This week we’ve been reading up on innovation in banking and financial services. It is an industry ripe for innovation.
One of our favourites is “Your Next Credit Card is Your Last“. Imagine going back to, say, 1985, and say ‘cheques cease to exist’. Most probably the average consumer would look at you funny and shake their heads. But that’s excactly what’s happning to credit cards and debit cards. We do not need them any more. The phone is taking over. We’ve been blogging about this for a while. But Fast Company’s recent article is bringing this closer to reality. And it probably won’t be banks doing it……
Following the theory of disruptive innovation, it will be the current industry òutsiders`who are small, quick and nimble, who will reinvent banking as we know it. Did you know that Google is the big driver of mobile phone banking payments in the US? And now rolling out across Canada too….
or that Square has one of the highest growth rates in financial services anywhere?Are you familiar with the web-driven, social banking concept of Bank Simple yet? Or perhaps you have yet to read about Stripe: payment for developers yet either?
While these examples are all from North America; looking across the globe, to Norway and Pakistan (!) a similar pattern emerges. The Norway-based telecommunication (now going on software) company is now the biggest bank in Pakistan. Yes. Under the name of Easypaisa, Telenor has grown its customer base to ten million, while other banks have eight million customers – combined. All in less than 18 months. With 100 million mobile users – and growing – Telenor looks set to become of the biggest banks in Asia. All thanks to banking meeting technology and innovation. Yet, as Telenor is quoted saying, “We talked to 36 banks in Pakistan, but none wanted to join us”.
This, of course, is the typical pattern of companies getting disrupted. They fail to embrace new opportunities, new technologies and new business models. At their own risk.
Facts that should absolutely scare banks throughout the western world are these:
Cost of opening a traditional bank account in Pakistan: $85
Cost of opening a Easypaisa bank account: 60 cents
Time to open a traditional bank account: one week
Time to open a Easypaisa bank account: a few minutes
“We got 500.000 new customers in the first month”, says Telenor. That’s not a bank in the world who can claim such figures. This is what we call “Think Different”.
So while non-banks are pushing the boundaries for innovation in, well, banking, traditional banks are watching from the sidelines, slowed down by their own size, mental models and organizational structures.
Starting tomorrow, today’s banks should embrace change, embrace innovation and embrace technology. And the should see their role changing in the customer relationship. Banking services should be more of just that; services. As businesses globalize, so will banking services. “Small businesses will expect their financial services provider to be their local portal to
the global marketplace, delivering the products, services and information required for successful international transactions” (Intuit). Intuit’s excellent Financial Services 2020 report paints a compelling picture of technology, customer service and personalization blending seemlessly.
“Technology will drive innovation and create new efficiencies and ways to interact with customers and business models”(Intuit). One such example is using Twitter for a digital townhall meeting.
(all photos from Banking2020.com)
(The complete transcript can be found using #IFSsurvey on Twitter)
If you are having trouble understanding this blog, that’s the big challenge for bankers. Even banking regulators are struggling with the emergence of social banking. Yet,these are all things banks should understand.