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The bank that removes the friction will win

Talking of no-one giving a jot about customer service in
banking, there is a subtle nuance here which I thought someone might have
spotted or commented upon but …

The nuance is that any organisation that takes friction out
of the transaction process has the potential to change banking considerably.

There are several examples of how such friction removal or
rather frictionless commerce occurs, and they are all the subjects we usually

Amazon, Apple, Google, Facebook, PayPal et al.

It is the reason why these firms have seen their volumes of
business spike exorbitantly.

Apple has seen its download business for apps alone blossom
into a $10 billion business in just three years (forget the iPad and the
iPhone) …


Source: Techcrunch 

Whilst iTunes revenue run rate is also $2 billion a quarter.

Amazon has seen revenues double in just two years (2009 through


Source: Michael J Parks

Google’s revenues are similarly doubling every two years.

Google revenues

Source: Marketing Land 

And Facebook’s not doing badly either (albeit with some
questions still about their business model).


Source: Marketing Land 

Meanwhile, my favourite is PayPal, as y’all know.  PayPal has grown from a mere minnow
processing $1.5 billion of transaction per year in 2001 to a behemoth
processing $1.7 trillion dollars by 2011.


Source: Venture Beat 

Every example is one where a business has seen an opportunity
to leverage the digital data age.

Apple has made accessing entertainment online easy.

Amazon has made shopping online easy.

Google has made finding stuff online easy.

Facebook has made socialising online easy.

PayPal has made payments online easy.

They regenerate regularly – google makes one or two
algorithm changes every day – and they recognise that data is their asset.

These companies have annihilated the old world of shopping
and watching, meeting and greeting, learning and working.

What does this mean for banking?

I recently made a commentary about this …

… but if you can’t watch the video, the gist is that banks
are data-based businesses and if they do not leverage data and become agile in
the focus upon the digitized customer, then they will be disrupted.

In fact, there are already fledgling examples of such
disruptions out there, such as Simple and Moven (Movebank, like Banksimple, recently changed their name).

We shall see what happens for, when there is one that makes frictionless
finance as easy as Apple makes entertainment and Amazon makes shopping, then we
will see a movement to the new world of future banking and customers will be attracted
to move rather than disturbed to change.



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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  • Comparing banks to the net companies is fun, but banks aren’t structured that way. All of the net powerhouses grew on stock promise and geek fervour. Banks however are shareholder-owned conservative organisations where bonuses rule inside and regulators rule outside. It’s unlikely that you’d get change in a place where bonuses come from conventional trading activity, and although outsiders know the word ‘change’ is it anymore than lip-service? Shareholders will sell on percentage point, and regulators want change-but-no-change.

  • Chris Skinner

    Wrong comment Iang
    I am not comparing banks WITH net companies. I am saying that a net company that can make banking as simple as the other net companies have made shopping, entertainment and other digitised goods and services will disrupt and replace the traditional bank model.
    Of course no bank will change if they don’t need to, as making profits from traditional means is the fine as long as it lasts.

  • Laruence

    You are spot on. Of the several principles of customer experience, “make it easy” is fundamental – organisations that get that right have a good chance of winning. Established organisations design service around internal products, processes and systems not the customer – that’s too hard. If the barriers to entry were lower, then like other sectors, banking is ripe for disruption.

  • Alfonso

    I would like to add a comment, that might give Lang a chance to focus Chris article from another perspective
    What I get from Chris message is: frictionless
    Is a bank’s customer feeling some “friction” when defining with the bank a Letter of Credit for the International Trading her/his company is doing?
    Is a bank’s customer feeling some “friction” when looks for moving some amount of money from her/his Company’s account to another Company’s account in another bank, in other currency, in other country?
    I am sure, there are many more examples of situations where the customer is getting that kind of feeling: “friction”

  • The challenges to getting established financial institutions to change are certainly many. But this post is spot on in warning that if banks/credit unions can’t figure it out – someone else (tech companies) will.
    And plenty of banks are interested in solving this problem before their competition does. We’re currently fielding a study on this very topic http://www.peoplemetrics.com/blog/about-the-2013-banking-customer-experience-trends-study/