We recently caught up with Scott Bales, author of Mobile Ready and the previous Chief Mobile Officer for Moven. He believes mobile is not about the technology but about behavior, context, and utility. He has found that when you embrace this idea, technology as an issue disappears. We delved into this topic in this interview, and you can also read more about it in his book here.
What should banks be doing that they currently are not doing?
Banks are attracted to shiny things such as UX, big data, omnichannel and the like. But they don’t implement the full potential of these opportunities. For instance back in 2001, CRM was a popular buzzword. The potential of CRM was huge. Banks were all aiming for the big single view of the customer, but 14 years later banks still don’t have a single customer view.
The reason this happens all comes back to culture and capability. Most financial institutions don’t have the capability to drive discussions around being innovative and mobile first. They don’t have the mindset or culture to drive it. You can see why in my Slideshare presentation on the seven deadly mobile mistakes:
What I am saying here is nothing new. People have been working to improve consumer experience for the last 20 years. What banks need to be do before they jump in and make any conclusions is focus on these four core observations about their target market and do it with empathy:
- Facts - Their age, race, lifestyle and hard facts about them as an individual
- Pain - The problems and friction your customers face in banking and their financial lives
- Behavior - What they are currently with their finances, because they don’t have your solution
- Goals - What are they trying to achieve (for instance look at the higher level i.e. they are not trying to get a mortgage, they are trying to buy a home)
For more on this check out my persona grid:
A simple example of this is with the guy who invented the ice pack. He observed that most people were putting frozen peas on an injury to reduce the swelling. After seeing and realizing this, he then improved the tool available to consumers and built the modern day ice park.
Institutions are getting this completely wrong right now with a number of large digital agencies just throwing money at the problem, thinking they will fix mobile with money. If banks don’t go through the process of understanding the real problems consumers face and building their products around them, then it’s just a waste of time and money.
Can you elaborate more on how banks can create these insights?
Bankers need to literally get out of their office building to understand and have empathy towards what clients need. I encourage bankers to get out there to do field research and create those “aha” moments.
An example of this was in India when Westinghouse washing machine sales spiked in 2005. They hypothesized that the local consumers wanted to move away from washing in the river and therefore wanted to upgrade to washing machines.
It wasn’t until a Harvard student went to India as part of his MBA and found out that no one was putting washing machines in their houses. He then delved deeper, and one day while he was having a mango lassi, he found out they were using the washing machines to mix these drinks! Washing machines were a perfectly scalable way to make multiple lassi’s side by side, with the mixing drum and tap at the bottom. If it wasn’t for the Harvard student delving deeper into the situation, Westinghouse would never be known and would have kept investing marketing and product resources in the wrong areas.
How should banks move towards customer centricity?
Financial institutions should offer free stuff. This allows them to participate in a free way just so that they can listen. As an example, Mint.com came about knowing that they wanted to do something in PFM, but struggled with what they should build. So they started listening into various blogs, forums and other areas where people are talking about financial management.
Through thousands of different sites, they found that 55,000 people in America were open sourcing and sharing a spreadsheet, which allowed them to upload transactional files and give a snapshot view of their finances. As a result, the first product they built was a web product of that spreadsheet. This meant, instantly they had 55,000 active customers because they no longer had to manage that spreadsheet.
The first version of a product should come from finding where people are talking about a certain topic, listening to that particular area for a period of time and then and only then, determining how you could you create a hypothesis to find a solution. The reason a lot of start-ups are going to be successful like Lending Club is they build once they understand. They understand, do painted doors, test landing pages and pinpoint their product value proposition.
There are so many cost-effective, simple experiments that banks could be doing to hear from customers themselves. Instead, they pay research firms to do research for them, and unfortunately the context isn’t valuable to that bank. As a result, it’s a worthless exercise.
How should banks focus on testing and learning in a practical way? Through innovation labs?
Labs have a place, but I’m talking about the stuff before that. I’m talking about when you don’t even know which problem to solve in society. You have to get away from your desk, take a pen and paper, and just observe the goals and pain points consumers have. You need to observe existing behaviors in an attempt to solve problems.
As an example is with debt consolidation. That is easy because it’s built off existing behavior.
The challenge most banks have is they spend far too much money on premature scaling. They have spent tens to hundreds of millions on digital and transformation, but they don’t know where they are going to go after. They could be a lot more effective if they spend time where the opportunity lies, which is listening to customers in the first place.
Your book is focused on being Mobile Ready. What does a good mobile experience actually look like?
