As Radtac has many banking clients, this blog post has been written from the perspective that we are part of the retail banking community.
“I’m not so sure that I want my bank to be ‘innovative’ with my money.” Isn’t it this kind of attitude that got us into mixed investment banks and retail banks in the first place? The challenge of casino banking using deposits from customers who just didn’t realise what was going on. So thanks, but no thanks.
Well I’m not talking about that type of innovation – because that isn’t innovation, it’s gaming and betting. I am talking about innovation that delivers valued services to the customer. The omni-channel “know your customer” banking that we are already taking part in on our smartphones and tablets.
In our contactless payments and plastic money world, where is the value for the customer, the value that is being returned to the them? When you have shared so much information and access as a customer with your bank, why is the bank not using this information to help you save money and make better decisions?
In the banking industry we are now uniquely placed at a crossroads. Either we deliver better value while making more money through customer centric pulled products and services, so this makes us market driven. Alternatively we do what we have always done and provide banking services - industry driven or pushed products, this perspective just ignores the reality of change that is happening. “Head and Sand” are not good bedfellows.
In survey after survey (see my previous blog) we have seen that consumers are trusting their banks more now time has passed since the crash of the late noughties. And maybe, strangely, trust them more when they “sell” them products. This is because customers will pay for services when the bank makes the effort to align the data it has on their behaviour with the needs they have as consumers.
My contention is that we need to act like a market, this means that we help consumers to achieve what they want for their financial needs. As an industry we would be focussed on delivering the traditional retail banking model, with some additional features, to a shrinking market of ‘traditional’ users. My believe is that the market is rapidly changing and therefore to stay with that the industry must adjust and change or face the consequences which will be rapid decline.
How are retail banks to do this? In my last blog I talked about innovation and effectiveness versus efficiency. As part of that we looked at incubators and hubs briefly from the point of view of the sponsoring business, additional general information can be found here
As recently as 2006 this table was produced that indicated those businesses or industry sectors that had incubators.
In 2006 the leading authority on business incubators in the USA, the National Business Incubation Association, concluded that there was very little activity of this kind in banking, and certainly nothing specific.
Now the best authority I can find in this area says there are around 30 banking incubators. While it is interesting to see such growth, it is paltry compared to many other industries. It seems as though retail banking is resistant to change.
It is worth noting that Barclays have got into this space and some of their successful examples are listed here. Some of these examples use big data to provide customer insight for creating rewarding customer experiences and loyalty.
Retail banks really need to step into the market using customer insights to drive product development (e.g. Big Data) and establish some disruptive technologies. We know we have the data and just cannot get our hands on it effectively enough. The future of services relies on the use of an individual’s data to create the personal experience, companies such as Glimr are showing the way here. We all know what Tesco’s did with data and the Clubcard using Dunn Humby.
Retail banks need to look at what Index Ventures have done, look at other models and companies that are building incubators, such as L Marks. Above all they need to fund it and do it. Realise that it needs expertise and understanding that they don’t traditionally have. Seek expertise from companies such as Radtac who can help them with technical and organisational development in these centres and keep the disruptive… well… disruptive.
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