What Banks Should Understand

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.

What Banks Should Understand

Nordea; 2012’s worst customer service?

A few months ago I moved into a new office space. It took me four weeks and too-many-phone-calls-to count to get the Internet up and running. In fact, I made sixteen phone calls to the company. At one point I even called the CEO’s office, but got ‘moved’ to a customer service rep (as a colleague at BI said today; only 16….?)
At the time, I thought I had seen this year’s worst customer service. Until today.

Today I received a letter from my “Customer Advisor” – whom I’ve never met – at Nordea Sandnes. After having been a customer of the bank for as a long as I care to remember – and an emotionally connected one at that – I get this letter. After having been a customer at the bank since, well, some 20+ years, I get this letter. Not a phone call, not an invitation. This letter.

In effect, it states, “You do no longer qualify for our premium customer segment. In three months, everything you get from us, everything you do with us, will become more expensive”. (Note to self: Hm, does that count for my corporate accounts as well? I wonder…..)

Let me just say thisto my Customer Advisor: THIS IS NOT YOUR JOB.

Your job is to call me. Book a meeting. Invite me to your plush offices. Get to know me. Understand my present and future needs. Understand my dreams, goals and desires. Understand how you can help me, in turn, get my entire private and corporate business into your bank. Help fund my next ventures. In turn, growing our relationship into a 20+ years affair of mutual respect, understanding and profitability. That’s your job.

But hey, thanks for giving me this nice example of how not to please your customers. It will be a great teaching case for my marketing students for the next two years.

Then I decided to test it. Test this as a social media marketing case. So I posted the first two tweets. On Twitter, Facebook and Linkedin.

In our marketing teaching, the “United Breaks Guitars” case is one of the most famous ones. Harvard Business School Professor John Deighton and research associate Leora Kornfeld published a 2010 case, writing: “This case dissects an incident in which a disgruntled customer used YouTube and Twitter to spread a music video detailing United’s mishandling of his $3,500 guitar and the company’s subsequent refusal to compensate him. The song was called “United Breaks Guitars.” Within one week it received 3 million views”.

So, what would Nordea do?

Turns out, a fellow blogger, Beate Sørum, had a similar experience two years ago. She posted it in her blog. The following day, after a few phone calls from Nordea, the case was resolved. Beate’s case and her blog is now required reading in some of BI’s courses on social medias.

Now, I’m just waiting. Whatever happens this will be a great marketing case to teach.

After teaching this as a case in a management course on October 20th, one of the Nordea employees in the class got things started.
Half an hour later I recieved this e-mail (translated by Google translate):

Hey Christian!

Hello and thanks for last! I tried to reach you on your mobile (92 41 59 49 ) Today, no luck, so I send e-mail instead. I hope it reaches you.
I was told by T.V. (Nordea employee and a friend of yours, I understood) today that you were not particularly happy with us at Nordea Sandnes.

The fact that you are not satisfied, I think the is highly regrettable, Christian! We rely on satisfied customers, and therefore I wanted to call you immediately to talk to you.

Great if you could call me back on ——– when you are available.

See you!

With kind regards,
Nordea Bank Norway ASA

General Manager
Avd.bank Sandnes
Mob. ——–
Customer Service – tlf.06001

So he called me, I called him, and then, I have not heard a word since. So, like the say, the saga continues….

Nordea; 2012’s worst customer service?

Delighted to work with PRO school

Engage // Innovate is delighted to work with SR-Bank’s Pro school. The Pro School is collaboration between SR-Bank and BI Norwegian Business School. The school is aimed at helping entrepreneurs and small business owners expand their business skills. Consisting of four programs; marketing, finance, leadership and innovation, it is basically a mini-mini MBA.

Christian Rangen, Lecturer at BI and Partner at Engage // Innovate, will teach a series of seminars on Innovation during the fall. The school is an example of partnership between academia and local businesses, and an innovation in itself.

