In 2004, Wells Fargo, the founders of American Express, and the American institution which reaches back to 1852, released its annual report which stated, “Banking is necessary. Banks are not.”
And they couldn’t have been more right. The 2008 banking crash coupled with the onset of digital disruption, technological advancement and the age of customer centricity, has meant that 12 years after this report was written, we’re faced with an alternate reality in terms of banking, financial services (FS) brands and their perceived value to consumers.
A report in 2016 by German company SigWatch revealed that out of the top ten most hated companies in the UK, three of them (Barclays, HSBC and Standard Charter) were banks.Unsurprisingly Shell and BP topped the list, but we all know that the company we keep,says a lot about our own character.
Despite this, I don’t believe banks or FS brands are broken. There is still light at the end of the tunnel.
First Direct has been ahead of the curve in recognising that an FS brand can, and should, be built on customer–first thinking that solves genuine customer pain points. It’s unsurprising then that First Direct has been able to recapture its position at the top of the KPMG Nunwood’s 2016 UK Customer Experience Excellence Rankings.
But it’s not just this that sets it apart – First Direct is a digital-first bank. Progressive in its nature, organisation and delivery, the brand has been built in a digital-first landscape at a time when customer centricity wasa key differentiator. But is that enough anymore? Isn’t it just standard practice that all brands should put their customer first?
If so then brands like First Direct face stiff competition from an aggregation site like MoneySuperMarket’s Ontrees platform, which I would argue is customer centricity itself. All of your banking needs in one place and on your terms. Its experience removes a need to interact with the bank once you’ve logged in, something that consumers are now very comfortable with. And something that “The Payment Services Directive 2” (PSD2) will only exacerbate.
And here in lies the problem.
It could be argued that banking brands have painted themselves out of the picture in terms of facetime with consumers – all in the name of “customer centricity”. Technology is in effect being used to further distance brands from consumers, instead of using it to embrace them.
The banking crisis was as visceral for brands as it was on balance sheets. If traditional banks historically built consumer trust, empathy and reputation through impressive hallways and oak desks, the digital age spells a particularly tough challenge for them. Without the physical reassurance, what do banks and financial services really mean to us today and why do we need them?
Although the audience’s need for financial security has remained constant, the context for that need has fundamentally changed. As a consequence, the psychological relationship between consumers and banks has also changed. This provides a very significant opportunity for those banks willing to accept, and adapt to this change.
Because of this the time for empathetic calm voices and reliable brands in the industry may be upon us. The least showy brands may in fact be the brands that see the most success during the current parliament. As people respond to turmoil and risk-taking, they will rely on their bank to provide a safe pair of hands above all else.
Counter intuitive as it may sound, there is a strong evolutionary psychology argument for banks to in fact be perceived as rather more conservative in response to the fast-paced modern world. The calm amid the storm.
Volvo for example has built its entire brand around this use of evolutionary psychology: cars are an expression of status (evolutionary) but they also invite risk (need for mitigation). Banking and Financial Services could learn a lot from Volvo during these tumultuous political and economic times where consumer trust and interest is low.
Technology must serve to bring us closer together, not act as a barrier to keep us apart.
Perhaps success lies in banks going back to their roots? The problem with this approach is that it doesn’t feel fresh or exciting, especially when we consider technological advances and our constant craving for the new. Banks have the opportunity to help their customers sleep better at night – and that’s a good starting point to rebuild long term strong relationships.
I would suggest it’s time to double down and reinterpret a new, social web 2.0 future which holds true to traditional values. All brands are now built and burnt by conversation, so banking and FS brands should look to embrace a more open and honest conversation with their audiences, on their terms, around things they care about. The more digital we are, the more human we must become.
So what will “Brand” mean in this new environment?
If Brand = Product + Experience, then how we package up a commoditised brand becomes increasingly important. It’s the proximity to consumers, the utility they provide and the net effect that they have on our lives that creates the biggest effect on our relationship with them. Not technology.
Undoubtedly new regulations and processes will play a pivotal role in how banking brands position themselves moving forward. PSD2 and GDPR will add further layers of legislation to an already highly-regulated market which could hinder as well as help banking credibility. On one hand, this will provide a new level of assurity that consumers are looking for, however safety and stability is an illusion when these newly created regulations are set against a backdrop of political and economic uncertainty. Brexit, Trump, falling share prices and the death of institutions all play heavy on the subconscious minds of consumers and their relationship with them.
However,the danger isn’t regulation, it’s the knock on effect of regulation; that we will become less reliant on “Brand” to navigate the market and far more reliant on convenient service, pricing elasticity and valuable utilities. The onset of new digital banks like Atom and Monzo shows us that new players can and will disrupt to fulfil this need.
The brands who will win, will be those that use new regulations as a trampoline, not a safety net. Embracing a new “can do” spirit which is underpinned by a level of stability, altruism and community that consumers crave in these less certain times.
How do brands set themselves apart and connect with consumers in a more meaningful way?
Be Relevant: Banks must build products and services around things that consumers care about, not what banks would like to sell. If banking and FS brands are to regain their stature as financial and reliable consigliere, they must be willing to adapt and flex to become relevant to their customers’ needs and pattern-match their language accordingly.
