stgilesresident on digital banking!

Alex Bray's view of all things digital banking - covering internet banking, mobile banking, social media and augmented reality. I'm Channel Solution Director for Retail Banking at Misys - but these thoughts are my own...

The $20 smartphone - and what it means for mobile banking

In every market I visit, the message is clear – it is all about channel innovation. A couple of weeks ago, I attended the West African Banking Dialogue in Lagos. This event brought together top banks from across Nigeria and Ghana to discuss the future of banking in the region. Again and again, banks looked at the future of digital and how it would shape their business.

A key message that I shared in my presentation was arrival of the ultra-low cost smartphone. I cannot emphasise enough that this will have a massive impact on banks. Both ARM and Mozilla have announced devices will be on the market soon at a cost of $20 or $25 ( The devices will be hi-spec and their screens will be similar to those in the iPhone 3. That is a serious reduction of the lowest price today – which is around $80 for a fairly low spec device.

This will mean a significant leap in the uptake of mobile technology across all markets. I suspect the impact will be most pronounced in emerging markets – but it will have implications for developed markets as well. We have already seen some leading banks seize the opportunities provided by mobile. An excellent example from the Lagos meeting was Standard Bank in South Africa – which is now the largest distributor of iPhones in South Africa. The bank offers the phones to customers at a low price, with their mobile banking app already loaded on it. Having realised that the cost of mobile data was a big blocker for many potential mobile banker on low wages, the bank had a great idea. All their branches have excellent internet access which was not utilised from 5pm to 9am. So they simply made their branches into wifi hotspots after branch hours. Customers who qualified for the bank’s loyalty scheme were given free access.

When you add such innovative customer strategies to the new device prices, you have the conditions where the adoption of mobile banking will fly. That means banks need to think carefully about how good their mobile banking is as a shop front for their brand. Banks also need to think about how they will grow revenue on the back of this upswing in adoption.

In my next blog, I am going to talk about the opinions from Lagos on the role of telcos in mobile banking – and why banks need to think seriously about mobile strategies involving telco dependency.  

Retail channels - competing and cannibalising?

Over the years, the banking industry has been adapting to a consumer migration from bricks-and-mortar branches, to digital points of interaction. To handle this movement, banks have built up the range of functionality in each of their multiple channels to deliver the best possible customer experience: delivering ‘multi-channel banking’. This approach has been intended to enable customers to use the most suitable channel for their needs.

However, in reality, this approach has not only hindered the customer experience, but in some cases, it has also resulted in conflicting competition between banking staff in the various channels.

Inter-channel competition – and sabotage

I know the case of a tier one bank which suffered as a result of different channels becoming protective of ‘their’ customers and sales in order to achieve their siloed targets. Branch staff feared the impact of contact centre staff ‘poaching’ their customers and sales. As a result, they habitually captured phone numbers incorrectly. This meant that customers could not be proactively contacted by the bank’s contact centre - leading to poorer customer service.

Channel silos lead to poor customer service

Similarly, in another bank, a multi-channel strategy was driving a bad customer experience when customers were applying for a new mortgage. Customers could initiate their mortgage applications online, but if they had a question and called the contact centre, their online application was cancelled and a new application was opened by the contact centre staff. The customer was then unable to access or review their application online again. This particular problem was driven both by channels competing for sales targets as well as inflexible, siloed bank systems. Consequently, customers were frustrated - when they would have otherwise chosen to self-service online. This also proved inefficient for the bank, as they transferred a self-service customer into a manual – and thus higher cost – application.

These stories are common examples of multi-channel strategies that are failing and having a detrimental impact on customer service. To address this, a shift from multi-channel (old and siloed) to omni-channel (integrated and mutually reinforcing) needs to occur. 

The omni-channel solution

 Omni-channel banking joins up the technological silos (branch, contact centre, online, mobile etc). Omni-channel banking provides a seamless and consistent customer experience across and between all channels, making it easier and quicker for a customer to gain access to new financial products and services. Customers should be able to start an application or complex transaction in one channel. Then if they need person to person support, they should be able to access that support conveniently, and without being migrated entirely out of their original channel of choice. Omni-channel allows the bank to gather information to create a detailed picture of the customer’s behaviour. This efficient approach to channel can deliver much-needed bottom line benefits and provide banks with a pragmatic way to unify technological silos and compliment the customer journey.

Have you had any experiences of silos with the multi-channel approach?

Do you see omni-channel as the way forward? 

