The bank of the future: collaborator, facilitator or centre of your information ecosystem?
Accenture’s Ian Webster chats with Marketing about the future of financial services and what paths banks can take to cement their place in customers’ lives.
The internet of things – comprising countless amounts of connected devices – is creating an amazing conglomeration of data and insight. The question that Ian Webster, managing director of Accenture’s financial services distribution, marketing and analytics practice for APAC, has been thinking through is: what does that mean for financial services? What does that mean for my clients and how might we get ready for that world?
According to Webster, in a financial services context there are three key dimensions to think through:
- Customers and their behaviours online are really quite different to what’s happening in a physical environment (Accenture calls this ‘customer 3.0′)
- the internet of things, the idea that more and more everyday items are getting connected, and
- what does that mean for banks?
Financial services businesses are at a crossroads now in terms of how banks can respond to the above points, he says: in short, they can either become a utility, or they can take an ‘everyday banking’ type position.
We ask him to break down what all that really means for the role of financial services brands in the lives of the people and businesses they call their customers.
M: What is ‘customer 3.0’?
IW: How the internet’s evolved, and broadly speaking it’s evolved in three ways, the power of those customers and their ability to devise their own products and services and create their own offerings and their own outcomes is getting greater and greater.
Think back to the origins of the internet. If you recall, it was very much a brochureware type world, where people used the internet to promote their product or service but at the end of it there was very much a call to action around, ‘Come to my branch or store and I’ll happily sell you this’. That was a web 1.0 kind of model, and customer 1.0 lined up against that.
The 2.0 version was one that said, ‘You found me’, and the search engines got stronger and this is when Google came to prominence. Now, rather than just researching my products and services you can now buy them online, but it’s very much a, ‘You come to my URL, you have to find me.’ It’s kind of like a digital version of a shop.
Then 3.0 is now turning all that on its head. Now the shop has to find the customer rather than the other way around. Of course you can transact and buy products and services, but now really, it’s much more that the customer is in power.
I think about things like social media and price sensitivity and so on, and there are some really interesting things, such as that two-thirds of people will go five or 10 minutes out of their way to get a better price. They’re researching because they’re price sensitive, and when you realise that 79% use their phone to help their shopping experience, then it’s not surprising to find more and more customers are going to use their phones to secure better deals.
I find it very interesting that businesses at large, that when it comes to customer segmentation, very few are pouting a digital overlay on that segmentation.
The reality is that age-based demographics are not a determinant of digital customer behaviour. I think people are starting to wake up to that reality, but [given that customers are] using all of these tools and assets and enablers to secure a better price, it’s very much a changing landscape. This changing customer, we call it customer 3.0, is right at the heart of that.
For the last five or 10 years, for internet banking in particular, the thinking for financial services institutions was about bringing the customer into the branch. But that’s becoming harder and harder. People are more and more time poor, and customers are using ‘crowd’ more and more as part of their decision making.
When you think about it in a banking context, or any advisory context where there might be a hint of bias, it’s not massively surprising that customers might be looking for a crowd-based input to fuel their decision making.
M: What’s the internet of things in a banking context?
IW: What I’m thinking about here is that as more and more assets – I’m putting a financial services spin on it now – get connected, and as the information around these customers get brought together, the question then is: what insights could we devise? And, what advice and real-time transactions could we concoct?
In a marketing sense, marketing’s all about creating a need and then fulfilling that need. So how do we identify a need and create a need? How do we use all of that data and all of those insights not only to understand the individual or business at the other end of that transaction, but to position our products or services at the right time in the right way in order to be timely and relevant and useful?
The closer we are to that point of realisation around the need then more likely our probability of converting that lead into a sale or service type interaction. And ultimately that’s what we’re trying to do.
For a bank there are a couple of really interesting spins on this. One is, what’s the definition of an asset? Banks are going to have to start thinking about how they’re going to aggregate not only the title-based assets like houses or motor vehicles and so forth where there’s a register, but they can look at bringing other assets into the equation so they get a better sense of what your net worth is. And that’s not a ‘Big Brother’ type dimension, because there’s a natural tendency to withdraw from that level of detail, but when you can see a benefit associated with it, I think a lot of customers would opt in to that type of relationship.
M: How does a bank address that bias, as you mentioned earlier, when the bank is at the centre of the information ecosystem?
IW: One comment I would make off the cuff is that it’s not really much different to the way the world’s been for the last hundred years. There’s always been integrative bias.
I’ve worked in banks for years, in Ireland and here, and all too often I hear my clients say ‘We are a bank and therefore we’re at the centre of a customer’s universe, the customer’s relationship with us is really important’. The interesting observation is that while it might be important to the bank, I’m not convinced it’s equally as important to the customer.
M: Having a bank is important, but a specific bank is replaceable…
IW: That’s true, but I think the bank is only really important at a particular point in time. It might be fine to have a conversation about buying a home and therefore what finance options are around, but how often does that happen? How often are you going to buy a car, really?
