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How 2012 will change retail banking forever E-mail

Brett King looks at 7 trends to watch
By Brett King 
As we kick off 2012, there are many expectations that as the economy slowly warms up and pressures to innovate increase, that the new year will bring some healthy change and positive resolutions. With lots of competitive plays continuing to infringe on banking as we know it, 2012 also promises to bring a slew of new models of payments and bank-like capability that further challenges incumbents.

So what will be the big themes of 2012? There are at least 7.
1. The “screen” has well and truly arrived
Unless you’ve been living in Outer Mongolia (and even there the iPhone is hot) the mobile has become the big thing of the last few years. Despite the massive success of the “App” Phone and devices like the iPad, banks have been traditionally slow to adopt these new technologies. All that is set to change in 2012.

  Apps versus Websites
“While our current customers will download our ‘app,’ new customers increasingly will be using their mobile or iPad to access our websites. … Those finicky websites … are no longer working to drive business.”

In 2012 if your bank still doesn’t have an iPhone app, you’ll be in the same category as your aging grandmother who doesn’t know how to use Skype or doesn’t use email or texting. Quaint--but totally irrelevant to most customers.

2012 will be the year banks start grappling with the multi-screen environment in more sophisticated ways. Planning not just for the basic land grab of a iPhone app, but exploring Android, Windows Mobile, Blackberry (while they are still around), iPad apps, and perhaps early HTML5 website deployment.

We’ll realize that while our current customers download an “app,” new customers increasingly will be using their mobile or iPad to access our websites.

And we’ll find that those finicky websites, with tiny little buttons and hyperlinks designed for mouse clicks or embedded flash marketing promos, are no long working to drive business.

In fact, they will be proving pretty much useless. 

Citibank did a great job of redesigning its U.S. retail banking website to work with tablets in its recent revamp. We’ll see more of this, along with websites that detect your browser type and serve up a site for your mobile mini-browser or tablet seamlessly. Note that Citi sends you to a mobile-optimized online banking sign-on by default on a mobile mini-browser.

Try this website from a tablet and you’ll find it just as user friendly, says banking futurist Brett King. That is not the case with many bank websites, and bankers need to remedy that as mobile devices and tablets become ubiquitous. Click here or on the image to visit the website.

2. Phone as a bank account and wallet
  The Mobile Wallet
“No one party can ‘own’ the mobile wallet, and the winners will be those that collaborate and cooperate.” 
In 2012 we’ll see a flurry of mobile wallet activity, along with a push to modernize POS networks to cope with both better “offer” capability and to integrate near-field communication and other cardless payment options.

Square and Google Wallet took the forefront of these developments in 2011, but expect to see much more competition in 2012. Everyone will be trying to get a piece of the mythical “mobile wallet.” Telephone companies, app developers, PayPal, Apple, Microsoft, and a bunch of others will all be dipping their toes in the phone-as-a-wallet play this year. 

The first indications we saw of banks in the wallet space was both Citibank’s partnership in the Google Wallet and the launch of “Kaching” by Commonwealth Bank in Australia using an iPhone-capable cradle.

In Australia, Commonwealth Bank’s new CommBank Kaching service allows P2P payments, Facebook payments, and more, from a mobile device. The service is a free download from the iPhone App Store. It was announced in December.
The risk for banks is that they own only one small piece in the infrastructure--the account. Telephone companies and mobile operating system platforms, on the other hand, are much more pervasive when it comes to the end consumer. Regardless, this year will be a time for lots of fussing about partnerships and trying to leverage off the emerging MasterCard and Visa wallet solutions.

Expect Verizon to get a big kick in their anti-trust backside this year for restricting use of Google Wallet on their network.


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If you’re interested in the trends that Brett King addresses in this article, you’ll find that many of the ongoing developments in these areas appear in our weekly Tech Topics eletter. Tech Topics, written by ABA Banking Journal contributing editor John Ginovsky, is a free subscription you can obtain here.  

Both banks and telephone companies will slowly come to this realization: No one party can “own” the mobile wallet, and the winners will be those that collaborate and cooperate.

This will also be the start of the realization that the “bank account” is really no longer the sole domain of banks … but that’s a whole new discussion.

3. Really knowing your customer—the implications
In 2012, the challenge will be integrating customer learnings and a single-view of the customer (an all-encompassing understanding of the customer) into a framework for dialog.

As traditional metrics wane, marketers will be looking at mobile, social media, and other technologies to engage customers. However, increasingly the realization that such requires stronger targeting, and better or customized messaging, along with real-time fulfillment, will push marketers to look for stronger customer intelligence capability and broader skillsets on the marketing team.

The key skills emerging in the marketing department of 2012 will be for journey builders and conversationalists--in short, those capable of carrying off the art of the dialog.