For the fall, BI has lined up a series of great lecturers, including Geir Knutsen, Morten H. Abrahamsen, Ragnhild Wiik, Robert Helland-Olsen and Ine Hellvik.


If you work in banking, and have not read Bank 2.0. Then you shouldn’t work in banking

For the last few months we’ve been recommending the book, Bank 2.0. Written by Banking expert Brett King, the book is a delightful example of swift, strategic disruption across any industry. While some believe the Bank 2.0 paradigm refers to technology only, in King’s writing, it does not. Bank 2.0. is an expression for the change in customer behaviour, which in turn lead to channel strategies, technology, social networking and a wide range of opportunities.

“BANK 2.0 represents a view of the future of bank retailing and channel strategies for the next decade. The fact that banks take so long to respond to these changes to the status quo means that any bank acting upon the key recommendations in this book will be a step ahead of the competition”, writes on executive reviewer on Amazon.
In particular, the post “How Steve Jobs killed the branch” is a great read.

Now, if you work in banking, and you still haven’t read Bank 2.0. Then you know what’s on your required reading list. While you wait for your book to arrive, we recommend watching the video. It’s a great introduction to King’s work.


Why Google (mobile payment)?

Four months ago, I published a brief post on our Linkedin Group. Why Google?, I asked. Why is Google, not banks, leading the move into NFC (Near Field Communication). Why is Google, not banks, leading the move into mobile payment solutions?

That was four months ago. Three days ago, on September 19th, Google launched the service in the US.

Reuters, The Guardian and Businessweek – to name a few – all covered the event. But few industry pundits have dived deep into what this means for banking – yet. It will be interesting to follow what Wired calls ‘the mobile payments arms race‘ in the next 12 – 24 months.

The BIG questions still stands: What are banks going to do about that?

The original blog post from April 2011.

Why Google?

Tomorrow Google is introducing mobile payment solutions in the US. But why Google?

Swipe your phone. Pay. No cash. No credit cards. Just your phone. It’s been a longtime coming. In parts of the developing world it’s been around for years. But tomorrow, the US. Nationwide,chains like Macy, American Eagle Outfitters and Subway are gearing up for the introduction. In the thousands of cashier points, they are already ready to serve customers paying by their smartphones. Hey, Starbucks has been doing this for a while now, through their My Starbucks Card App.

But why Google? Why is a (still) young, Internet Search company (yeah, right!!) the ones to introduce this nationwide in the US? Why are not the banks, or even the creditcard companies leading this fray? Whatever happened to Mastercard and Diners leading innovation?

The answer fits perfectly with Clayton M. Christensen’s theory on disruptive innovations. Radical innovations in any industry are not introduced by the existing industry players. Far more often than not, these innovations will come bubbling up from completely unknown and irrelevant players. Name me one single banking executive who three years ago thought Google would become a threat. Name one executive team who even thought Google would become an industry player. In banking.

Pay attention. One of the world’s most innovative companies has just blown open the door on mobile payments. While at the same time, Brett King concludes that not a single bank is to be found of the list of the world’s 250 most innovative companies.

What are banks going to do about that?

Why Google (mobile payment)?

Capital One buying its way to innovation

U.S. Based bank Capital One purchased game-changing online bank ING direct US for $9 bn.


$9 bn. For 7 million customers. You do the math!
What Capital one gets is a well-running online banking business model. ING is built around an online consumer model. With only seven outlets in the US – all built as coffeshops – there is little in terms of traditional banking outlets. But probably more important is the culture Capital One is buying. ING Direct has always been a game-changer, a challenger, an innovator. That’s what’s worth paying a premium for.

But can you really buy culture? Knowing that between 50 – 7 % of m&a’s fail, what can be expected from this one? Keep your eyes on the likely fallout as cultures crash and the innovation engine that was worth paying $9 bn. for walks out the door and takes the innovation capacity with them…… Will this be another banking m&a down the drain?

Check out the picture series of ING Direct’s banking cafes.


Capital One buying its way to innovation