The dilemma of digital banking is not about tech

scientist-762627_640I recently had the privilege of speaking at the BAI Beacon conference in Chicago. The topic was about the potential for APIs in financial services. The focus was on customer engagement.

Update: A more detailed version of this blog is now on BAI.org as an article titled: Pieces in Place: The Rubik’s Cube Model of APIs

This session presented a 3-step model for how opening up and become more connected will improve customer engagement. The 3 steps are below. You can read more on BAI under the pretty bubbly title of “Financial Services APIs: Amazing Potential Innovations“.

  1. Opening up access: Adopt APIs so we can make our services and products available when and where they are needed. This can boost top line growth and help retention.
  2. Originating transactions: Get in the middle of customer experiences to help initiate transactions that otherwise would be triggered elsewhere. For example, improve the adoption of features such as card linked offers, develop wish lists, provide better tools for personal financial management etc.
  3. Connecting experiences, creating value: Focus on improving financial well-being. Orchestrate between both banking and non-banking services. Such services include bill pay, PFM, investments, retailer loyalty programs, goal setting etc. Guide customers, advise them, and ultimately help them meet their financial goals.

However, one thought keeps coming up: Is the first step of this journey really the wholesale core technology and delivery transformation? Should that take place before we can do anything else? Indeed, if we go by popular opinion on financial technology (or FinTech), it does seem to be the case.

In my opinion, upgrade of technology is a reality that must be met as soon as possible. Doing so will help us deliver more efficiently. However, the immediate challenges have to do with customer engagement, differentiation, and building of context. This is arguably more so for full service banking. That is because their business purpose is higher (or can be higher) than simply helping us transact and hold balances.

If we look at what’s happening in the sector, its actually this higher purpose of financial money management and financial well-being, rather than the core banking landscape, that is being disrupted. Innovations are cropping up and aiming to meet peripheral customer needs. Such innovations include – personal financial management, saving for retirement and education, peer to peer payment transactions, lifestyle needs, product warranties, lending and mortgages, broad based loyalty management, and so on. As a result, it is evident that simply supplying various (and disjointed) products and services to customers to choose is not proving to be enough. We need to actively help customers with their goals.

Furthermore, two important considerations arise:

  1. As digital innovations drive customer experience based engagement, the underlying core is becoming more and more invisible and undifferentiated.  Given this trend, step 2 of the model to build context assumes higher importance. I outlined some approaches in this article on BAI titled Think Simple for Digital Transformation.
  2. Although innovations in Fintech provide better and effortless customer experience, the silo transactions may actually be causing defragmentation of customer engagement. So we should be looking at integrating the customer context where possible to drive immediate impact. Here step 3 of the model to build partnerships takes priority.

Those who have scale can start with Step 1 to build strong momentum in a broader market. But for others, there’s actually an opportunity to solve for customer engagement and context first. The underlying enabler will still be technology but they can first focus on creating models of customer and community engagement. These models will then demand various building blocks. And based on these we can then properly utilize and structure the core, if at all we can call it that in the future.

For those out there who are helping their organizations or clients think through these issues, please feel free to get in touch. I’d love to interview you for an upcoming series on best practices. As usual, most of the thought process in this post is based on the 5 principles from my book Dancing The Digital Tune, which are now being extended in my upcoming book – Connected! – How #platforms of today will become apps of tomorrow.

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Appreciate your comments!

 

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