It’s interesting to hear bank CEOs talking about the threat of technology to their business, and the fact that more and more CEOs are talking about it. Jamie Dimon and Francisco Gonzalez of JPMorgan and BBVA were the first to start the call to action five years ago. Jamie talked about Silicon Valley eating the bankers’ lunch and Francisco forecast less than 50 banks surviving.
Now the rallying call has been picked up by many other bank CEOs from John Cryan, former boss of Deutsche Bank, to Antonio Horta-Osario at Lloyds. In the very latest discussion Dave McKay, CEO of Royal Bank of Canada (RBC), made some interesting commentary around how banks need to reincarnate and rebuild their business models and turn into platforms, rather than just focusing upon banking.
The idea is that the bank will expand its services way beyond finance into accountancy, home moves, starting up a business and more. According to the Financial Times:
RBC aims to offer more end-to-end services — or “ecosystems” — covering wider customer needs than only financial, such as when they want to start their own business, sell their house, or find a new car. For instance, the bank is offering a service for entrepreneurs to register their start-up company with the government, provide it with cloud-based accounting software, supply a branding service and send it letterheads and business cards, all before it has lent the company a cent. For people looking to buy or sell a home, it offers to research neighbourhoods, move furniture, remove garbage, paint a house and even decide which bins to take out each week. Many of these services are supplied by partners integrated into RBC’s digital platform.
He also makes a key point as to why the bank has to do this, which is that banks have historically been the place the would learn when people were starting a business, buying a home or expecting a birth. This is because they would walk into the bank and ask for advice. Now, they don’t do that anymore and the first place to get to know about these life events is Google or Facebook. As a result, there players are far better positioned to service those needs than the banks, who are still reliant on old ways of communicating. This is why banks need to create better life event ecosystems.
Now this is something I’ve heard talked about for over two decades: servicing customer journeys during life events, rather than focusing upon transactional moments; but it’s the first time I’ve heard a bank CEO talking about creating a financial ecosystem around those life events. It makes sense.
In fact, in another Financial Times article this week, Francisco Gonzalez has been writing again about the tech change in banking.
Big tech’s threat to banking is no longer a headline. It is close to consensus. China is the clearest example: Tencent and Ant Financial absorbing huge parts of the payments market, and a new league of competition is in the making …
Some banks that have invested in platforms and digital services will be able to build their own ecosystems, starting from financial services and expanding into other areas. With customer consent, banks have access to valuable data that can be used to help clients make better, more informed decisions about their finances. This, in turn, will encourage them to take on other services from the bank or a partner.
This natural evolution into a marketplace transforms a bank’s role into that of a trusted adviser. But it only works if we create tailored offerings with the best suitable products and services wherever they are available.
This is what we call the circle of trust argument: if customers are willing to confide their data in us, we can use it to suggest money saving alternative investments. The exchange builds trust, leading to more data-sharing, better recommendations and data-driven sales of products and services …
This is a paradigm shift for banking — but, at the same time, it is also the evolution of something we have been doing for many years. It is about finding a new way to support customers to increase their assets — to make their money, and now their data, work harder for them.
So much resonates with my recent writing about big tech giants getting regulated, banks becoming data vaults and curators of marketplaces of apps, APIs and analytics. However, the new addition to this is the serious consideration of how to build that ecosystem focused upon end-to-end services for customers’ life events:
- Moving in together
- Buying our first home
- Having a child
- Starting a new job or new business
- Being in an accident
- Losing your job
- Dealing with illness
- Being a carer
- Dealing with separating
- Dealing with a death
… and so on.
My favourite is one I blogged about recently is where a bank had been mapping financial moments – getting married, buying a house, having a baby, crashing your car, etc – and had started to reimagine the whole customer experience in those moments using APIs.
A good example was the car crash. Today, you’d call your insurer (if you could remember who they were and what their number was), maybe the police (if your phone had enough juice) and probably your nearest and dearest. But what if the car could tell the network what had happened? What if it could tell the tow truck to come, inform the insurer automatically, order you a taxi (or ambulance if needed) and arrange for a replacement vehicle to be delivered to your home that evening?
This is the future of finance: wrapping a financial cushion around the customers’ life to be relevant to them in these times of higher stress and higher value. It’s a whole new world.
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...