Last week I wrote about the rise of new, disruptive financial institutions that specialise in only one thing but do this extremely well, just like smartphone apps – one click and your requirement is met. This specialisation allows them to concentrate on the user experience and woo customers with their funky interfaces and frictionless interactions – something traditional banks with their multiple priorities, compliance and regulation restrictions find difficult to compete with.
However, all is not lost, it’s time to fight back! By learning from the success of these upstart companies and looking to trends in retail, banks can use their significant IT infrastructure and experience to fight back. Here are some tips to put banks on the right road:
Secure your Eco-system: Life thrives in a good eco-system. One of the important reasons for apps success is they focus on just what they do. This continues to be possible because of the eco-system provided by iOS and Android platforms, leaving them to focus on their offering. Our specialised financial institutions too need a nurturing environment that provides them with a banking platform eco system that promotes focus on their offering and allows them to be lean and efficient.
Scale vertically: in a retail business, it is better to be known to as many customers for 1 or 2 things rather than be known to few customers for a lot of offerings. These new financial institutions should establish themselves as specialists in a certain area (Lendo in Sweden is a good example in the credit segment) with a unique positioning and offering to its customers. Again, follow the apps – do just one thing and do it well.
Be efficient: An app that drains your battery or clogs too much memory is quickly ejected. These institutions should be wary of this and remain efficient in their cost/income ratios, ensure good Net interest margins (yes it is possible) and provide higher return on equity. They would do well to look at sharing the cost of banking platforms to ensure day to day processing and regulatory reporting while retaining their edge on pricing their risk to translate into benefit for customers.
Be ubiquitous: why do people use so many apps in their mobiles? Because they can! Financial institutions have to learn that as long as your customers can reach you in an instant and you are there to capture the business moment as it happens – you are remembered and rewarded. Therefore investing in technology and an agile platform to be present when and where your customer needs you is a must-have.
It is said that the average banking relationship lasts longer than a marriage, but that is changing. Customers, especially Gen Y, are not as loyal as they were and, unlike having only one spouse, you can now have many bank accounts that cater specifically to your different needs and change them frequently! And if you wonder how customers are going to handle the complexities of multiple accounts - savings, deposits, transaction accounts, mortgages etc., across different financial institutions, never mind – where there is a need, there will very quickly be an App for that!
By Premkumar Bhagwatsaran, CEO, Ideal Invent Technologies PVT Ltd