Building upon yesterday’s discussion - where your product is a username, your processing is an API and your customer engagement is just an app - I was talking to a bunch of banks and new entrants about Big Data opportunities today and realised ONE BIG THING.
Banks need to start making strategic decisions before it’s too late.
This is not a new big thing, but it hit me squarely and clearly as I was talking about the fact that banks are trying to evolve to keep up with EVERYTHING.
They want to be the payments processors, the customer engagers, the mortgage providers and more. That is old world thinking.
The old world is the one where, because the bank has the deposit account, the bank tries to leverage that relationship – which is proprietary, locked in and difficult to change – to get more share of wallet from insurances to loans.
THAT IS THE OLD WORLD.
Y’see, as I was talking about banks being decomposed into constituent pieces where customers will determine their relevancy, I realised that this means banks have to refocus upon where they’re really, really good.
Banks are not good at everything. They are good at some things.
Some banks are good at customer relationships, some are good at products and some are good at processing. Some are good at relationships and processing, some are good at products and processing and some are good at products and relationships, but I’m not sure I can think of any that are good at everything.
That’s why there are so many new entrants and upstarts getting into banking and finance.
The upstarts are trying to eat the margins from products, processing and relationships. Upstarts are focused upon products (Zopa, Wonga, Kickstarter etc); processing (Currency Cloud, Fidor, Stocktwits etc); and relationships (Moven, Simple, Alior etc).
Incumbents are hell bent at preserving the status quo, ceterus parabus, caveat emptor and a bunch more Latin stuff.
In fact Latin is where the incumbents might belong, as the old language of integrated processes that deliver the product, process and service is just where that dialogue belongs.
Customers will not live with that.
THE NEW WORLD IS ONE THAT BREAKS UP EVERYTHING, and then integrates it back together again.
The new world is where banks offer APIs to process, usernames to access and apps to service.
Banks will not offer all of these.
Some will focus upon the process, some will focus upon the product and some will focus upon the relationship.
To process, they will offer APIs to ensure they can get volumes on their wiki; to manufacture, banks will make sure their product is the most pervasive and ubiquitous on the net; and to relate, the bank will aggregate and integrate everything into simple apps that customers love.
That’s the real challenge here: how to be the bank fit for the 21st century by focusing upon what you’re really, really, really, really, really good at.
And you’re not good at everything.
You know that, I know that and your customers know that.
So make a strategic decision to focus upon what you’re really, really, really, really, really good at, and then market the hell out of it to make sure everyone knows that’s what you’re really, really, really, really, really good at.
Either that or let the new guys nibble at your best bits leaving you with the bits you don’t want.