Changing banking consumer preferences demand that banks evolve
July 29, 2010
BANK 2.0: How Customer Behavior and Technology will Change the Future of Financial Services, by Brett King, Marshall Cavendish/Business, 397 pp., 2010
Reviewed by David Gerbino. Gerbino, a community banker, has been working in marketing field for 23 years. He has been involved in community banking for the last six years as a researcher, marketing analyst, and database marketer. Prior to that, he worked as a sales/marketing analyst, and database marketing and advertising account executive in the financial services, publishing, and entertainment industries. Gerbino “tweets” on Twitter at http://twitter.com/dmgerbino. If you’d like to review books for our online book column, please e-mail
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The preface to Brett King’s new book, BANK 2.0: How Customer Behavior and Technology will Change the Future of Financial Services, begins: “A staggering 90 per cent of daily transactions are executed electronically today. Institutions that hold on to the belief that physical branches remain at the core of what the brand does, will not adapt easily to the customer of tomorrow who rarely visits a branch or the customer who sees no need for an over-the-counter transaction with cash or cheques. Those who still classify the Internet, ATM and iPhone applications as ‘alternative’ channels will be playing catch up for the next decade, while intermediaries will increasingly capture niche service opportunities. This is where BANK 2.0 starts.”
The author is direct and to the point.
The second paragraph begins “Let us be clear. This book is not for traditional bankers who want to stick to the status quo.”
After you finish reading this review, read a companion article of reviewer David Gerbino’s takeaways from King’s Bank 2.0 Read now
You can also read the first in our online/print series, “The Community Bank of the Future: What will it look like?” Read now
Brett King raises the bar very high for this book. At 397 pages, he delivers. My Twitter- style review (140 characters or less) of this book is:
“If you are a banker, buy @BrettKing 's book BANK 2.0 - http://amzn.to/a781Ex ”
But now on to more specifics.
A re-imagining of banking for all sizes
King’s book is ambitious. It contains 14 chapters split into three sections:
• Part One: Changes in Customer Behaviour
• Part Two: Fixing the Broken Bits—Channel Improvement
• Part Three: The Road Ahead—Beyond Channel
King works with some of the world’s largest banks and many examples are drawn from those experiences. As you read this book, you will have to occasionally modify what he describes to the scale and structure of your institution, as I did, as a community banker. Do not make the mistake of thinking that what King talks about is only for the world’s biggest banks.
Everything in this book is relevant to the nation’s 10,000+ banks and credit unions. As a community banker, I know we do not offer all the same services as the big money-center banks. Some of the examples in the book refer to these types of services like travel insurance, foreign exchange or examples where one customer service representative team passes a customer off to another CSR team. The book also focuses on retail banking. However, nearly everything in the book is applicable to business and commercial banking.
BANK 2.0’s first section begins with the history of technology adoption by consumers. King introduces the following concept: “The rate of diffusion is the speed at which a new idea spreads from one consumer to the next.”
This is a recurring theme throughout the book. For example, on page 33 we are told that the telephone took 50 years to reach mass adoption (50 million users); TV—22 years; cell phones / PCs—14 years; Internet—7 years; and Facebook—2 years.
The author also begins to lay the groundwork for changing the way we look at banks. He argues that the branch is no longer the center of the customer’s universe, but merely one of many channels a customer chooses to engage with a bank. Others that bankers must today consider as much part of the picture as branches include internet, Interactive Voice Response (IVR) systems, ATM, mobile banking, etc.
Exploring banking’s growing number of channels
Bank 2.0’s second section focuses on channel history, improvement, and future direction. It is the book’s largest section. The author starts with evidence supporting the death of the traditional role the branch plays in our day-to-day banking experience and ways this channel needs to evolve to stay relevant. He does a similar analysis with the IVR, call center, Internet, mobile, payments, and ATM channels.
In BANK 2.0 fashion, Brett King makes the point that the changes will be rapid and significant.
For example, King says on page 72 that “the sooner retail bankers see the Internet, branch, ATM, phone, and other such channels collectively as the ‘bank’ rather than seeing the branch as a some how more superior channel, and the sooner we understand that the role of the branch must evolve, then the sooner we can get on with really servicing customers appropriately.”
And on page 73 he says “...we’ve seen that community banking centers have thrived where big banks have failed. Why? Again local knowledge that translates into better service for local small businesses has been the key to reviving unprofitable small town branches, not the branch in itself. Knowledge of what the customer needs and streamlining the process to solve the needs and problems of customers is a true differentiation, not products or interest rates.”
The call center improvement that King preaches on pages 98-99 focus on intelligent inbound selling where the right offer is matched with the right client by using customer analytics, business intelligence, and getting product teams to develop sales messages for 10-15 different offers.