Even from an insurance perspective, how many customers set up a premium on their home and contents, never to want to talk to the insurer ever again. So really the challenge is: what’s the role of the bank? How can the bank position itself differently?
M: What are those options?
IW: There are two paths to pursue. One is the utility path, and by that I mean you produce a product but you make it available to multiple parties. You don’t necessarily have to have the distribution, you don’t have to have the branch network, the mobile bank, etcetera. You basically become the wholesaler of financial services.
We’ve seen that in Australia with a couple of guys. White-labelling happens a lot, and that’s one model.
The other [path] is to try to engage these customers on a more frequent basis. What we term ‘the everyday bank’. The idea here is that rather than just those once in a lifetime conversations, we try to get t o a point where we’re having more and more conversations and interactions with our customer. And interactions can happen via alternate types of media, like mobile internet, but they can also be related tools.
Bringing it back one step to the ‘bank of things’ concept, we get more understanding around customer assets and the usage around those assets. To elaborate, we see a lot of insurers now starting to think about and using technology to see to what extent customers are actually driving their car. How many miles are they doing? How aggressively are they driving? Where are they driving – is it city or all country? The whole point of that is to think through, can I be sharper on the premium? Can I be more tailored and specific? The premium I offer you can be tailored specifically to your driving behaviours and your habits. That’s a clever use of information but it’s also to your advantage, so long as you’re on the good end of the spectrum.
M: And if you’re at the other end?
IW: If you’re at the other end, then what’s going to happen is over time, as more and more insurers find more and more customers who want to have these tailored to them because they offer cheaper premiums, what it’s going to do is leave a bucket of customers, the bad drivers, in a pool of customers whose premium is going to rise.
At the moment you and I are subsidising those bad drivers, right? Because our premium is geared up in such as way. If we were able to extract all of those good drivers from the pool of insurance customers then what’s left is bad ones, supply and demand being such that price will have to go up.
M: But isn’t that the idea that the whole insurance model is based on?
IW: It is when you think about it in terms of the overall portfolio, but what happens at the individual level might be that the premium I pay might be driven by my no-claims bonus. In aggregate you’re right, but at an individual level it’s really quite specific. The idea is that as you get sharper information about driving behaviours, there can be more competition in place for your policy or for my policy, such that wend up getting the right policy for us at the right price. And it would leave other customers behind.
M: So amazing drivers, with the data to back it up, basically have their pick?
IW: Well yeah, if you expose that to all the insurers.
M: That changes the power structure quite a bit. What roles do you see financial services providers taking?
IW: There are essentially three, and they’re not necessarily independent roles.
The first is around the benefit provided, the idea that you leverage your size but you bring economic benefits to your customers through the different ecosystems you create. In a marketing context – and recognising once again that a bank isn’t the centre of a customer’s universe – the question is how can a bank participate in more everyday transactions?
The answer might be by working in collaboration with other people. This notion of creating ecosystems, the word that you used before, I think is the right one. How can value be provided through a broader set of ecosystems? At a consumer level that might mean things like loyalty programs and other stuff. At a business level it could mean bringing accountants and lawyers and other service providers into the interaction to give a business customer a greater probability of a successful outcome.
There are all sorts of ways a bank can create ecosystems that generate value.
The second role is around the traditional role, which is around ‘advice provision’. Banks still need to provide advice – we talked about the bias dimension before and that, to a degree, can’t be avoided – the challenge now needs to be around how can the advice be provided to more people? How can we lower the threshold for access. To a degree, some of that might be around self help. If I could automate the provision of advice, then theoretically I could make that advice available to everybody.
Now, of course, there’s always a human dimension to it, and historically banks have always wanted to give high net worth individuals or businesses a relationship manager. So what does that model look like, how could you provide a relationship manager to more people, and how could that be advantageous? That’s the second type role.
The third dimension is around facilitating access. In this context I think back to the way banks for 30 or 40 years ago. Back before internet banking it was all about the branch and the branch manager was really important. As much because he or she had the keys to the safe’ and could lend you money, and take away some of those financial challenges for you, but perhaps equally as important they could facilitate introductions to other people or other businesses. They could bring you into the community and help you on your journey to become a successful business, or to develop your personal wealth. I think that with the centralisation of a lot of those decisions and the automation of a lot of those decisions has allowed banks to be far more streamlined, but a lot of that facilitation type role has been lost.
M: How does all this play out over the next couple of years?
IW: What I’m expecting to see over the next few years is that these tools – the internet of things, the behavioural analysis, the insight around customers and what they’re doing – all of that comes together now together with insight around all the other customers, and can all be done at a global level. [This could happen] to the extent that if my customers behave globally then theoretically I could be bringing them together at a global level.
That might be a little bit further afield than the Australian banks are thinking, but even if you look at ANZ with their super-regional strategy then what if they could connect Australian businesses with Asian business so they could become more effective in Asia? What if they could do the same in reverse?
Although traditionally that’s where the banks make a lot of money, I think a lot of businesses would be appreciative and pay for a service that helps them interact and engage and build their networks into areas where they’re trying to develop.