Be Honest: Beyond GDPR and PSD2 which are hygiene factors, banks must seek to go beyond what they “have” to do, to what they “must” do. Fair pricing, no jargon and a greater level of transparency on how and where they make money will pay dividends (excusing the pun).
Be Useful: Utility is not really a differentiator when technology is bricolage. We now expect brands to do and be more. We expect things to intuitively just “work”. How banks become more useful to consumers should centre on life outside of banking to ease the stress of modern life. If a computer company like Apple can transform the music business, then why can’t a banking brand look outside its competitive set to mean more than banking to more people?
Relinquish Control: In a world where it’s easier to partner than build from scratch traditional banks should open their doors to new ideas and new processes. The key to this is recognising that the best minds for a certain task aren’t necessarily in the existing organisation. Off platform and incremental innovation around API’swill be the live blood of “beta-banks” moving forward.
And perhaps most importantly…. Have purpose and a clear narrative:
Brands obsess about visual identity, but digital technology is underpinned by conversations and connections. Owning a simple and clear narrative, laddering up to a verbal strategy will differentiate a brand beyond pictures. Owning the conversation around your brand and turning your products and services into talk points, not touch points, will deliver a more sociable, differentiated experience.
And it’s on this last point where banks will truly attract consumers and differentiate their offering. Atom bank has the right idea. Mark Mullen, their CEO was recently quoted as saying:
“We believe in banking. It’s deeply unfashionable to admit that. But we think that banking has value to add to society and will continue to have value to add to our society for as long as money is needed.”
That’s a purpose which is far reaching beyond typical banking products. Perhaps a 21st Century solution to the more cautionary words of Wells Fargo in 2004. Wells Fargo and American Express are both brands born from virtual service, so it seems fitting then that the sector has gone full circle. And as with so many things, we can and should look to the past to help build the future.
Nick Tate is the Chief Growth Officer at Verbalisation, a behavioural communications agency.
SoftBank telco unit rotates CEO, Son steps down as chairman
By Sam Nussey
TOKYO (Reuters) – SoftBank Corp, Japan’s third-largest telco, said on Tuesday Chief Technology Officer Junichi Miyakawa would become its chief executive officer, effective April 1.
The change at the top of one of SoftBank Group Corp’s largest assets comes after two years of deliberation, with the telco emphasising the need to “pass on the strengths of its current management system to future generations.”
The rotation is likely to lead to speculation over SoftBank Group CEO Masayoshi Son’s own succession plans. The 63-year-old billionaire abandoned a previous plan to hand over the reins and went on to launch the $100 billion Vision Fund.
The son of a Buddhist priest, 55-year-old Miyakawa is a technical whizz driving projects including the wireless carrier’s 5G build-out. He replaces 71-year-old Ken Miyauchi, a key lieutenant of Son, who took up the post in 2015.
Miyauchi will take the post of board chairman from founder Son, who will remain on the board. A household name in Japan, Son joins business leaders such as former Apple CEO Steve Jobs in being the face of the company he runs.
During Miyauchi’s tenure, the telco had a bumper IPO in December 2018 to feed cash to SoftBank Group as it shifted its focus to investing in tech companies. Son has since further reduced the group’s stake after a series of high-profile stumbles.
Miyakawa takes the helm as the industry faces unprecedented political pressure to cut fees, potentially eating into fat margins in its core business.
Looking to grow sales beyond selling mobile and broadband subscriptions, SoftBank is integrating a hodgepodge of companies including online fashion retailer Zozo and message app operator Line Corp into internet business Z Holdings.
Known for blue sky thinking including flirting with the idea of making cars, Miyakawa’s pet projects include an attempt to deliver broadband via drones. Alphabet Inc said last week it was abandoning its own balloon-based attempt.
(Reporting by Sam Nussey; Editing by Tom Hogue, Shri Navaratnam and Subhranshu Sahu)
Over 60’s turning to digital banking up by 90% during pandemic
More than 90% of people aged over 60 have used online banking for the first time during the Covid-19 pandemic, according to a poll by iResearch Services, highlighting the importance of banks getting digital right in 2021.
In comparison, 17% of people aged under 30 said they were accessing services via an app or web browser for the first time.
The findings show how banks must adapt to help service the influx of new digital users and gain their trust, accelerated by the Coronavirus pandemic. With 97% of 18–24-year-olds trusting their bank with their data, compared to only 33% of people aged over 66.
Commenting on the findings, Gurpreet Purewal, Associate Vice President, Thought Leadership, at iResearch, said: “Our study demonstrates the lasting impact of Coronavirus on how people will access banking services from now on. Banks will be required to refocus on really understanding customer needs in order to engage with the different requirements of each individual customer.
“More than half (54%) of respondents said they are less likely to attend a physical branch after the pandemic. This demonstrates a seismic shift in the way people will access banking services now and into the future.”
In other findings, 63% of respondents said their bank acted in their best interests during the pandemic, but a third said they would consider switching their bank for better, more personalised communication.
