Is This the Bank of the Future?
by John Lappin
To navigate turmoil and uncover opportunities, financial services — not known for innovation — are turning to design.
The financial services sector is undergoing a period of prolonged and unprecedented turbulence. The business challenges are varied and profound and echo many of those facing other industries and society as a whole: coping with repercussions of the financial crisis, responding to demands of global and domestic regulators as they aim to ensure the crisis doesn’t happen again; a legacy of mismarketing and misselling; and adapting to customers who are fully embracing the internet, not just to access information but also to carry out increasingly complex transactions.
This all adds up to a rather daunting environment for established financial players — but also a tempting one for new entrants. And there are many: 20 banks, for instance, are currently in the process of applying for banking licences with 14 others having received licences since 2013, according to the Financial Conduct Authority, the UK’s conduct regulator.
Increasingly, more forward-thinking firms, old and new alike, are embracing design to navigate the turmoil and uncover opportunities. Design in its widest sense offers them a useful set of strategic tools, both for those seeking to win market share, and for those trying to defend their bottom line.
The new challengers
Banks have taken a double beating in the recent past, first for being at the heart of the financial crisis and then for refusing to lend to businesses and individuals in the following years. With the reputations of many longstanding banks tarnished, the UK government has actively encouraged increased choice in banking. New banks are taking a variety of approaches, some seeking business or regional niches and others aiming to take on the big established players.
Many new banks have a strong emphasis on design. Metro Bank, a leading ‘challenger’, has integrated design by rebooting the unloved bank branch with high ceilings, lots of glass and even dog-friendly policies. Launched in 2010, it was the first high street bank to open in the UK for more than a century. Since then, many of the new entrants are choosing to focus their design efforts instead on reimagining their presence online.
Building a digital bank
Atom Bank, which has just received its banking licence and plans to launch later this year, won’t have any physical branches. Founded in Durham in northeast England, it’s a completely digital alternative. New customers will be able to open accounts using an app; when they want to speak to a representative, they’ll pick up a phone.
Edward Twiddy, Atom’s chief operating and innovation officer, says: “Design is absolutely fundamental to our approach. The great opportunity we have is that we have a clean slate brand.
“Of course, there are lots of things we don’t have — we don’t have real estate and we don’t have legacy IT systems that are the result of mergers and acquisitions or demergers and de-acquisitions. We don’t have multiple channels and we don’t have any preconceptions. All of this can be quite expensive, but also very liberating. It gives you a chance to architect everything.”
He says that another bank looking to expand its digital offerings might add on a banking app or perhaps an aggregation tool that improves the quality of experience for customers managing their money. “Yet what it doesn’t do is go any further, because it sits on top of your existing bank account.
“In our approach, we are taking the best of fintech and then placing that on top of a brand-new bank with a broad UK banking licence. That is where design comes in, on so many levels.
“We have had a chance to design the entire customer experience, in the app, outside the app, whether we are talking about video or on voice calls or using social media, though the most prominent and public examples of design in our approach will be through the app itself.
“There will be choices about how information is presented and we will give people the chance to intervene and predict. We give them a sense of the past, present and future. Because we are not simultaneously building functionality for an adviser with a green screen or a teller in a branch, we are not restrained by the wire framing other banks have to follow.”
According to Twiddy, Atom’s design isn’t set out to dazzle customers, but rather to be seamless and customisable.
“If you want the information displayed in a linear way, you can have it that way. If you want it to be much more informative or comparative — say, comparing your behaviour against someone else’s or your behaviour this month against next month — or to measure your achievements against a target — for example, what you need to do to save £25,000 for a house deposit — we can offer all these ways of looking at things.”
Atom’s choice to develop its online offering with Unity, a platform usually used to develop video games, has been key.
“We didn’t just rush in and start coding. We wanted a certain tone of voice, playfulness, contrast on colour,” explains Twiddy. He says the system will include 3D animations and will hopefully be beautiful as well as practical.
“We will produce a configurable experience, so everyone will have their own version of the brand.”
While Atom will be online only, it aims to feel as safe as a traditional bank: “We can give you a biometric pathway into your account, which will be secure for you to access and which you will feel confident with.”
According to Twiddy, both quantitative and qualitative work suggest that the public is ready for a digital approach to banking — just as they have taken to shopping, listening to music and booking holidays online. “There is still a role to play for traditionally delivered banking. We are not going to be the bank for everybody, but we think for the vast majority it will be of interest, and for a significant number of people it will be exactly the right thing at exactly the right time.”
