What should we expect from our banks?

As I have written elsewhere, bank bashing is a favourite Australian pastime. In recent months, this has struck a new crescendo. There have been various allegations, legal cases and regulatory investigations surrounding such misconduct as mis-selling of products, rate fixing, over-charging and money laundering, all culminating in a hastily announced Financial Services Royal Commission.

Cartoon by David Rowe, sourced from the AFR, published November 30, 2017

The banks had tried to get on the front foot, by abolishing ATM fees, reigning in some of their lending practices, and appointing a former Labor politician to help them navigate the growing calls for a Royal Commission (largely coming from her former colleagues in the Labor party). But the (Coalition) government clearly decided enough was a enough, and sprung their own inquiry into the industry.

For the benefit of overseas readers, Australia has a highly concentrated banking sector, which is also highly regulated, highly profitable, and in some ways, a highly protected market oligopoly. There are only four major banks (also know as the four pillars, as they cannot acquire one another, nor can they be acquired by foreign banks), and a few regional banks. There is a smattering of non-bank financial institutions, but by their very nature, they don’t offer the full range of banking products and services. As an example of this market concentration, the big four banks traditionally account for something like 80% or more of all home loans.

Aside from the Royal Commission, there are a number of policy developments in play which will inevitably change the banking landscape, and the dynamic between market participants. In addition to the growth of FinTech startups aiming to disrupt through digital innovation, there are four key areas of policy that will impact traditional banking:

  1. Open Banking – giving customers greater access to and control over their own banking data
  2. Comprehensive Credit Reportingmandating the hitherto voluntary regime among the big four banks
  3. The New Payments Platform – designed to allow real-time payment and settlement between customers, even without using bank account details
  4. Restricted ADI Regime – to encourage more competition in the banking sector

The major banks have tried to laugh off, rebuff or diminish the threat of FinTech disruption. They believe they have deeper pockets than startups and just as good, if not better, technology processes. Moreover, customers are traditionally so sticky that there is an inherent inertia to switch providers.

But with banks having to set aside more risk-weighted capital to cover their loans, they may be vulnerable to startups focussing on very specific products, rather than trying to be a full service provider. Banks no longer have the technology edge, partly because of the legacy core banking systems they have to maintain, partly because they lack the know-how or incentive to innovate. And changing demographics will influence the way new customers interact with their banks: “mobile first”, “end-to-end digital”, and “banking for the gig economy” are just some of the challenges/opportunities facing the sector.

So what should we expect from our banks? I would say that at a minimum, a bank should provide: trust (but with Blockchain, DLT and trustless, zero-knowledge proof solutions, banks are no longer the sole arbiter of trust); security (linked to trust, but again, with biometrics, digital ID solutions and layered encryption, banks do not have a monopoly on these solutions); capital protection (although no bank can fully guarantee your deposits); reasonable fees (still a way to go on account keeping fees and some point of sale transaction fees – while disruptive technology will continue to challenge legacy costs); and an expectation that it will not bet against the direct interests of their customers (like, shorting the housing market, for example). The latter is particularly tricky, when banks are mainly designed to deliver shareholder value – although of course, most Australian bank customers also own shares in the banks, either directly, or indirectly through their superannuation.

In recent months, and based on personal experience, I think a bank should also know its customers. Not just KYC (for regulatory purposes), but really understand a customer as more than just a collection of separate products, which is how most banking CRM systems seem to work. Given how much banks spend on consumer research and behavioral data, and how much they talk about using big data, artificial intelligence and machine learning to anticipate customer needs, it’s a constant frustration that my bank does not really know me – whenever I contact them, for any reason, I always feel like it’s a process of “product first, customer second”.

Moreover, I can’t think of a single new product that my bank has launched in the past 15 years of being a customer. Sure, they have rolled out mobile apps and online banking, and they may have even launched some new accounts and credit cards – but these are simply the same products (accounts, loans, cards) with different prices and a few new features. Even the so-called “special offers” I get for being a “loyal” customer bear no relation to my interests, or even my spending patterns (despite all the data they claim to have about me). And because banks are product or transaction-driven, rather than relationship-driven, their internal processes fuel silo behaviors, to the extent that the left hand very often does not know what the right hand is doing.

Finally, with more and more of the working population becoming self-directed (self-employed, freelance, portfolio career, contracting, gig-economy, etc.) banks will have to innovate to meet the financial services needs of this new workforce. Bring on the disruption, I say.

Next week: Box Set Culture 

 

 

 

 

Australia Post and navigating the last mile

Over the years, Australia Post has featured in this blog. And here. And over here too.

You would think I had no more to say on the topic. (Believe me, I’d prefer to have something else to write about – but it’s the summer, it was a long weekend, the weather is frying my brain, etc.)

But Auspost just loves to keep delivering poor service (see what I did there?).

From direct personal experience, four times in about as many weeks Auspost have failed to meet their own service levels for parcel delivery. In short, on each occasion their drivers claimed to have attempted delivery, but did not leave any notification. As a result, the parcels were delayed, and it was only when I received the “Final Reminders” from my local post office that I had any idea these items were awaiting collection.

Each time, I have lodged a formal complaint. In fact, I was encouraged to do so by the counter staff, who indicated that my experiences were not unique, and that they were as exasperated as I was. They also suggested that the front line staff are not being listened to by management.

With each complaint, I have been advised that “the relevant people will be spoken to”, and I have been assured “it will never happen again”. But it keeps happening, and nobody at Auspost can adequately explain why.

