For years, I’ve dealt with banks talking about multichannel integration and adding new capabilities to the core traditional channel of branch operations.
In the 1970’s we added ATMs, the 1980’s added call centres, the 1990’s the internet, and now mobile.
For all those years, we merrily added these techno-capabilities as the world revolved around us because we felt we had to and because, in some cases, they saved us money.
We added ATMs because they reduced costs; we added call centres because new competitors were eating our lunch; we added the internet because we thought we could close branches; and we’re adding mobile because it’s the latest fad for customer service.
For all those years, we did the best we could to keep up … but we failed.
You see, I had a realisation this week.
One of those eureka moments.
The realisation that multichannel does not work.
It was something that we’ve been doing in our sleep, but it’s wrong.
What we actually created is mixichannel. Mixi stands for mixed up.
We added ATMs and they’ve grown massively in the UK, from 10,000 in 1986 to over 60,000 today.
These were typically stuck on the outside of branches and are now in car parks, pubs, casinos and anywhere else you might need cash (there are many around Soho, which I’m informed need refilling far more frequently than most ATMs!).
The ATM saved cash by increasing transactional services without the human hand involved, or not the bank's hand anyway.
The ATM however is not really a channel.
It’s an adjunct to the bank’s reach. It’s a cost reduction mechanism. It’s a method of getting rid of a branch or adding a remote branch, but it's a transaction engine.
It’s not a channel.
A channel is one where you can sell stuff and provide advice.
Anyone lingering at an ATM talking about a pension would either be (a) mad or (b) annoying, as the 100 people standing behind them wanting cash will be out with the daggers.
So the ATM is not a channel as such, but call centre, internet and mobile are channels.
And the thing about the call centre, internet and mobile is that the banks have typically added these channels onto existing operations after another player has proven their success.
In the case of the call centre, First Direct were one of the first movers to make this channel work, and are the UK’s leader in this area.
First Direct built their bank around a remote telephone based centre, rather than adding call centre to branch operations. Therefore, the difference is that First Direct have processes designed for remote customer reach, rather than a process designed for administering customer service when the branch is closed.
In the case of the internet, Britain’s leading internet bank is Smile. Smile is a bank designed for exploiting internet self-servicing, rather than adding traditional bank processes to a home-based self-service channel.
And in the case of mobile, we now have a new dedicated mobile bank, Mobank, which is soon to launch in the UK.
What’s the point?
Well, my eureka moment is that the banks of the 1970’s are still the banks of the 1970’s.
The reason why their call centre operations ask for name and account number, and focus upon balance and transaction statements, is because they view the branch as the key contact point.
The reasons their internet services are dull and boring is because they are just automating statements online, rather than leveraging and using broadband-based social media.
And their mobile services will be the same.
This is because the technology is being added to the bank focused around branch operations, rather than using the technology to design a new bank specifically for that technology.
However, when a bank is designed around the technology, it wipes the floor of the competition.
First Direct is not only Britain’s largest call centre based bank, but it’s one of Britain’s favourite banks.
Smile is not only an internet designed bank for internet access, but also Britain’s favourite bank.
According to a BBC survey last year of 13,000 UK viewers, these are the top banks for customer satisfaction and service in the UK.
They are banks without branches designed for the channels of today, rather than banks with branches who added these channels onto their traditional structures.
In Japan, I recently talked about Jibun Bank and eBank. eBank has half of the internet banking market in Japan, as a bank designed for the internet. Jibun Bank has already stormed up the bank charts, as a bank designed for the mobile.
What this tells me is that it’s not about banks closing down and being eaten by new competition, as all of these banks other than eBank are owned by traditional branch-based banks.
What it says is that a bank is far more likely to be successful with a new channel if they design a bank for that channel, rather than tagging on the technology as another on top of their branch operations.
Just a thought as, if true, it says that banks should really be launching new banks designed for new channels under separate brands as their future strategy, whilst making the absolute minimum investment in the new channel with their older channel brands.
Some banks do the latter anyway, but I’m not sure whether it’s by design or lethargy.
Final thought: if my business can run today for 80% of the costs it did a decade ago, thanks to broadband access and low cost technology, why hasn’t a bank passed on these savings to their customers?
UK bank branch numbers declined 11% between 2002 and 2007, and broadband means that UK banks have most customers looking after their own needs these days through self-service. Call centres have been outsourced and offshored, and ATMs have extended to cheque deposits and more.
All in all, banks should have reduced costs massively for distribution and service over the past decade ... so how come customers aren't seeing the cost reductions?
Just a thought, and one I'll come back to I'm sure.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...