Purewal added: “On the whole, High Street banks have emerged with great credit from the pandemic for the way they have supported their customers. As the economy rebuilds, it will be more important than ever that they communicate in the right way to help consumers through 2021 by leveraging digital platforms and understanding their needs fully.”
Asked how banks can improve their communication with customers, ‘connecting on a personal level’ ranked highest, followed by ‘more honest and open dialogue’, a ‘demonstration of how they are helping customers’, ‘more creative campaigns’, ‘consistent messaging across channels’ and finally ‘responsiveness to major events’.
Banking on the cloud to create a crucial advantage in financial services
By Rahul Singh, President of Financial Services, HCL Technologies
Once considered a revolutionary technology, cloud is now at the heart of agile and innovative businesses. The financial services industry is no exception, and has been a major adopter of cloud-based Software-as-a-Service (SaaS) for its non-core applications. Functions such as customer management, human capital management, and financial accounting have progressively shifted to the cloud. Several banks have also warmed up to using cloud for services such as Know your Customer (KYC) verification. IDC analysts say that public cloud spending will grow from $229 billion in 2019 to almost $500 billion by 2023, and a third of this will be spent across three industries: professional services, discrete manufacturing, and banking. The time is ripe for an increasing number of financial services providers to consider moving more of their core services to cloud.
Adoption is already on the rise
Earlier reluctance to move core activities to the cloud has softened, and many banks have put strategies in place to migrate services, including consumer payments, credit scoring, wealth management, and risk analysis. This significant change is driven by factors such as PSD2 and open banking, which require secure and cost-effective data sharing.
Regulators too were once cautious in their approach to cloud technology, but this is also changing. The Australian Prudential Regulation Authority (APRA), for example, whilst acknowledging the risks associated with cloud, also recognised the risk of sticking to the status quo. ARPA trusted the enhanced security offered by the cloud, and updated its cloud-associated risk advice. Wisely, APRA recommended that banks must develop contingency plans that allow cloud services to be provided through alternate means if required.
Rising pressure from new challengers
The other pressure for incumbent banks is from next generation fintech firms. These are cloud-native organisations, and are able to onboard customers remotely in minutes, roll out new services in days, and meet compliance requirements at lower costs.
As a result, the need for traditional banks to upgrade core systems and integrate the latest technologies is stronger than ever. The COVID-19 pandemic has been an additional driver, highlighting the importance of upgrading and migrating core systems to the cloud. Financial services organisations have been forced to rethink their approach to digital transformation, and pay special attention to a cloud-aligned culture. The industry is recognising how the cloud can address new and ongoing regulatory changes, meet different demands from customers, support the roll-out of emerging technologies, and enable incumbent providers to respond to the relentless competition from fintech firms.
New year, new priorities
As we enter 2021, financial services providers will need to reset their priorities, and go beyond using the cloud for scalability and cost efficiency alone. The new areas to focus on will include:
- Creating a robust digital foundation: The cloud market is expanding fast, and there is an ever-increasing number of services on offer. Whilst the big three hyper-scalers are the obvious choice, various other players are also gaining traction, such as IBM, Oracle, and Alibaba Cloud. Organisations will need a robust digital foundation to adopt cloud at scale in a secure and compliant way. A well-architected digital foundation, supported by resilient operations, ensures that organisations have continued access to their systems and data, regardless of where employees are located, or what device they are using.
- Adoption of technology platforms: Enterprises are finding ways to reduce complexity by embracing a platform approach, and increasing the speed of business IT consumption. Physical infrastructure is being abstracted into cloud-based platforms, with data consolidated into data lake platforms. Software products like Apigee are being offered as capability platforms to drive better analytics and intelligence.
- Enhancing IT security: Cloud offers organisations greater security than on-premises servers, if implemented correctly. Financial services organisations have relied on control and compliance-based security for years, but these practices are increasingly vulnerable to cyber threats. Whilst service integrators create robust cybersecurity solutions for financial services organisations, cloud providers are also looking to provision industry-specific security and regulatory measures like end-to-end data encryption – making it easier for financial services organisations to be compliant whilst migrating to cloud.
- Driving innovation: Cloud is the fundamental factor behind the ability of fintechs to innovate rapidly. Using cloud, financial services can leverage new technologies and tools like augmented reality (AR), virtual reality (VR), natural language processing (NLP), machine learning (ML) and the Internet of Things (IoT) to unlock new processes that improve customer interaction and experience with portable real-time services. Whilst fintechs have led the way in cloud-based innovation through open banking platforms, some of the leading banks are also adopting cloud to simplify their business processes, including KYC as a Service, to enhance customer experience.
- Enterprise synchronisation: Effective collaboration, both internally and with external partners, is crucial to success in the ever-expanding financial services ecosystem. Cloud allows businesses to integrate collaboration through shared tools and platforms. This is a critical ability as it leads to faster decisions and improved innovation cycles.
Legacy systems hold banks back from improving revenue generation and restrict their ability to build a responsive and resilient business. Cloud is a key factor in the success of challengers: traditional banks have no time to waste in migrating their core systems to cloud and building a secure future.
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