According to the BBA, the leading trade association for the UK banking sector, customers will use mobile devices to check their current accounts 895 million times in 2015, more than the 427 million branch interactions.
“The 7.37am train may already be the biggest branch,” says Twiddy.
Online investment firm Nutmeg, founded in 2011, has positioned itself to encourage more people out of the apparent safety of cash to become investors. It inhabits what could prove to be the fertile business territory between very experienced investors who ‘self-select’ their investments and those who pay for the help of a financial planner.
As with Atom Bank, Nutmeg sees possibility in starting from scratch on the web. Nutmeg head of user experience Jono Hey says: “People expect finance to be like their experience with the rest of the web. Without legacy technology and cost centres such as high street branches, we are in a great position to focus all our energies on the core experience of customers. This includes ensuring that the often complex and jargon-full world of investing is made understandable and clear by talking in language that people understand, and using interactive tools to help simulate and deepen understanding.”
One way that the service facilitates investing for users is by focusing on their personal goals, like retirement or a child’s education. “We offer goal-based investing because ultimately money is used to improve our lives,” says Hey. “Investing towards goals also helps focus on the long-term, for example, knowing that you’re on track to a target over the 18-year timeframe of investing towards a child’s education helps allay the concerns of daily market ups and downs.”
Nutmeg, like many of the new challengers, places great priority on trust and how to build it.
“The reputations of many longstanding banks may now be tarnished by one or more scandals,” says Hey, who perceives an “opportunity to provide a new kind of trust […] for our customers when it comes to finance.”
One way Nutmeg aims to do that is by mitigating what are regarded as investor flaws. “Good design plays a role in helping protect ourselves from ourselves through, for example, smart defaults, automation and helping keep progress towards long-term goals in mind during the ups and downs of the market.” Even small adjustments in a form or an interface have been shown to make huge impacts on people’s long-term financial success.
“Finance and investment management have traditionally been about relationships, but personal relationships are costly to maintain at scale. The expansion of the internet and application of technology to automate manual processes, customise communication and democratise access to a sophisticated service enable a rare combination where the experience can be improved while lowering costs. In our case, lowering the costs ultimately means higher returns for customers and, hopefully, a tangible impact on their lives.”
Staying on top of the game
Where design enables new entrants to stake claims, it also allows existing firms to raise their game. Clive Grinyer, customer experience director at the Design Office within Barclays, says that larger established banks are also embracing design principles more widely and deeply.
Three years ago, Barclays launched the Design Office to act as an internal design consultancy, partnering with different business units and functions to create and improve customer, client and colleague interactions. Its multidisciplinary team of around 200 employees work globally across the Barclays Group.
“We are seeking consistency of visuals and tone of voice and consistency of design delivery,” says Grinyer. “We have been working on combining big projects together so they have that consistency, providing people with the tools, so that anyone coming to use design in their activities knows how to make it consistent.
“That is not just visual; it’s also about user journeys. The issue with designing individual products and services is that it is not how the customer sees it. The product is just one aspect, so having a full understanding of everything customers do and making it consistent for them is important. The Design Office within Barclays as a cross-group function has taken that on very well.”
Grinyer says that the quality of design outside the sector is elevating the level of design within it.
“We are creating attractive, compelling page designs, and it is a lot more human. The leaders of Barclays are demanding a higher quality of design. They realise customers are used to that. In any industry, managers tend to measure things according to their own industry, but when they are online, customers are used to moving, say, from the BBC website, to using a beautiful online retail site, and then coming to their bank. There is no reason why the bank should be a horrible experience.”
According to Grinyer, the Design Office’s use of agile project management in coordination with Barclays’ tech team allows them to build in user-centred design at an early stage of a project. “That is a major improvement, because design can get knocked out in sprint delivery.”
Customer experience now defines new services and products from the beginning of the design process: “We understand in more detail who the customer is, why a service is of value to them, what is the context of how they arrived at Barclays. It is a much more strategic view of where the design sits, starting with the customer experience and designing the service in. It is something we are getting better and better at.”
One major innovation that exemplifies Barclays’ new approach to design is Barclays Pingit, a mobile payment service that allows users — not necessarily Barclays customers — to send and receive money with only a phone number. According to the Design Council’s Leading Business by Design research project, which examines how business leaders use design and the impact it has on their companies, Barclays chose to develop Pingit as if it were start-up. “Traditionally, a waterfall method would have been followed, starting from technical requirements and sequentially working on design, implementation and verification, culminating with the launch of a product inclusive of all features. However, such a process would have been too time-consuming in this instance.” According to the Head of Design, the development team reimagined its process: “ ‘What if we did it differently? What if we did it like a start-up? What if we said: you don’t have to work on anything else, just Pingit?’ ”
Barclays used a ‘hopper’ set up for the project: everyone on the team, from the designers to the business analyst, programme manager and tech person, sat at one table and were responsible solely for Pingit. According to the Leading Business by Design report, “This more collaborative approach allowed a much faster time to market. Interestingly, despite tight deadlines, the development was much more grounded in customer insight than usual”; the design team quickly understood the customer need and turned it into a usable product.