The Digital Differentiator – why banks need to think differently about digital

Internet Banking and Mobile Banking are fundamentally different to most of the functions within a bank. Digital Channels teams exist in a lightning fast market, where the pace is set in Silicon Valley’s fizziest start-ups and sustained by the goliaths of Web 3.0 – such as Apple, Google and Amazon. The pace of change in the financial services industry impacts banking operations or operational risk at a more sedate pace. Here, significant change is more likely to originate from regulators rather than competitors.

As a result of these differences, few banks have been able to foster the culture of rapid innovation necessary to deliver a sustainably differentiated digital channel experience to customers. At a recent Misys Customer Advisory Board, a number of banks highlighted that customers feel that online banking experiences are becoming commoditised.

And this is happening at the worst possible time. Customer faith in banks is already very low. New entrants are nibbling at the most lucrative segments of banks’ customer bases. One or two mega-players are starting to invest. Most banks could find themselves squeezed on all sides in the next 12-24 months. So what should banks do to defend and grow their customer base?

1. Start innovating

Banks must regain their verve for innovation – particularly in digital channels. If traditional retail banks harness the same levels of enthusiasm and willingness to experiment as the disruptive ‘new finance’ start-ups, then we will see banks delivering on the promise of a differentiated digital channels proposition. Just take a look on Apple’s App Store – the majority of the highly-rated banking or personal finance apps on the market are not built by banks.

Innovation need not be an enormous expenditure, rather banks can invest in many small innovations, beta test them and focus investment where customer feedback is positive. Banks can also use crowdsourcing as a way to test customer sentiment. First Direct Bank (a part of HSBC) in the UK has done this successfully with their First Direct Lab.

2. Be brave

The essence of innovation is being bold, and challenging the status quo. This will always incur an element of risk. But at the same time, banks can in mitigate that risk by paying attention to successes in non-financial services companies. One good example is gamification – the use of the principles of gaming in delivering a customer facing process. Gamification has proved very effective boosting customer engagement and retention, whilst also making use of social networks for word of mouth marketing.

Again rather than taking a big risk with a large investment, banks can look at cloud-hosted solutions that lower the cost of entry and enable them to grow organically as adoption rises. Also, banks can mitigate any risk by working with partners and customise or extend innovative packaged solutions for their local market. DSK Bank, the largest retail bank in Bulgaria has just launched a unique mobile savings application developed by Misys – BankFusion Gameo. The cloud-hosted app harnesses elements of gamification to improve DSK Bank’s customer experience, while uncovering valuable sales leads for the bank through greater customer insight.

3. Don’t give it away

Banks are sitting on a data gold mine. This data is the key to unlocking the best possible experiences for bank customers. Don’t give it away! I have heard some banks talk about exposing their APIs – and a couple of financial services companies have started to do so. The idea is to allow digital agencies to come up with wacky and creative ideas to use the bank’s data. The argument goes that this would let the banks focus on what they do best – and leave innovation in the hands of ‘more creative types’.  I disagree.

Banks should not give their data – their key advantage – away to third parties. Instead, leading banks will use that data to learn even more about their customers. Yes, banks should work with partners who have expertise in digital channels innovations, but banks should continue to own the end-to-end customer relationship and all the related data. This data can then be used to personalise customer experiences as much as possible – giving the bank the edge in the war to stand out.

Despite the changes of the last few years, even as the market has become more competitive, there is still everything to play for. Banks will stand out from the crowd if they keep innovating, are brave about those innovations and keep control of their data. Those banks will be known for providing useful innovations that improve the customer experience, while delivering ROI for the bank.

Skype-hype? Is now the time for video-chat in banking?

I worked on the first web-chat deployment at Lloyds TSB back in 2006. At the time, we were convinced it would deliver us a range of sales and customer satisfaction benefits. And yet, it flopped. It was hard to operationalise and customers were decidedly lukewarm. I’ve been a little cynical of real-time digital communications since then, but a recent statistic in Celent’s recent Myths and Misconceptions in Digital Channels report caught my eye.

Celent have identified that tablet ownership is a clear predictor of video chat usage (e.g., Face Time or Skype), with tablet owners nearly twice as likely to have ever done so (59% versus 36%). This is very significant when you consider the growth in tablet ownership - up to around 35% for US respondents. However this figure rises to over 50% for those with salaries over $100k p.a.

This means there is a growing device class which is particularly popular with wealthy customers who already have a high propensity to use video-chat technology. The devices and technology are reaching critical mass.

This is significant because many banks are still struggling to connect with customers online – particularly during sales processes. I’ve always believed that video chat would be much better for banking than webchat. From a customer’s perspective, it is easier to initiate – it takes just one click, no tricky numbers to remember or dial in. The face to face option gives the customer a more human touch.

