How choice is becoming a burden and innovation a never-ending rollercoaster
Peter De Wit, Director Strategy and Guy Roosen, Member of the Executive Committee
Innovation at Beobank at Beobank
In the spirit of Daft Punk’s “Do It Faster, Makes Us stronger, More Than Ever Hour After Our Work Is Never Over”, the banking industry is being challenged to continuously re-invent itself, in line with customers’ high standard expectations and industry landscape alterations. Innovation is a must, and a perpetual journey. A journey towards an increasing digital environment where-in flexibility, counseling and security remain the key pillars of banking 2.0.
“3 out of 4 millennials would be more excited about a new offering in financial services from the likes of Google, Apple and Square than from their bank. Would the cloak of complexity & compliance that we use to guard our old ways be finally lifted by these millennials?”*
Convenience and the drive for “financial liberalism” is tearing down the walls of existing infrastructures. But there is a clear schism between the needs and the desires of the Millennials versus Generation X and the Baby Boomers. Each generation filters trends and innovations through their own reference framework. This explains why innovation is often adopted at slow intervals and needs to withstand several stress tests before new practices become institutionalized.
The financial industry has never witnessed the Shinkansen turmoil which is more common in the FMCG world. But banks have greedily modernized their front façade for the past decade, with virtual channels interfacing with consumers at an increasing intensity.
With the pressure of the Gang of 4 (Apple, Google , Amazon and Facebook) and the rise of a myriad of financial oriented start-ups, all looking at less “complex” financial products like payments and loans, the race is on to glue customers to new solutions and methods.
In payments, the Holy Grail materializes in the form of digital wallets, which cater for both the online as offline world. The major card schemes (Visa, MasterCard) have developed pre-packaged solutions for banks to implement, but several ICT and software companies have prepared similar containers. The e-wallets integrate payment solutions (whether NFC, QR based or other), but also provide for loyalty & CRM additions and come with an impressive line of security defenses. In the local market few wallets have emerged, but undeniably the pressure is on to launch them.
Consumers seem weary to embrace the virtual wallet, as the dematerialization of the plastic card seems a bigger step than imagined. Fear for security breaches, battery anxiety or the lack of a high performing 4 G connection may be important barriers here. Nevertheless wallets will have their tipping point in the next 2 to 3 years.
Mobile payments, another much hyped evolution, require a rigid set of security parameters and the so-called Host Card Emulation (HCE – cloud management thru a range of unique keys) seems to be the standard to come.
Without “Mobile” having found proper inroads just yet, the gadget store of wearable technology is opening. After all, NFC scanners can be stored in a variety of containers, like clothing, jewelry , shoe ware, etc…Accounts can be accessed through the well-known pin code or going forward through biometric indices, be it fingerprint, IRIS scan, etc…
All and all, the innovation avalanche is flooding us, and banks suffer from the burden of choice and the need for standardization. Question is how to identify a trend versus a real killer application and moreover what innovation is affordable enough to develop. IT development time and integration processes in mainframes are costly, at a time where already 75% of resources are allocated to regulatory and mandatory (scheme, processor, etc…) improvements.
While investing in virtual offices, banks are also upgrading their brick & mortar networks to make them appealing “bank stores” with a modernized floor plan, digital supports and flexible opening hours. The branch of the future remains a pivotal access point for customers to collect advice from topic experts, in a secure and private environment. The list of digital interfaces is endless, ranging from tablets-to-go, digital signage and postage, conference screens, intelligent ATM’s and interactive software appliances. Finding the right balance between technology and the human component is key here, not to mention the return on investment on the digitalization part.
Choosing the right innovation with a long term perspective in mind is what keeps the industry awake at night.
What helps is being part of a broader, international group. Trends and products are increasingly cross-border, despite the importance of local footprint and heritage. For Beobank there is a wealth of expertise with its mother holding, the Credit Mutuel group (CMNE) : best practices from the French market, platform and flows expertise from in-house developer Euro Information, innovation insights from a mature large scale economy with > 60 MM consumers. It allows to develop tomorrow’s bank with innovations which have been piloted in a test market, investments which can be written off across several entities and an intelligence cockpit which analyzes all innovations and bench markets them against their merits. Beobank’s recent launch of new insurance products in collaboration with NELL(NORTH EUROPE LIFE LUXEMBOURG) and NELB (NORTH EUROPE LIFE BELGIUM) are testimony of this : the Beobank Invest4Life (branch 44) and the Family Protection Plan products were recently launched.
Partnerships are another key component in Beobank’s strategy, often in the form of co-branding cards or distribution channels (like RTL Club). Thru alliances with 3rd parties, banks can develop solutions for customers from a broader perspective than the pure financial need. While the backbone of these agreements remains a lending, service or financial planning need, the innovation is often in the customer packaging and the customer interaction process. Typically these partnerships generate multi-level loyalty benefits (like cashback or discounts), new communication channels (partner websites and face-to-face points) and cross marketing wins (like integrated offers). The innovation lies in the hybrid combination of both partner’s strengths, resulting in a more all-round product proposition.
With more actors entering the financial arena and regulation facilitating freer competition, banks have no choice but to invest in innovation and compete directly with the bold predators. Competition always drives opportunities in otherwise conservative markets and will herald new in-ways for managing the financial household of customers. While consumers are eager to evolve with technological standards, piece of mind and financial security are dominant considerations to drive adoption of new behavior.
Though banks have no monopoly on these values, it is part of the industry’s NDA to always counterbalance innovation, whether external or internal, against the core value of managing our customer’s financial wellbeing.
* Parin Kothari, Senior Vice President, Digital Channels & Strategy, TD Bank Financial Group