This means more than social media messaging or simply pushing out Twitter offers. The new marketing team will look at customer behaviors and work to fit financial services into that landscape. Behavioral analytics and a single-view of the customer will be critical in this new environment.
4. Bigger, smarter data
We hear much about “smart data.” But this remains a nebulous term, bandied around like “social media.” It means many things to many people. Yet in 2012, we’ll see more requirements for smart data as organizations start to collaborate on payments, on offer management, geo-location data, and other such customer-engagement schemes.

In this respect, I’ll define smart data as the data floating around in the real world that needs to support or drive customer marketing or organization collaboration across IT systems, and through the cloud. Packaging customer data, for example, or moving from a trigger on a payments system, to an offer engine and out to a mobile phone handset, requires integration and coordination of multiple players.

Ensuring that data moves seamlessly and securely from one system to the next, or from one participant to the next, will require increasingly complex systems integration.

Smart data will begin to emerge in 2012 as a common theme to act as the “glue” for all these exciting collaborations, event- or trigger-based marketing, and for enabling the pervasive distribution of financial services.
5. The conversation, not the platform
In 2012, we’ll start to see banks understand that Facebook and Twitter are no longer about shoving the same old messages down new broadcast pipelines. Instead, banks will understand that social media platforms are now part of a growing dialog about the brand, products, and customer advocacy.

  The “Conversation”
“Strong social brand advocacy will become a highly sought-after goal, but it will bring with it a host of complexities.” 
Customer advocacy will grow as a dominant new metric over the next few years, starting in 2012, as banks try to measure the value and popularity of their brand in the social “cloud.” As they do so, they will work to work to improve customer referral and positive brand sentiment. Bank of America certainly found out this year, as Bank Transfer Day targeted their brand, that the social dialog is incredibly powerful as a tool both for growth and for damage.

We’ll start to see search engines incorporating more and more recommendations from our friends or our networks. We’ll see geo-location tools starting to record brand preferences based on our friends’ “likes” married with location.

Strong social brand advocacy will become a highly sought-after goal, but it will bring with it a host of complexities.

For banks of all sizes, a challenge in building and maintaining market share is delivery on the brand promise. For the first time, marketing and simple customer service will be hardwired into this new metric--having satisfied customers results in stronger brand advocacy and back again.

So there will be the realization that the entire organization is involved in improving advocacy so that it is positively reflected in social media and promoted by key influencers as referral agents. For this reason, we’ll start to see retail banks create a new layer of brand management across both marketing and customer service, using tools like Twitter, Facebook, Google+, and such to improve brand perception more broadly.

As the realization hits top management that everyone in the organization is a potential brand advocate and part of the dialog, organizations will work to develop better engagement models and policies around social media, instead of denying access to Facebook and the like within the workplace.

“The conversation” will be a big theme in 2012. Talking to customers and solving their problems via open, transparent dialog will be a challenge for those banks whose processes currently dictate that customers need to jump through hoops or where support mechanisms are hardwired today into the branch or call center. We’ll start seeing customer service increasingly becoming more broadly distributed through 2012 and beyond.
6. Core systems flexibility—rethinking the connections
The chink in the armor of many banks will be their aging core systems and the problem of bridging the gap between today’s real-time engagement and yesterday’s batch-based processes.

Increasingly we’ll start to see more failures of ATM networks, POS networks, internet banking websites and the like, as we began to see in 2011. Primarily this will be a matter of unexpected loads being placed on digital channels, stressing the weakest links in the chain: integration points with core systems.

Bankers will continue to discuss the need for better core systems capability. However, beset by limited budgets and the massive cost of core system replacement, they will begin exploring alternative solutions. Expect the “cloud” to offer some potential solutions here. The likes of Temenos, Fiserv, Oracle, Jack Henry, and others start to move some or all of their core systems capabilities into cloud configurations so that banks can transition to more robust systems on a pay-per-use basis, rather than big deal billion-dollar projects.
7. Interbank and P2P transactions will vie
  P2P Payments
“The goal will be simple--if I know your phone number, Facebook identification, or email address--I should be able to send you money.”
Peer-to-peer payments will continue to be a strong need for consumers in 2012 as they move away from the use of checks and cash for day-to-day transactions. The need to more simply move money from one person to the next has been one of the core reasons behind PayPal’s phenomenal success. We’ll see big pressure on wire transfer fees, and the gradual abandonment of ACH, in search of something better as a result of the high need for utility in the P2P arena.

You can expect the likes of PayPal, card Issuers, and SWIFT to be looking increasingly at trying to by-pass the traditional clunky bank-to-bank payments mechanisms, in favor of much simpler end-user solutions.

In the end the goal will be simple--if I know your phone number, Facebook identification, or email address--I should be able to send you money. The cloud could emerge as a new platform to build these interbank P2P solutions upon, avoiding the need for an account number, routing number, bank address, and the like.

