Banking on pain, minus the gain

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Traditional channels for doing business are being seriously disrupted by the easy access that digital devices provide to their users.

Smart phones and tablets have penetrated the user community to such an extent that businesses are being created that cater for the always-connected individual and their ‘want it now’ attitude.

The expectations of the always-connected individual are that the businesses they elect to deal with will be highly responsive to their wants, providing new and improved services, as evidenced by their device applications, which are regularly updated in response to user demands. When a business fails to deliver, the customer will promptly move on to another that does.

Recognising that business needs to change is important but having the ability to adapt and change rapidly is imperative. The banking sector specifically, in attempting to meet perceived needs of its customers, has been forced to undertake massive technological change.

Recent reports have indicated one Australian bank, over multiple years and with a minimum of another 18 months to run, having a planned expenditure of over one billion dollars for this purpose. The end result may be an improved user experience but initially only to new banking customers, with their existing ‘loyal’ customer base having to wait up to 3 years to be migrated. Not what anyone would call ‘truly agile’ and at what cost to competitiveness?

Such lengthy and expensive adaptation programmes expose the inherent issues of rapid technological developments which, despite deemed initial suitability, may inevitably involve compromise, be superseded or be rendered obsolete by the time they are realised.

‘Bricks and mortar’ businesses have long been complaining of the advantages that online businesses have over themselves. Providing effectively 24/7 access to goods and services from any location the online business removes that barrier to purchasing that a physical business outlet cannot avoid. Being able to decide they want something, select and purchase an item without having the inconvenience or additional costs of traditional retail outlets (that may not have required stock), provides the instant gratification that customers demand.

Examples of online markets:

  • Amazon,
  • eBay,
  • Kogan,
  • Alibaba,
  • Etsy marketplace for selling unique/hand-crafted items.

Online shopping has provided businesses with the opportunity to simplify the payment experience of the shopper. By providing a secure and simple payment method, kept at arms length from traditional banks, the online shop provides the impetus for frequent repeat business.

Examples of payment systems:

  • PayPal initially supported just eBay but has matured and expanded to support many other businesses,
  • Google Wallet- predominately US based,
  • MasterPass (Mastercard),
  • PayWave (Visa),
  • Alibaba – with escrow service.

Cutting banks and other financial institutions and governments out of the picture, virtual currencies, existing only in digital form, have been developed and are being used as mediums of exchange. These, like traditional currencies may be used to buy physical goods and services.

Examples of cyber currencies:

  • Bitcoin,
  • Ripple,
  • Litecoin,
  • Darkcoin.

Both legal and taxation systems are attempting to respond to the emergence of these new currencies. Whilst some legal jurisdictions acknowledge them as ‘goods’ rather than true currencies, recognition is only a matter of time.

Telecommunications companies have for many years had their ‘bread and butter’ earnings associated with fixed-line and mobile voice calls. With the advent of smart devices and services such as

  • Skype,
  • Viber,
  • Whatsapp and
  • VOIP offerings provided by ISPs

this business model is rapidly changing. Users are more likely to now utilise these communication apps on smart devices and data provided through wireless access points or cellular data providers.

Dissatisfaction with ‘big’ businesses and the fees that they, as the ‘middlemen’ take from a business transaction, has resulted in the spawning of new peer-to-peer market places such as:

  • AirBnB holiday rentals cutting out the multinational franchises.
  • Uber connecting riders with drivers an alternative to taxis.
  • ING Direct – branchless banking services

These, and similar, are designed to put the customer in closer contact with the service provider whilst containing costs.

Businesses that are sufficiently agile to provide responsive, always available access to goods and services wanted by their customers will prosper. Businesses wedded to older business models and unable to respond when required, become uncompetitive and eventually marginalised and overtaken by those that adopt more agile models. Media reports frequently cite examples of manufacturers and retailers in rapid decline and/or succumbing to resistance to adapt.

Businesses need, in order to remain competitive, an effective enterprise knowledge repository from which decisions affecting their future growth and change opportunities can be informed. With knowledge of their own business capabilities and access to what the market and their customers want the opportunity to offer both goods and services that are able to be located and readily consumed by their clients is greatly increased.

Coupling the knowledge repository to a robust Enterprise Architecture and having resources able to exploit it, can also assist in establishing and maintaining a cohesive, rather than a fragmented business approach to dealing with both the business and IT departments who are often at logger heads as to what is ‘best’ for the business.

Businesses need to maintain both a macro and micro view of what their customer base are demanding. Business transformation programmes are all the rage but how and when goods and services are delivered needs some balance.

The bank, previously mentioned, may provide, when they finally deliver, an excellent product and service portfolio but at what cost to their existing customer base. Having an awareness of what is required now or in the near future and having the ability to respond to that awareness in a timely manner will win new and maintain existing customers.

Taking too long to deliver risks both technological obsolescence and missing the ‘wave’ of popular demand.

Having an awareness of what is wanted with no way to respond is no better that having no awareness at all.

Ultimately it will be the business enterprises that have excellent market knowledge, can anticipate trends, are aware of their own capabilities, are able to innovate in an agile manner and deliver who will succeed.

The market is both fickle and changeable. Successful businesses will be accommodating.


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One Response to Banking on pain, minus the gain

  1. Could be says:

    It is likely that banking replacements will be built and purchased by over funded / under servicing banks.

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