As we were finishing a lunch meeting the other day, the bank executive I was with laid down a challenge. He said, "Richard, my cab will be here in five minutes, so, taking into account the time it takes me to walk from this table to the front door, you've got three minutes in total to tell me the top four things I should be spending my money on this year."
Never one to shy away from a challenge, I accepted.
And my guest was serious! The next thing I knew, he was taking out his iPhone and setting the timer. As the self-doubt set in and I wondered whether I would be able to make a case for four things in three minutes, I thought I'd better get going — the clock was already counting down …
Here's what I recommended:
Everyone is talking about the digitization of cash right now. There are reams and reams of whitepapers waxing lyrical about how music, books and films have all been digitized and how cash is next. Apple sells more records than high street retailers do; Amazon leads in book sales and Netflix beams movies into the living rooms of more people around the globe than the Blockbuster rental store ever will — and they all achieved this with apparent ease.
Cash, however, is a different kettle of fish. Digitizing branch banking is more than just the money; it is the creation of a paperless transacting channel. In order to do this, banks need to work out how to truly own and develop a close relationship with their client base. To app, or not to app: That is the question … on most practitioners' lips at the moment.
To my mind, if you put off app development until 2014, you'll look on with envy at what the likes of Google achieve this year in terms of market share. But if you are willing to take such a risk then my top tip for 2013 would be to sharpen up the innovation on products you already sell, and to do it soon.
Be a specialist and be part of the community, because if you're not innovating then you're likely to have fallen far behind in the efficiency stakes. Small players have the benefit of agility here, and may in some cases seem to be one step ahead already, but banks shouldn't let the gap widen: Make 2013 the year to tackle digitization.
2) Don't bank on your data helping you out
Contrary to popular opinion, demographics do little more than present us with a clumsy selection of untailored product offerings with little or no individual story of how they are relevant to our daily lives.
In this day and age, banks need to deploy proper business intelligence units that utilize psychographics in order to dissect customer data. Achieve this, and you'll be able to relax and watch your competitors struggle on.
3) Think like a retailer — think like a media company
I've previously written about the need for retail banks to put the retail back into retail banking. I wish to add to this point by arguing that banks also need to think like a media company.
You need to own your customer relationships by cleverly and constantly engaging with customers on social media. Look at your bank's social media department and their reporting line. Are they truly integrated into the bank's marketing department?
What can often happen is that, through a lack of understanding at the top of an organization, social media is seen as a separate department rather something which needs to be integrated. If social media isn't integrated with your marketing activity, it needs to be.
4) Apply the three pillars approach to anything you take on
The success of any bank, or of any organizational strategy for that matter, is based upon addressing:
•bottom line operating cost reduction;
•growing the top line through sales to existing customers;
•new account acquisition, and enhancing the customer service/experience.
So when you're considering investing in something new — technology for example — it's crucial to check that the investment supports all three pillars.
Take an ATM, for example. It will undoubtedly lessen branch network costs and there will be some customer service gain, but unfortunately it does not grow the top line. For it to do so, you need to carry out sustained self-service adoption which successfully facilitates transaction migration. There are four parts to this equation:
Availability + Usefulness + Usability + X = Success
And what's X? Well, it's the 'special sauce', gained from spending years in the industry and coming to know a little about what works and what doesn't! Alas if you want X unveiled, then you'll have to drop me a line.
So readers, did I achieve my target of four things in three minutes? The answer is no. When making your case for how one of the largest banks in the world should spend millions of dollars, it certainly takes longer than three minutes to put your point across!
But what I did hopefully convey is that 2013 is going to be a big, big year for retail banking. Organizations will have to make some tough decisions regarding their future. These will probably take more than three minutes to make, but they shouldn't take all year.