There used to be a day when applying for a mortgage was dead-on nerve-wrecking. The tighten-up, 50-something banker in a dark dress looked over the desk at the diminishing applicant with the eyes of a head-principal. No? Yes? No? Maybe. The sound of paper. The keyboard. A claustrophobic room.
If the computer said yes, you’re in heaven. Dreams will become true (as soon as stacks of papers difficult to understand has been processed and signed). If the computer said no…
The upper-hand of the bankers over customers is about to change. Dramatically. It’s
is called customer power, and to some extent competition. We have already passed the early dawn-of-the-customer which was fueled by internet; social media amongst friends, discuss-forums and a string of accessible consumer services and comparison sites making pricing, service and accessibility transparent. The dark-dressed banker better shaping up because today’s consumers are not begging. They look for service and they ask for tenders.
To top it up, consumers are increasingly living their life online with endless of choices. We have become used to immediate positive response and we are likely to switch to more likable alternatives recommended by friends …and total strangers, should the service not be on my terms.
Banking is not the only business where millenniums and folks in their 30th and 40th with a more “intense” view on relationships are increasingly dominating the customer pools. And do you know what? They will not be fewer with an ageing population.
On the contrary it is one of the last industries affected by changing consumer power, partly protected by being a seldom-purchase monopoly industry. Bookings.com took the travel industry online. Amazon did the same with retailing. Google and YouTube has almost killed all yellow-pages, printed newspapers and printed magazines. Youtube and Netflix killed television. Apple and Spotify took music online. Airbnb challenged hotels and apartment rental traditions. Uber is doing the same with taxis. Even the pharmacy industry, schools, railways and postal handling service has changed dramatically.
The electricity utilities used to refer to lists of connection-points, and tariffs used to be decided annually by utility managers in dialog with their local politicians. Some 20 years ago that changed with deregulation. Connection-points became customers and tariffs became traded hourly prices offered between sellers and purchasers and easily accessible through new on-line sales intermediaries. Pricing formulas changed over-night from monopolized “Cost+Profit=Price”, to the new scary “Price-Cost=Profit”.
Banking is one of few industries, if not the only industry, that only until very recently has not been subject to dramatic changes in consumer power. Fueled by new customer knowhow and benchmarking via internet. Fueled by generally changing customer behavior and not least expectations where service, alternatives, low prices, user friendly processes, immediate access and not least easily understandable offers have become the new norm. It is on my terms, not on the terms of the seller (or the lawyers, or the credit departments, or compliance or IT-department). The traditional banking service model is challenged, the business model and the in-house competences and traditional career paths is challenged.
Bankers; you are about to lose the comfy luxury seat unless you change, including developing new business models, new true service models and attracting new non-traditional competences. Fortunately – most banks have started to address these issues and the future will not only be in the hands of hungry startups.
Advocates for close-downs of the traditional banking branches better be careful as well. In what other industry would you cut your revenue stream before you have established new ones? New ones in terms of user-friendly, rapid and easily understood online full-stop customer products and services generating steady income. Or new commercial banking revenues from user-friendly end-to-end processes such as an integrated billing, reminders, accounting and payment process. Banks need to go this road and build new revenue streams, because banking has already started to do exactly that, well beyond banks.
There will still be room for a few banks with the traditional branch strategy; servicing those entering the door between opening and closing hours. To a larger degree however consumers would like to do banking when it fits them. During breakfast, evenings and Sunday afternoons. And they will not like to travel down-town to pre-booked meeting at a bank office, most of them. In fact, and maybe most scary, many might not even care if they do banking with a bank… or the local grocery-store, or with a new fancy app from somewhere, or with Google.
To be eligible to customers will be important to banks. Not the other way around. And that is way different from “computer says yes, computer says no”. Slowly, banking is on my terms.
Thank you for reading. Please feel free to like, comment, share, tweet, email, etc. Hopefully the Pareto principle, also known as the 80-20 rule, will apply. I.e. 80% agree and 20% will give a constructive challenge.