From the bank’s side, the customer interactions are likely to be faster than via webchat – where customers tend to drift off mid-conversation. They also provide the opportunity for banks to differentiate their service, by providing a human interaction – which can be particularly tricky to achieve through digital channels. It is one of the ways a bank can deploy an effective and targeted omni-channel sales process.

The word targeted is significant here. Obviously, deploying this technology will involve cost. Rather than try and video-chat enable all online processes, bank must stay focused on targeting the right customers at the right times.

All this given, I believe the changes to customer behaviours and device adoption are now sufficiently advanced to make online video chat a meaningful opportunity for banks. Time to turn the hype into a reality.

Does IBM’s 2-factor have the X Factor for mobile banking?

I’m a big fan – and former employee – of Big Blue. So it’s always good to see the innovations that continue to emerge out of the IBM Labs. In their latest offering, reported by Finextra last week (, IBM has employed NFC technology to deliver a simple customer identification and verification process for mobile banking.

They have done this by using contactless cards and Android 4.0 phones. In effect, mobile phones begin to operate a little like ATMs. The user enters their PIN into the phone and then presents their card to identify themselves. They then present their card again to authenticate. It is a nice way to try and make logging into mobile banking and authenticating transactions easier – and more intuitive. Certainly ease of use is often cited as an important barrier for banks to overcome to ensure their mobile banking services are adopted. The IBM proposal will nicely piggyback on the existing adoption trends for NFC and contactless cards – and by basing it on technologies which already have critical mass, they have ensured the solution is immediately accessible.

The IBM proposal varies from using an ATM in one significant way. In the IBM concept, the customer’s  card has to be presented twice. Whilst it is not a serious usability issue, it is indicative of the clumsiness that many different mobile authentication approaches still include. Similarly, the spread of mobile wallets and NFC should remove the need for users to have cards in the first place – and I doubt any user will want to carry one just to be able to log-in to mobile banking. So whilst the IBM solution is not the ultimate destination for authentication via mobile devices, it is certainly a step in the right direction.

I still believe that biometric solutions in the future will be far more convenient, effective and secure. Rather than carrying cards with us, we will just need our fingers, irises, speech or even smell. In Japan and Turkey, fingerprints are already used to authenticate ATM transactions – I don’t see why mobile phone transactions need to be any more complex. Banks could also introduce lighter, biometric-only authentication for small payments. I’m confident we will start to see this kind of innovation in mobile banking in the not-too-distant future.

Is the Google Glass half full or half empty?

In February, the release of Google Glass to developers was greeted with much fanfare in the press and excitement in the blogosphere. So, was this all puff? What has happened since?

Well, there is no doubt that it is still early days. After all, the actual device is not going to be commercially available until 2014. However, there are already some interesting signs of activity. In fact, a few banks have already announced Glass applications – and we can glean some insights about the likely direction of future Glass based banking applications.

That doyenne of Iberian innovation, Banco Sabadell has been one bank to announce Glass-based innovation. Sabadell  will be launching a Glass app that can display the nearest ATM, allow the viewing of accounts and support 24/7 video conferencing.  The bank has in effect focussed on customer service rather than transactions – and specifically placed emphasis on customer communications. This is a great start - but with references to future ATM functionality, the bank is already hinting at a different direction for the future.

PrivatBank in Ukraine was one of the first banks to state their intention to launch a Glass based app (as was reported by Finextra back in April ( They have now launched a video of their proposed service on YouTube ( Their video of the application includes QR code reading for bill payments and in-store purchases, transfers to contacts initiated by voice, replacing cards at ATMs and even integration with petrol station pumps to decide how much fuel to put in your car. It also includes some interesting perspectives on gender stereotypes, but that is beside the point. The PrivatBank proposition is all about making transactions easier – and for me this is where any Glass proposition will be at its most valuable to a customer.

We also know the world’s banking goliaths are working on their own Glass apps. Miranda Hill, vice president and manager for digital innovation capabilities at Wells Fargo went on the record to this effect back in August. Patents lodged by Bank of America back in September 2012 also suggest that the bank is looking at how to use mobile technologies based on device cameras for object recognition and live video stream analysis. This could have a significant impact on personal financial management applications deployed through Glass, making them more immediate and accessible to customers.

So whilst progress is still slow, the current still seems to be flowing in the direction of Glass. It will doubtless accelerate as soon as the Glass devices are commercially available in 2014. Once banks are in a position to offer customer service and transactions through Glass, I believe we will see a significant shift in customer banking habits. The Google Glass is definitely half full.