The Internet chapter (Chapter 5) mentions how the legal and compliance departments also need to innovate, particularly by breaking away from old processes that were branch- based over the last decade and embrace the unique challenges and opportunities the online channel has to offer. King calls the bank’s legal and compliance function an “...institution’s own worst enemy when it comes to revenue generation through...” non-branch channels.
Somewhat related to the Internet is mobile. King titled Chapter 6, “Mobile—The New Internet and Death of Cash?” This chapter features an infographic, the “Years Taken to Reach 100 Million Users,” that illustrates the expected rapid adoption of mobile banking and payments.
The chart shows it took the magnetic stripe credit card 28 years to reach 100 million users; debit accounts 12 years; Pay Pal 7 years; iPod 6 years; and Facebook accounts 5 years. King projects that contactless credit will take 5 years; mobile banking 4 years; and mobile handsets enabled with Near Field Communication 3 years.
The road ahead for banks
The third section of the book is a road map of technologies and trends that will affect banking, from screen displays to payments to social media to advanced forms of marketing. King’s research in this section is extensive and is very appropriate for both bankers and third-party financial service providers.
One of the potential next-generation technology King mentions is voice-driven interactive voice-response conversations that utilize predictive modeling to sell the right product to the customer based on customer input. He also talks about mobile apps, widgets, and gadgets being everywhere the customer engages on the web to provide basic banking services. He also delves into the bi-directional dialog via social media and future payment technologies like RFID (radio frequency identification) chips.
King’s “brave new world” of banking
The book’s most impressive attributes are the strong opinions expressed by the author, real world examples, and his global perspective. To help the reader along, each chapter features a summary section listing the key lessons, and tips and ideas to implement now to improve your financial institution. The last chapter takes these attributes to another level. It features a critical-path checklist for those who want to embrace the BANK 2.0 paradigm, a summary of the entire book, a five-year timeline of changes required for banks to migrate to the BANK 2.0 world, and a project list to help financial institutions to be ready for the full impact of BANK 2.0.
Brett King has compiled a lot of research and case studies in writing BANK 2.0. At the end of the day, it is not about technology but about customers, and how we as bankers need to stay connected to them in the channels they choose to interact with us.
After 383 pages, Brett King begins the conclusion of his book with “BANK 2.0 is about change. Change that is inevitable, change that is speeding up, and change that extremely disruptive.”
So, where do you head from here?
BANK 2.0 provides the facts, real-world examples, and his strong opinions to back up his claim about change. Practical application of what he discusses is up to you and your fellow bankers.
While you read this book, look at your own institution’s data and compare it to the book’s examples. Keep up with industry research, immerse yourself in the data like never before, and view it with BANK 2.0 eyes. This is very important. I have always believed in change, particularly through the use of technology. It is why I chose to attend Clarkson University, the first American college to require each student own a personal computer. It is why I chose to get my hands on BANK 2.0 before it was released in America. It is why I started public and private Twitter conversations with Brett King as soon as I found out about his book.
Despite my predilection towards change via technology, BANK 2.0 impressed upon me the urgency for this change. The customer’s adoption and use of technology is getting ahead of most bank’s adoption and use. This is, as Brett states, “a revolution of sorts.”
While reading BANK 2.0, you will not agree with all of Brett King’s opinions. That is to be expected.
King is trying to convince bankers and financial service providers to innovate and keep pace with customer expectations. As a community banker who keeps pace with most bank technology research, I believe that King is spot on.
I must admit that I do not always agree with his opinions, either. In fact, I have an issue with his statement “If your marketing budget is not at least 50 per cent dedicated to digital or interactive today then replace your heads of marketing immediately because they are already five years behind the trend on this.”
How many small financial institutions have a marketing strategy controlled or heavily influenced by a member of the board of directors, CEO, or other senior management team member? I have seen this happen in many of the industries I have worked in. To put the blame squarely on the shoulders of the head of marketing is unfair and not representative of how many small financial institutions are run. As for the rest of Brett King’s quote, make sure you know the channels where your customers live and engage with them there. Even though I disagree with the author on this one small point, community bankers have a lot to learn from Brett King and his BANK 2.0 book.
The book closes with this final paragraph:
“Understand one thing. Customers are not going back to the old ways of banking. They are moving forward. If you are not moving forward with them, then they will pass right by you—at warp speed. BANK 2.0 is now. Get moving, or get out of the way!”
I firmly believe BANK 2.0: How Customer Behavior and Technology will Change the Future of Financial Services, will help you and your institution move forward with your customers.
Read a companion article of reviewer David Gerbino’s takeaways from King’s Bank 2.0
Bank branches aren’t going away. To read a banker review about a new book about branch design, click here
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[This article was posted on July 29 2010, on the website of ABA Banking Journal, www.ababj.com, and is copyright 2010 by the American Bankers Association.]