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How the new bank will win

In the last of my explorations of building a new bank, here's why the new bank will win.

One of the biggest things that constrains existing banks is their past. They were created over a century ago to manage retail transactions in branches over the counter with human tellers and, to a large extent, this is pretty much how most branch-based banks look and behave today.

Yes, these banks have added new functionality over the years, and new channels, but it has never really overcome this branch-centric view in that time.

It is for these reasons that mainstream banks do everything outside the branch pretty badly, because everything outside the branch is an adjunct to that branch-centric view.

You may think this is an extreme critique but I cannot think of many traditional banks that do the non-branch channels well. The few that do are global banks that are defocusing upon branches, which is perhaps why their online and telephone channels are improved and enhanced when compared to their domestic rivals.

If you take UK for example, banks have never replaced their core systems in my memory, except through mergers such as those of HBOS and Lloyds today, or RBS and NatWest a decade ago. In both instances, the banks are migrating one banks’ legacy system to another, rather than a wholesale replacement of core systems.

Wholesale replacement of core systems is difficult you see. Everyone refers to it as being like changing the engines on an aircraft whilst flying at 40,000 feet, and they’re right. This is amply demonstrated by the migration of Abbey and Alliance & Leicester to Santander’s core systems over the past few years, and by the Australian bank debacle of NAB and others who are in migration mode as we speak.

Therefore banks avoid migration to new core systems, and are handcuffed into legacy operations through their legacy systems.

We talk about front ending such systems with single customer view through middleware integration, but it’s all sticking plasters on the open wound.

What is that wound?

It is the slowly beating heart of the branch which, over time, will be extinguished and replaced by mobile internet but, whilst it is still beating, it is crushing the life out of progress.

It is this handcuff to the slowly beating heart of branch-centricity that constrains many banks from breaking free into low cost, remote, self-service delivery that is seamless, enjoyable and cool.

Now there’s that word again: cool.

I’ve used it deliberately this week to describe a bank that people want to be with.

That’s what ‘cool’ is all about.

I jokingly referred to it as the bank where the staff don’t wear suits, which was actually more pertinent than I thought.

After all, UBS has a dress code for their staff that is very exacting.

Mine wouldn’t.

It would be smart casual every day.

It would define a brand around cool values of fairness with transparency through the mobile internet.

It would have branches, but only a few Apple store style branches where the Genius bar would be with people who really get the numbers of finance.

And they wouldn’t have to wear suits, but could wear whatever they wanted as long as it was designer label.

Maybe I am just being dreamy, but the bank that is cool has to be one that people aspire to be with.

It is an aspirational brand, and I cannot name any bank right now that is aspirational for the masses.

For the private banking crew, sure, but for the general populous I cannot think of one, aspirational, cool brand out there.

Don’t get me wrong, there are cool brands out there.

Dependent upon your age, Harley-Davidson is a cool brand and, as everyone says every few minutes, Apple’s cool.

Apple always has been.

They have a fan base.

Yet Microsoft is nerdy.


Because Apple is for consumers and Microsoft is for suits.

Microsoft is business; Apple is creativity

So to be a cool bank, you have to be different, creative, aspirational and accessible, and very consumer focused.

And, in this century of mobile broadband, you have to be techno.

Maybe it is for these reasons that there is no ‘cool’ bank out there, because banks are handcuffed to legacy.

So this is my conclusion in this debate about creating the new bank.

The new bank will differentiate by being in the customers’ interest whilst making money by gaining their loyalty and advocacy.

It will appeal to a demographic that is not defined, apart from its psychology.

So it is defined by a psychographic rather than a demographic.

The psychographic is to appeal to those who love Apple and technology.

The customer wants to be with the bank.

They think the bank is working with their interests.

They don’t want branch-based banking, where mobile internet is an adjunct.

Instead, they want a bank built just for them based upon a mobile internet focus, where branch is an adjunct.

So my bank would be built from the ground up, with a customer view based upon the mobile generation and how they behave and interact.

Once that outside-in view is defined, I would build the infrastructure to deliver apps of functionality across mobile internet devices.

The bank would be a digital bank first and foremost, with humanity augmenting that reality.

Humanity would pervade the bank through our fun and cool approach to interactivity via the mobile internet.

And, as we grew into branches, our branches would be Genius Bars for finance with a cool and fun approach that breathes our humanity and fairness into the pores of our human operations.

Something like that anyway.

Either way, it would be better than living on a century-old system of branch centricity that handcuffs us to that past.


About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.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…

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  • Ron

    What’s long surprised me, given how much banks spend on technology, is that existing banks don’t copy your model. i.e. build a new bank then move thier customers to it, rather than keeping thier legacy systems and business processes.
    So you purposely greenfield all systems, in every tech cycle. Create a brand new bank, new tech, new staff, build out services. Migrate customers from legacy to new bank, redeploy staff. Repeat after 7 years.
    To much bravery required perhaps…

  • Chris I could not agree with you more. In fact Rons response is the answer and I have to ask is an ambition to cut your cost efficiency ratio by 3-5 percent the right approach when a new build could possibly double or triple that number ?

  • To my mind Capitec is a good example of the efficien that can be achieved with a new build and they haven’t even started to tap into the “cool” on-line aspect yet, they’ve just started out with more efficient back office systems.

  • I so love the “cool bank” model. Can I please apply for a job when it starts up?

  • Jitz Desai

    The ‘cool bank’ series has been very interesting but, Chris, I think you missed one essential ingredient of becoming a cool bank – partnerships. Apple would not be where it is without the mountain of App developers out there or their approach to retailing their wares through relationships with the mobile operators and retailers.
    Banks have always been arrogant and have never partnered with corporates for the better good (except when they want to extort fees from them).
    For a bank to be cool, customer interaction needs to move from being a ‘Need’ to becoming a ‘Want’.
    This entails an experience that does not entail conscious effort with everything working seamlessly … a must being your mobile intrinsically liked to a payment card of choice with voice/fingerprint security to authorise payment. For this to work, a cool bank would need to have partnerships with retailers(not the current model where only the bank wins and retailer pay) as they would need to be geared up to take payments.
    Partnerships with technology companies is also a must as the real gamechanger to becoming cool would be Apps – these will provide the every day wants; such as automatically categorising purchases for budgeting/expense claims, informing the purchaser that there are better places to buy the same product close by (foursquare anyone?), apps that inform you of where to purchase certain items etc … these are all currently available and with geolocation services can utilise you natural habits into loyalty programmes.
    A cool bank would therefore need to have real partnerships with not just retail corporates but with technology suppliers and innovative 2Gen dotcom leaders – without these, a cool bank would remain a pipe dream… in fact, why don’t Apple just go into banking – millions of customer already at the door…