The Digital Dollar - generating digital channels revenue

If banks don’t develop a second generation digital channels strategy, they won’t be around in 10 years time.

It sounds like a bold statement, but it is a pretty safe bet. Customer behaviours, right around the world, are changing at an unprecedented pace. The effect of these changes is starting to drive a sea-change in bank strategies. Banks need ‘second generation’ digital propositions that deliver a more retail-focus - and will generate revenue.

When banks began implementing internet banking back in the late 1990s, it was all about cost reduction through activity migration. The dream of self-servicing customers and widened profit margins seemed within reach. However, there were unexpected consequences. The earliest adopters of internet banking were the high value customers.

No surprise really - they were most likely to own a computer. As a result of their new internet service, these customers were able to stop transacting in-branch. Whereas before, face-to-face conversations with tellers and relationship managers had provided a rich source of leads, now banks found it much harder to reach these customers and identify their financial needs.

The efficient new digital transaction service was actually diminishing sales. Banks responded to this shift by adding new sales functionality to their webpages. They started with advertisements and moved to adding online application forms. Banks began to learn from retail businesses and evolved their online revenue generation to the next level.

Some banks have been extremely successful. Lloyds Banking Group in the UK currently achieves 25% of its retail sales by volume through digital channels - this has accelerated by 35% in the last two years. This is a very significant proportion of the bank’s revenue generation. However in many markets, banks are well behind this curve - generating only between 1% and 5% of their sales online.

There are lots more details in my new whitepaper, ‘The Digital Dollar’ on the Misys website - but fundamentally, banks need to address how they define and differentiate their brands, how they understand customers and their financial needs, how they provide timely product information and how to deliver slick sales processes.

An African Sunrise - new dawn of Internet Banking

It was announced this week at the Commonwealth Telecommunications Organisation’s Annual Forum in Nigeria, that the Alliance for Affordable Internet (A4AI) is to be launched to drive down the artificially high internet prices in emerging African economies. Supported by individuals like Sir Tim Berners-Lee, the founder of the Web, and organisations such as Google, the Commonwealth and USAID, the Alliance for Affordable Internet will campaign for cheaper Internet access – aiming to reduce the cost of Internet access to below 5% of monthly income worldwide, a target set by the UN Broadband Commission. In Mozambique, just 1GB of data can cost over two months’ wages for an average citizen.

This initiative should be setting the banking industry a-buzz with excitement across Africa.

For the last few years, players like Safaricom with MPesa or Airtel Money have been eating into the payments space and customers have built relationships with phone networks rather than banks. As telcos have built up deep insights into the behaviours of retail customers and have slowly moved deeper into the banking territory, banks have been steadily edged out of the picture.

But in a role-reversal, banks now have the opportunity to tilt the balance of influence away from telcos by disintermediating these mobile money providers and recapturing market share through internet and mobile banking. This is particularly important for customers in Africa – as it will enable banks to put a more sophisticated range of products and services into the hands of their customer than is available today from the telcos.

We know banks in Africa are keen to take up innovative financial services products – as shown by the widespread adoption of mobile payments. By offering a suite of new payment products and functionality via Internet or mobile, banks can encourage customers to stay within bank-owned payments ecosystems. This will bypass the telecoms companies’ USSD offerings. In addition, banks will be able to retain all the customer behaviour data – which is so invaluable for banks seeking to model customer behaviours and product needs.

Furthermore, widespread Internet access will provide banks with the opportunity to grow their customer penetration without a heavy investment in new branch infrastructure. Customers instead will be acquired and serviced remotely through digital channels.

This can only be good news for consumers and the banks of Africa – providing a wider range of products and services and supporting economic growth.

Sell, sell, sell! The future of Digital Banking

Digital channels are all about sales. If they aren’t, then you’re doing something wrong.

First and foremost, banks are about creating wealth. To do that, banks need to help their customers articulate financial goals and identify financial needs. Once that has been done, banks can provide the products and services to enable customers to achieve those financial goals. This is all about helping customers to live the lives that they want to – and that comes back to selling products to customers.

In the past, the most effective distribution channel banks had to sell products were salespeople in branches. Even today, by and large, banks make most of their sales – and certainly most of their high value sales – through face-to-face interactions in branch. However the world is changing fast.

Today’s consumers are used to a 24/7 retail experience – with late night shopping on the high street, and 24 hour convenience stores. Scheduling banking around 9-5 branch opening hours is not what consumers want to be doing. They, or rather we (!), want to be able to use our digital devices, wherever and whenever we like, in order to get the information that we need in order to find the products that we want. The spotlight is moving onto digital channels as an effective distribution channel for products and services.

