By Sonny Singh
Banks are facing an identity crisis. For the last century, traditional financial services institutions ? banks, credit unions, savings and loans ? were largely the only game in town for consumers. Individuals often formed lifelong relationships with a single institution and accepted that the bank was the dominant partner in that union.
For decades, consumers abided the status quo, but then everything changed. With the proliferation of mobile technologies, today?s consumers have come to expect anytime, anywhere, any channel connectivity and the ability to conduct transactions, whether with their favorite retailers, entertainment providers, or local government. This expectation has extended to their banking relationships and is flipping the balance of power.
Supporting customers through multiple channels is no longer an option for financial services organizations; it?s a necessity. Consumers are now seeking an omni-channel experience in which they can move seamlessly between channels, even simultaneously leveraging multiple channels to optimize their experience.
Further contributing to the upheaval is the emergence of bank alternatives. Financial institutions face growing competition from non-traditional players, such as Coin, Isis and LevelUp, in banking and mobile payments.
Large corporations are setting up new companies, such as Bluebird by American Express, which offer an alternative to checking and debit products. Further, retailers and telecommunications companies are offering financial products. It?s estimated that Starbucks Cards generated $2.5 billion in sales last year, as customers used their mobile devices to pay. Imagine the balance on these cards used for more than $2 billion in purchases.
In addition, new digital brands are breaking into the market with innovative financial products, such as Green Dot prepaid credit cards and Moven, an app that markets itself as an alternative to a bank.
The rising number of unbanked and under-banked individuals complicates the identity crisis. Traditionally, these populations faced barriers ? geographic and economic ? that excluded them from access to traditional financial institutions.
Banks have a challenge ahead — just 1 percent of the unbanked in the top 10 countries with the largest populations would bring 40 million new customers into the business. But today these growing numbers of individuals do not view a bank relationship as an economic necessity, especially as new players make it increasingly easy to transact.
In many emerging markets, mobile phones far outnumber bank accounts, a reality that has led to the creation of a growing ?mobile money? ecosystem that facilitates funds transfer among mobile phone users. According to one estimate, these types of mobile money services are now in more than 70 countries and are used to transfer billions of dollars monthly.
?But there are broader implications as well,? writes John Villasenor in Brookings? Issues in Technology Innovation. ?The growth of mobile money has closed the loop in a positive feedback cycle that increases the incentives for the unbanked to use mobile phones, which in turn increases the market for companies delivering phone-based financial services. As mobile phones become more capable and less expensive, mobile money will drive digital inclusion in developing countries in ways that go far beyond the set of currently available transaction-focused services.?
Time to reinvent
How can banks confront this identity crisis and reinvent themselves in a transformed economy?
After studying the innovations of new players, banks must look in the mirror and assess their own inherent strengths: expertise that only dedicated financial services institutions can deliver, financial fortitude, proven delivery channels, and public trust.
The trick then is to combine the best of both worlds ? the agility that today?s consumer demands and the security and financial excellence only banks can deliver. Three important tenets can help to guide this transformation:
? Have it your way is the expectation, not the exception. The customer is in control. Banks can use this to their advantage by focusing on providing an omni-channel experience. While most banks have adopted multi-channel strategies, few deliver the seamless, omni-channel service that customers have come to expect in the retail sector, for example. Old culprits continue to haunt many institutions, including an inability to gain a single, comprehensive view of the customer due to stove-piped legacy systems. Banks that master the omni-channel experience stand to set themselves apart from less agile institutions.
? Get serious about getting to know the customer. Consumers expect that during their online and mobile experiences they will be served products that will be of interest to them based on their browsing or past purchases. Financial institutions are ideally suited to deliver this personalization due to the volume and diversity of customer and transactional data that they capture. External sources, such as social media, hold the opportunity to capture additional rich data, such as information on life events — relocation, marriage, the birth of a child, a new job — that might drive financial purchases. The ability to manage and analyze big data is essential to moving to a new level of customer intimacy.
? Make it easy. Consumers are busy ? juggling family, careers, and personal interests and commitments ? and they want to transact quickly and easily. Focusing on ways to make it easier to get all the information they need about a product, whether in a branch, on the phone, or via a mobile device, in easy-to-understand terms, and then quickly transact, can boost their receptivity and loyalty. Customers also want the ability to compare products and costs, and the flexibility to begin a process in one channel and finish it in another. And they are eager to access end-to-end financial services via online and mobile channels. To make this vision a reality, financial services organizations require flexible, scalable, and extensible modern platforms and applications.
As financial institutions work through their identity crisis, they have a valuable opportunity to reinvent themselves for the connected consumer. Fundamental to the success of any such customer initiative is a strong organizational commitment and willingness to think creatively and put the customer at the center of the enterprise, along with an agile and robust enterprise architecture that supports flawless execution.
The author is the senior vice president and general manager for financial services global business unit at Oracle