projects on a bon-a-fide agile delivery model. Some agile success stories (i.e., from concept to production) were evidenced at FIs like Bank of Internet (~1.0 month), SunTrust (~1.5 months for unauthenticated digital channel solutions), and Key Bank (~ 4.0 months).

Questions for FIs to consider: How far is your organization along the agile continuum to be able to deliver new or enhanced digital solutions to your customers? Are you making achieving DevOps a strategic objective?

7. Data remains the new oil in the digital age

As customers spend more and more time preferring to interact with FIs through the digital channel, understanding customer behavior (i.e., activity, needs, desires, frustrations) in this channel has become increasingly important. In the digital age, the amount of data being generated (online, mobile, chat, twitter, blogs, Facebook, etc.) that pertain to the customer experience have undoubtedly created a big data challenge for FIs to contend with. Most FIs are still laying the foundations needed to track all of this behavior in an effective manner. The ultimate goal is moving to ‘data-driven decision making’, whereby FIs can graduate from a state of simple ‘web analytics’ to true ‘customer intelligence’ that will help drive a 1-to-1 personalized customer experience. For “Good data beats opinion”5

Questions for FIs to consider: How well does your FI deliver a personalized experience for each of your customers? What can be better understood and/or analyzed about your customers to help deliver a more personalized customer experience in the near or mid-term?

1 – Source: Time Magazine Online, “5 Things You Never Knew About the Sharing Economy”, Jan 29, 2015, Link
2 – Source: Mobile Turning BBVA’s Future Into a Software Company, pymnts.com, March 6th, 2015, Link
3 – Source: Grand Openings: The State of Marketing New Branches, ,Media Logic, Dec 3, 2014, Link
4 – Source: ‘Consumers Crave Digital Account Opening Capabilities’, Mar 5, 2015, Link
5 – Source: ‘Data is the new oil of the digital economy’, Wired, Link