Leading Business by Design reports that Pingit, launched in 2012, has been downloaded more than 2 million times and has won over 20 awards for innovation in the banking space. It has enhanced Barclays’ brand and is proving a commercial success.
In a move that indicates the importance of design within Barclays, the bank named its first Chief Design Officer in 2013. In an interview for Leading Business by Design, the CDO says that staff throughout Barclays, up to the CEO, are embracing “ ‘the entrepreneur start-up approach’ ” in which design plays a fundamental role; in fact, he says, it’s “ ‘the thing that sets Barclays apart’ ”.
New reforms hit the industry
Design’s iterative methods and focus on users have in particular helped pension providers, another segment of the financial services industry, deal with two hugely significant reforms: auto-enrolment and freedom and choice.
With auto-enrolment, which began to touch big firms in 2012, employees are opted into pension saving automatically, rather than having to make an active decision to sign up — which has massively boosted take up rates.
Freedom and choice was announced two years later and turned the pensions market on its head when it came into effect this April. Now, from age 55, people have the option of withdrawing their entire pension built up over a lifetime of working, in cash.
Withdrawing all your cash in one year, however, may make you liable to extra income tax; in fact, you could be pushed into a higher bracket by doing so. The more financially conservative can convert their money into an annuity, or they can leave their money invested but take an income from it — an arrangement known as income drawdown.
The reform also makes it lot easier to pass on pension wealth to your dependents, a bonus especially to wealthier savers — but one that further complicates the decision.
Essentially, there is a huge amount of important information to get across to a cohort of people who have not previously been very engaged with their pension planning. Along with more freedom and choice, they also face a lot of potential pitfalls.
Prototyping retirement planning
Global giant Standard Life, founded back in 1825, linked up with True Office, a New York-based company specialising in gamified learning technology, to help their customers through the retirement journey.
Stephen Ingledew, head of customer and digital marketing for Standard Life, says: “Customers are choosing who they engage with based on their experience as the products become more and more commoditised. It is more about how easy you make it, how simple, how helpful and even how inspiring.”
From July of last year, when it became clear what the rules were, Standard Life started to build prototypes of the online retirement journey and tested six of them with customers.
The firm took the prototypes out to customer road shows; it also set up online customer communities and labs where users ranked them, a bit as they do on TripAdvisor, says Ingledew. The most important factor was whether users found it easy to understand what to do with their retirement money.
“This interactive approach led us to have a strong engagement journey, which went live in February. It lets customers educate themselves but also — since April — lets them transact. It has taken a lot of demand off the telephone help, because customers have found it easier to deal with the online process.”
When Ingledew took over the digital marketing role a couple of year ago, he says that only two colleagues really understood user experience design. They presented how it was applied in telecoms, travel and, to an extent, in retail — and how it might be applied to Standard Life. With the approach working, the firm has now brought in more staff with such expertise from a variety of sectors.
He had expected customers to dip in and out of the new online retirement journey, and it was thought that perhaps 400 people would complete it, but instead 6,000 have done so with positive customer feedback about how intuitive the site’s tools are and praise for the ability to change scenarios and move things around.
The return on investment is measured in cost to serve, client retention and winning business from rival providers.
Ingledew thinks that harnessing the power of digital design represents a fundamental change for financial services. It is also one that he says the regulator, the Financial Conduct Authority, is interested in because of how it may help spread financial capability.
“In its previous approach to customers, the financial services industry has aimed to be rational and logical but it could also seem aloof. This approach makes savings and pensions more open, and that is important because of how we are all using digital– on laptops, tablets and phones. People expect more, but we are also more available.”
For Ingledew, digital design will increasingly be a tool firms will need to understand in order to compete:
“We are learning from other sectors, and financial services is on a catch up. In the future, this will differentiate organisations — it won’t just be product.”
Putting the customer first, at last
Paul Lindsell is creative director at Space01, a creative agency that works with a wide range of clients in financial services on their digital design strategies. He confirms there has been an industry awakening about customer-focused digital transformation, and that it has happened very recently.