Expect PayPal’s increasing domination in this area to push more solutions like ClearXchange to the fore as banks realize that their customers just aren’t writing checks anymore and that PayPal is cheaper than a bank-to-bank wire transfer.
Looking forward
In short, expect a year of continued push to innovate as banks and competitors alike battle for the minds and devices of the consumer. The biggest theme to emerge perhaps by the end of 2012, will be the realization that cooperation will beat all-out competition.

The bank growing out of 2012 will be much more connected, much more viable beyond a physical place, and more open to new ways to reach and influence the potential customer. The realization that the bank will come to you, not you to the bank, will be ever stronger.

In 2012, we’ll really start to engage!

Read and hear Brett King
In our September 2010 magazine banking futurist Brett King and three community bankers “met” in the pages of ABA Banking Journal in the cover story, “Keep Your Bank Relevant.” To read the article and to listen to the associated podcast, “Can your bank become ‘channel agnostic’?,” click here

About the author
http://www.banking4tomorrow.com/images/brett.jpgBrett King, banking futurist and consultant, wrote BANK 2.0, and is in the midst of founding Movenbank, the first direct mobile bank in the U.S. and U.K.

A frequent speaker at global events for financial services and innovation--he spoke at ABA’s 2011 National Conference for Community Bankers--King is an expert on innovation, customer experience, and channel distribution strategy. He publishes regularly in his role as industry advisor on Huffington Post and his personal blog Banking4Tomorrow.com, among other internet forums.

King also a runs a niche strategic advisory firm, User Strategy, and advises some of the world’s largest financial and technology organizations.

[This article was posted on January 5, 2012, on the website of ABA Banking Journal, www.ababj.com, and is copyright 2012 by the American Bankers Association.]   
Comments (5)add comment

Jon Matonis said:

Brett, you neglected to mention bitcoin under #7 for p2p transactions. For the first time ever, banks will have to contend with a distinctly different and decentralized currency unit. More than just PayPal or VISA pushing national currencies around, bitcoin has the potential to obliterate processing fees. Banks only hope in this scenario is to recognize the foreign exchange opportunities for their bitcoin customers.
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January 06, 2012
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Taylor Schaeffer, Get Smart Content said:

Great post Brett! I think that what you said about providing a unique, personalized customer experience for customers is right on for 2012.

Let's think about this in terms of a traditional brick and mortar banking experience. If a customer has been a customer of the bank for 15 years and visits every Friday, the tellers would know him by name and know that he primarily visits the bank to deposit. It would make sense for those tellers to discuss how to make depositing easier or even talk about other types of accounts that he might want to open for his banking.

The same is true for the online experience. If a customer comes to a banking site and the bank knows that they have not set up an account, let's suggest that they set up an account. If a new location opened in their area, why don't we recommend that they visit the location to talk with a personal finance professional. By providing unique experiences with call to actions that are specifically targeted to what the bank/website already knows about the user, we have the opportunity to better reach our customers - increasing conversions and user experience.
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January 06, 2012
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Esaďe DIEI said:

Great job Brett! These 7 points are crital clear and banks have to pay closed attention if they want to survive in 2012 and going forward. Indeed, the digital world that is changing all industries will have a greater impact on banks due to new players entering into the bank's traditional field. For instances MNOs, MNTOs and so on are taking years after years great deals of bank's market shares thanks to their clear understanding of mobile technology on common customers. This is the beginning and there are many to come in 2012. Thanks
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January 07, 2012
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Brett King said:

Jon - I picked what I thought were the big themes this year, and while alternative currencies like BitCoin and Ven are coming along a treat, they're not going to be a dominant theme in Retail Banking in 2012. I do predict, however, just like ThomsonReuters with their inclusion of alternative currencies on their trading desks, that we'll see more Internet banking plays with ForEx trading on alternative currencies - as we have with Fidor in Germany.

Taylor - I agree that the customer experience should be optimized regardless of the channel.
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January 08, 2012
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Daniel Smith said:

Brett - Some great comments and observations - as always.
I think one additional thing that is missing in the above items is around the question of "personalized customer experience".
The customer experience will never truly be personalized until banks are able to offer products that match each customer's true needs and preferences.
This is not just a question of extending the existing traditional vanilla flavor product catalogue, but instead it's a question of having the ability to allow customers to build their own products, particularly in the saving and investment space.
Of course, you could argue that this has been around for years in the world of private banking, but that requires customers to have significant liquid assets to access the same.
If banks however can take this down to a Retail level - then you can change the rules of the game. With this, I believe you can then get away from pure rate shopping, increase the sense of true service, build dynamic relationship pricing throughout the life of the product, and allow customers to define what they personally need and want, which will give you longer term customer loyalty and greater share of wallet.
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January 09, 2012
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