As customers migrate from branches, the spotlight is moving onto digital channels as an effective tool for delivering sales. Today’s digital channels are slowly becoming more evolved sales channels. It is usual to see a number of different marketing assets on a webpage. Some will be contextual, some will be personalised. Banks have started using in-site tagging to analyse sales pipelines and tweak sales processes. However there is still a long way to go.

Banks need to use digital channels applications to understand the needs of their customers better. With customers choosing to bypass human interaction by taking their banking online, the opportunity to gain customer insight and anecdotal lead generation is reduced. Digital channel applications will feed the bank with customer intelligence. Personal Financial Management tools or Gamification applications offer banks the opportunity to understand better what their customers are trying to achieve – and offer relevant, tailored products on that basis.

Digital channels must become an essential part of a genuinely multi-channel sales strategy for any bank. And by multi-channel – I don’t mean multiple channels operating in silos, side by side. I mean customer journeys that can pass back and forth between channels – as the customer wants. Customers should be able to start the research process online, create an application and then interact with a salesperson if they wish, be that face-to-face or via a video chat. That salesperson should be able to see the application that the customer has already started. The customer must be able to go back to their digital applications and continue in their channel of choice throughout the rest of purchase.

I believe using video chat to further integrate salespeople into the digital sales process will drive a significant improvement in digital sales – as banks can offer advice, identify other needs and continue to up-sell in the customer’s channel of choice. It’s about creating a process that is convenient and effective for the customer – to ensure that they’re not lost mid-application.

Mobile banking is the least developed of the digital channels for sales. There are many products which could be sold in one touch that would be appropriate for a mobile device – overdrafts and credit cards are obvious examples. In addition, there are a range of native capabilities still to be explored. Location based services can be used to target products at customers in specific locations (for example vouchers based on credit card rewards). Augmented reality could animate adverts or bring product illustrations to life.

Savvy banks will focus on helping customers create wealth. To do this, they need to sell more products and enable customers to achieve their financial goals. Customers want convenience – so that means banks will need to focus on digital channels. Sell, sell, sell!

Augmented Reality in FS - got your goggles?

‘Mobile banking’ is not a very precise term. Today, we know it as meaning using your mobile phone for banking. However, back in the late 1990s, all that it meant was SMS banking. If your bank was particularly advanced, it may also have meant a WAP-based mobile banking service. It has only been since the launch of smartphones in the mid-2000s, that ‘mobile banking’ has come to mean a browser- or mobile app-based banking service.

But I predict that the term ‘mobile banking’ is about to undergo a major transformation, with some serious implications for retail banking. In the next 3-5 years, the meaning of mobile banking will become more literal – an umbrella term to refer to any banking on the go. I believe the catalyst for these changes will be wearable devices. The much heralded Google Glass (or one of the slew of alternatives from Vuzix or even China’s Baidu) have the potential to radically reshape customer behaviours – just as the iPhone has done since 2007.

With these new devices, customers will be able to see information in a whole new way. Printed advertisements or product illustrations will be animated or overlaid with supplementary information – yes, think Minority Report – providing customers with a clearer explanation of their options and helping them to identify any financial needs. Personal information displayed through the glasses cannot be overseen, offering users a higher level of security. Customers will be able to voice activate their devices whilst on the move. Directions to ATMs and branches can be overlaid onto a customer’s view of the world around them, making services easier to locate. These are just a few of the possibilities augmented reality glasses will open up to banks.  Other wearable devices, like the ‘iWatch’ bracelet design recently patented by Apple, hint at a yet another inventive approach to mobile banking.

To make the most of these opportunities and land grab through innovation, banks need to start thinking now about how to design customer experiences for the arrival of these technologies. Even at this early stage, it is possible to identify a potent customer value proposition based around enhanced convenience and security. At the same time, banks need to start thinking creatively about the ways in which these technologies can help customers to identify needs and ultimately select and buy products. Banks like Halifax in the UK and Commonwealth Bank in Australia have already demonstrated the potential to drive sales from augmented reality functionality with their home finder mortgage apps. Clearly there is much more that could be done.

There will be many who think this is all pie in the sky. I fervently disagree. iPhones went from revolutionary to commonplace in a matter of a few short years. I strongly expect the new wearable devices to complete this process even faster. Banks need to prepare now – or run the risk of being left behind.

What do you think? Will you be sporting Google Glass when it hits the high street? If you say no, I’ll hold you to it when I catch you.