“A year or two ago, people didn’t seem too concerned that customers were digesting information on other channels — on mobiles, tablets, YouTube and Twitter. That has changed massively this year. So just producing a page of text is not enough. It is so much more about rich animation and storytelling and not about businesses pumping out stuff because they feel they have to. Our clients are starting to realise that their customers are real people.”
He says the agency is now doing much more user research for its clients.
“There has been a lot more rapid prototyping of ideas, which we use to test with real customers so we can validate our ideas quickly. This really helps stakeholder engagement too, as our clients are invited to watch their customers interact with their brand and use their products. By working this way we are able to get a viable product or service out to market much quicker.
“From banking to insurance and pensions, there has been a massive shift to a customer-first approach, to identify customer needs and make them central to the solution. If customers want to digest information by video, then we give them video; if they want a downloadable report, we give them that.”
In particular, customers have grown accustomed to self-service — when it comes to buying flights and checking in, for instance, or simply purchasing groceries — and they’re demanding it from their financial services, too.
“More and more customers want to self-serve; they don’t always want to deal directly with advisers or help lines. They don’t want to wait for your server and certainly don’t want to be dragged into a store or branch to complete a transaction. They want stuff now, and on their terms. They want to take control of their decisions and are looking for instant rewards for doing so.”
This can also apply where a financial intermediary is involved: “With the pension reforms, a person may be faced with one of the single most important decisions of their lives — how to take their life savings. We are now giving them the self-service tools and information to empower them to make that decision,” says Lindsell. Space01 has designed tools that, with basic numbers from users, can generate an interactive report allowing them to explore and understand their options. If they want, they can take the report to a financial adviser for one-on-one advice.
When it comes to digital strategy, says Lindsell, clients’ focus must start with mobile: “Some customers only have a mobile device, and for many a mobile is likely to be used when they first connect with your brand, so you have to start thinking mobile first. We’re talking to our clients less about native apps now and more about responsive, mobile-first websites. That’s not to say that apps don’t have a place, as they definitely do, but our clients’ current focus is definitely responsive web offerings.”
This may seem like old news to other sectors, but financial services is just catching up: “As a sector, our FS clients are typically not first adopters, but now they are racing to become the close followers, to work in a more agile and responsive way. To quickly build, test and iterate to get to a usable customer-focused solution much faster. That is how 60 to 65 percent of clients want us to work, whereas two or three years ago it would have only been around five percent.”
The tipping point?
Even the Financial Conduct Authority — often seen as a barrier to innovation — is offering resources to support digital transformation.
It set up an Innovation Hub in 2014 to identify areas where its “regulatory framework needs to adapt to enable further innovation in the interests of consumers.”
The hub also helps new and established firms with innovative financial products and services to understand the regulatory framework and how it applies to them, before they apply for regulated status (with all the regulatory costs involved). According to the FCA’s director of strategy and competition, Christopher Woolard, the hub has had discussions with some 170 firms and helped about half of them.
In a recent speech, the FCA director of strategy and competition Christopher Woolard said: “The way in which consumers engage with financial services is changing rapidly. Digital and mobile channels are making a huge impact. This is not evolution — it is revolution. We think there is real disruptive potential in the switch to digital channels and more specifically, use of mobile.”
Where to from here?
We may be at the tipping point: across the board — from pension providers to investment firms and banks — the financial services industry is employing design to cope with the modern ways consumers engage. Designing user-centred propositions will particularly be key for firms fighting to stand out in the rapidly expanding marketplace, among new products, new services and entirely new players. It’s one more area where designers can expect to find their skills growing in demand.
However, the image of finance will need to change considerably if it’s going to attract the best design talent. Tech companies like Google, Apple, Facebook and Amazon — so powerful they’ve earned their own acronym, GAFA — are known for their predatory hiring style. Even the automotive industry is having trouble contending with them for design talent — so how will finance do it? Could design-led banks like Atom change the face of the banking industry, just as Uber has done for transportation and Airbnb for hospitality? The race is on to shift the image of finance, and firms will need designers to compete.
Other articles in The Design Economy series:
- The Design Economy primer: how design is revolutionising health, business, cities and government
- The secrets of the Chief Design Officer
- Reinventing death for the twenty-first century
- Can Obama reduce the ‘empathy deficit’?
- The Ethics of Digital Design
- Can Design Fix Our Ailing Democracy?
- It’s education, stupid. Or, how the UK risks losing its global creative advantage
- Policy v5.127: Could government make services like Dyson makes vacuum cleaners?
- Will the Internet of Things set family life back 100 years?
For more information, please contact:
Greg Eden, Digital Communications Manager Greg.Eden@designcouncil.org.uk