OK, so once could be a genuine error. Twice sounds like poor performance. Three times, and it starts to seem like a regular occurrence. But four times, and it points to a systemic problem, a failure which Auspost seems unable or unwilling to address.

So pervasive is Auspost’s reluctance to engage in genuine, honest and open dialogue with their customers (remember the National Conversation?), that at one point, a supervisor I spoke with refused to confirm the address of my local parcel delivery office. During another call, when I asked for some basic information as to whether other people in my area had made similar complaints, I was advised to submit a Freedom of Information request to obtain that sort of data.

After the second occasion, and sensing that Auspost was not getting the message, I also submitted a complaint to the Ombudsman. However, the latter said that “twice was insufficient” for their office to take any action. Ironically, the exact same time as I took the call from the Ombudsman, the postie was delivering yet another “Final Reminder” card, in respect to a third parcel for which there had been no evidence of a previous “Attempted Delivery”. I’m still waiting for the Ombudsman to get back to me….

More importantly, I’m still waiting for Auspost to notify me of what specific steps they have taken to resolve this pattern of poor service.

Meanwhile, Auspost keeps boasting about all the parcels they are delivering, thanks to the boom in online shopping. It’s just a pity that (from my experience), they are doing a really poor job of it.

Next week: What should we expect from our banks?

 

 

Big Data – Panacea or Pandemic?

You’ve probably heard that “data is the new oil” (but you just need to know where to drill?). Or alternatively, that the growing lakes of “Big Data” hold all the answers, but they don’t necessarily tell us which questions to ask. It feels like Big Data is the cure for everything, yet far from solving our problems, it is simply adding to our confusion.

Cartoon by Thierry Gregorious (Sourced from Flickr under Creative Commons – Some Rights Reserved)

There’s no doubt that customer, transaction, behavioral, geographic and demographic data points can be valuable for analysis and forecasting. When used appropriately, and in conjunction with relevant tools, this data can even throw up new insights. And when combined with contextual and psychometric analysis can give rise to whole new data-driven businesses.

Of course, we often use simple trend analysis to reveal underlying patterns and changes in behaviour. (“If you can’t measure it, you can’t manage it”). But the core issue is, what is this data actually telling us? For example, if the busiest time for online banking is during commuting hourswhat opportunities does this present? (Rather than, “how much more data can we generate from even more frequent data capture….”)

I get that companies want to know more about their customers so they can “understand” them, and anticipate their needs. Companies are putting more and more effort into analysing the data they already have, as well as tapping into even more sources of data, to create even more granular data models, all with the goal of improving customer experience. It’s just a shame that few companies have a really good single view of their customers, because often, data still sits in siloed operations and legacy business information systems.

There is also a risk, that by trying to enhance and further personalise the user experience, companies are raising their customers’ expectations to a level that cannot be fulfilled. Full customisation would ultimately mean creating products with a customer base of one. Plus customers will expect companies to really “know” them, to treat them as unique individuals with their own specific needs and preferences. Totally unrealistic, of course, because such solutions are mostly impossible to scale, and are largely unsustainable.

Next week: Startup Governance

 

Tech, Travel and Tourism (revisited)

Just over two years ago, I posted a blog on how the tourism and travel industries needed to embrace the opportunities brought about by digital disruption. Having been on half a dozen overseas trips in the past 12 months, I can see that there have been some improvements in the traveler experience, but there is still a lot of room for improvement…

One of the biggest benefits has been the expanded integration of public transportation information into Google Maps. Navigation and route planning, right down to which platform to board from or which subway exit to take, has been a huge boost to the traveler UX. Many cities are now using integrated stored value cards for public transport, but limitations still exist: for example, some systems don’t make it that easy for overseas visitors to obtain the card itself, others make it hard to re-load other than by cash; while only a few systems, like Hong Kong and Japan, support multiple point-of-sale transactions for shops, restaurants and other services.

Another plus for frequent travelers has been the increased adoption of chip-enabled, e-passports which streamline the immigration entry/exit process (but only for participating countries, of course). Laborious paperwork still exists in many cases with arrival/departure cards and customs declaration forms – but over time, these processes should become more streamlined with the adoption of digital IDs and biometrics.

Using local mobile phone networks may have gotten easier with compatible operating systems, but even with pre-paid travel SIM cards and data packages, access costs are still disproportionately expensive for overseas visitors. Sure, there are more and more public WiFi services and hotspots available, but most still require users to provide personal data and/or reveal security weaknesses. Even though I recently purchased a mobile pass to access “free” WiFi services abroad, it’s hard to see what value it offers, because it only works after I have already logged onto the WiFi network.

Getting flight information, notifications and alerts via SMS and e-mail has improved considerably, along with easier online booking tools and mobile check-in solutions – and of course, QR codes now support paperless boarding cards. But I’ve noticed that some airline apps don’t support full integration with mobile phone wallets, and consolidating ticketing and invoicing information (e.g., for consolidated expense reporting) from multiple airlines and booking platforms still feels a long way off.

Finally, a constant irritation for travelers are the card transaction fees that most hotels still pass on at checkout – as if many guests are likely to pay in cash! – compounded by the FX fees that the credit card companies also like to charge. All up, this can mean an average of between 3% and 5% in additional fees, in a situation where hotel guests are something of a captive audience. Transaction fees remain a target for further disruption….

Next week: Token ring – a digital ID solution