How banks can win customers by making branches the technology supermarkets of the future.
It’s that time of year again. When marketers and technologists make their predictions about what trends are the coming in year ahead. I’ve read dozens of these articles so far, and what they seem to have in common is that everyone plays it safe. They don’t make predictions, they just extend trends. But outside of the few column inches, likes and shares that the authors get for themselves, where is the value for the reader?
Trends mean nothing if you can’t translate them to ideas. So here it goes, my summary of the 2019 predictions I have read, and then an idea to follow.
Trend 1 — Data privacy will remain a focal topic for brands, and data ownership/portability will become a growing concern. Really? I would never have guessed.
Trend 2 — IOT, wearables, and voice will further penetrate the home. Well with CES already focusing on these areas it seems a pretty safe bet.
Trend 3 — Commerce will blur the lines between physical and digital as more digital pure-plays (e-commerce brands) open brick and mortar. With Amazon, Warby Parker and Hema (by Alibaba) all slated to open shops as product experience showrooms, this is already underway.
Trend 4 — Challenger banks will continue to grow as they provide people with recognized value for more money, improved experience, and convenience
Are we all bored yet? That’s enough of the obvious trends right. So let’s focus on an idea demonstrating how these can fit together. But first, look at the trends again and ask yourself this: If e-commerce brands are more digitally mature than traditional financial service brands, then why are they opening physical stores while banks are racing to close branches?
Think about it. Roughly 60 branches closed in the UK every month of 2018. In 2017 over 2,000 branches closed in the US. And 2019 looks like more of the same. But while they are closing branches, legacy banks are also launching their own digital pure-play banks (e.g. Finn and Marcus) to compete with the challenger banks like Monzo (UK), Chime (US) and MyBank (CN) on their digital turf (trend 4). And if they aren’t building their own, they are partnering. And while I don’t want to downplay the effectiveness and success that banks are experiencing with their digital offshoots, the strategy doesn’t answer the question of what to do all those branches?
Now I’m not here to say they need them all. I certainly don’t have the financials and details to accurately build a case. But in putting together ideas based on our four trends, let’s consider another industry that has a lot of “branches” — Telcos. In thinking about them we have to remember that before everyone had mobile phones, the telco’s didn’t have any stores. Now there is a Verizon (US), Vodafone (UK), Singtel (SG) Optus (AUS), or China Mobile (CN) store on every corner. And as a consumer, many people are still more than happy to sign a two-year contract for between $25 and $100 a month to ensure they not only have the most current phone model but that they can upgrade again in 2 years simply by signing on again.
Today, this tech need is going beyond mobile. IOT is the talk to of the town (trend 2). Technology is invading the home, and it has me asking myself, will I need new tech every couple years? Can I afford that, or how should I subsidize my purchases so that I can keep up to date and always have the latest and greatest? And where do I buy the devices? Bank branches. That’s where. That’s how.
Now making that promise real requires more than just putting a bunch of tech products into bank branches for people to look at. It would require a logical marriage between the technology and the financial product. So in the same way that smartphones enable cell phone accounts, the technology would need to be genuinely connected and add value to the FS product itself. Then, just as Telco’s subsidize the price of the smartphone as part of the contract, these new financial accounts would have monthly fees designed to subsidize the technology they connect with.
Think of this as the fixed term account: you sign up for two years, you agree to pay a monthly fee, you get your technology, and after two years you can sign up again if you want to get the updated versions.
Personally, I think this kind of account only makes sense. Banks have long built their models on the notion that they have customers for life (or nearly), because after all, it’s always been hard to change banks. But as Data Portability becomes a commonplace requirement (trend 1), we should expect to see more countries institute policies similar to what the UK did with Open Banking, and with these regulations, we should expect to see a greater amount of natural movement between banks. After all, the barrier to exist is being lowered, and the challenger banks have already shown that they can dramatically lower the difficulties and barriers associated with opening new accounts.
So, if people are going to move their accounts around more anyways, then banks should it easy for them. Make accounts that are designed for mobility — and designed to keep people engaged and interested by offering something new at the end of their two-year contract.
There are a lot of options of what could be done with this type of account:
· Current Account: Make a two-year commitment that you will deposit your paycheck with the bank, and agree to a $20 to $50 a month fee, get a “free” iPad or tablet for my online banking. This could be especially effective given that the new iPad Pro is a laptop replacement and so people might finally want them. And I’d venture to guess that Apple would be interested in partnerships like this given their most recent revenue challenges and their failure to scale the iPad as a product line thus far.
· Homeowners insurance: Take up a two-year insurance policy, we add a little extra to the fee, but the customer walks out with NestCam or another indoor/outdoor camera solution. After all, if you have camera’s around your house, you will be more aware of what’s happening there even when you are not home and hence the technology directly complements the product.
· Health or life insurance: With your two-year policy you get a fitness tracker to help you keep track of your health regime and to motivate greater levels of physical activity (Manulife and some other insurance brands have already started offering plans with fitness tracker-based incentives). With one survey saying that 76% of Apple Watch owners planned to upgrade to the most recent version, this two-year upgrade cycle would appear to be logical. And, with body and health sensor likely to propagate beyond the watch in coming years, we are likely only at the start of potential applications.
You get the idea. And it doesn’t have to stop with these products — this principle could just as easily be applied to investment products and others as well. The point is that money and insurance are so intrinsically connected to us as individuals that as technology further invades our homes, banks have the opportunity to become the technology supermarkets of the future, allowing their customers to experience and connect themselves with the aspirational technologies of today as they plan for tomorrows financial future. Then, in two years time, when they renew their accounts, the get the technology devices of tomorrow (trend 3) as well.
Obviously, none of this takes away from the need to deliver relevant and valuable financial advice in a branch, as well as amazing digital experience in the way that challenger banks, and many leading global banks, are doing today. But it does put traditional banks in the position that they can offer more than the challengers by leveraging their existing branch networks. It creates a reason why average people might want to stop by the branch. A reason why average people would want to talk to their bank about insurance products etc. Because not only do they get the product/investments/ insurance coverage they know they need but have avoided addressing, but they also get the latest generation of new tech.
Imagine financial conversations in branch that center around demoing technology while showing people how they will get more out of the bank by using their latest PFM services on an iPad, or payment services with voice. Imagine the long lines of people waiting outside the bank to get the new Apple Watches on the day they are released, or when some home tech is finally made available to the public. Ok, lines of people waiting to get into the bank might be going a bit too far.
But, I know that if my bank offered me an account like the above, I’d go to the branch and check it out. I might even walk out with a few new products (both financial and technological), all of which I would happily pay a monthly fee for.
In any case, that’s my take on the 4 trends I listed at the beginning of this article. Hopefully, my thinking illustrates one way in which this seemingly disparate trends can fit together and be applied in the real world as something bigger because combining ideas is where innovation happens. But one idea is just the tip of the iceberg. To know what will really happen with these trends, and with banks, well I guess we’ll have to wait and see.