As mentioned earlier, it’s around context, behavior and utility:
Context: It’s about me understanding that I know something about you. It comes down to the point where you walk into the branch and the bank knows who you are, like Minority Report. Amazon has been doing this for years. If I walk into a BofA branch, they should know where I am with my products.
Currently in the digital banking space, the dotcom looks the same for every audience. It looks like a broadsheet newspaper. In reality what should be happening is since it’s easy to know if I am a return user, the experience should be unique based on who I am and what type of interaction I want. This is why Amazon is amazing because it knows what I’m interested in and gives suggestions around that.
As another example I have a pet hate with Singapore Airlines. I’ve been a gold status customer for 9 years and I’ve had the same telephone number for that time. However, each time I call they ask me if I want to speak in English or Mandarin. This kind of technology to personalize this has existed in call centers since the 80’s, and they should recognize that I am calling from the same number. This is just a simple thing to show that they recognize and acknowledge me.
Behavior: The behavior isn’t about the mortgage, but about the higher calling (buying a home). Google did a research project through Think With Google where they found that 60% of the research that consumers do about a financial product is done before speaking to sales reps. Taking this a step further, Google has given financial institutions a 6-month lead time for when the consumer wants to get a new financial services product. When a consumer wants to buy a house they are often learning about the process 6 months in advance through Google. You can see they want to buy a home based on their search patterns. This is the same with building wealth, debt consolidation etc. That means bank are missing huge opportunities to engage with the broader experience.
As an example, NAB in Australia created a platform called ‘people like you.’ They found a way to do analytics across different geographies by looking at average prices, income ratios, average stats to help consumers understand where they may like to live. Those simple things helped engage NAB early in the home buying process.
Utility: To get utility, you have to add value without initially gaining revenue. What startups do so well is they say, “If I have 10 features, I will give one feature away for free.” Then customers will use it, see the value and be upsold.
Financial institutions have to look at mobile clients and think about what are the 10 ways we can engage them. Then think about which areas make money. What is scaling? Which areas could we give away for free?
As an example, mortgage calculators didn’t use to be free. Now they are. There are a number of other things that financial institutions could give away for free. However, the digital consumer is quite fickle. They will try things easily, but they will leave easily too. Google research shows that greater than 60% of consumers will turn away from a brand if they have a poor mobile experience.
On a practical level, what are consumers searching for and researching before they are willing to speak to financial institutions?
To answer this, banks needs to spend time listening. They need to know where consumers are and understand their patterns. Then they can start to contribute to the conversation and build empathy. This way financial institutions can understand what is worth pursuing and if they can create a value proposition around that.
Too often banks jump to the execution phase without listening. It shouldn’t cost banks hundreds of millions of dollars to transform into digital, but it does because they don’t listen. Moven has higher engagement with a much lower budget because they took the time to understand the customer first. In the book, The Four Steps to the Epiphany, Steve Blank says, “You need to listen to needs before you move to the executional phase. However most decision makers think how much money can I throw at this? And ignore the listening part.” You have to generate the insight first.
What do you see as the biggest innovations occurring that are going to disrupt the financial services industry?
I look a lot at mega trends and one of them is that digital natives are a completely different generation from their parents. By 2023, digital natives will make up the majority of the population in all G20 countries. As a result they will control consumer trends and the public consensus.
While this is still eight years away, digital natives started to enter affluent markets in all g20 markets two years ago. This is happening right now. Banks have missed the boat.
The only bank that is doing something amazing is BBVA with their acquisition of Simple. They are willing to cannibalize BBVA by letting Simple sit as a siloed entity. Simple has the ability to be huge.
A lot of banks believe Millennials are not profitable. How would you respond to that?
Banks may have found Millennials not to be profitable because they are trying to attract digital natives with a 100-year-old banking model. They don’t realize they are speaking to a whole new audience. There is no point using yesterday’s model.
Millennials, Digital Natives and Younger Gen X can be hugely profitable customers. Lending Club is hugely profitable because it is not run by banks.
There was a case study that looked at the cost of doing business in different industries by assessing the cost of putting a $1 blue ball point pen on a worker’s desk. They found for start-ups the cost is next to nothing because they would get pens from an event, find one somewhere, borrow one, etc. For small companies it cost $2-$5 because of the cost to do it and the time of employees. For mid-size companies it cost $550. Here is what is staggering though. For large banks, due to the cost of compliance, anti-fraud, large overhead costs etc., it cost $1500 to put a ball point pen on an employee’s desk. That is 1500x the retail price! There is no way banks can compete as we get more digital, with this kind of business model.
Should financial institutions create a separate digital business then?
Yes, they should have separate businesses which can cannibalize themselves at the core. The core at every bank is hugely entrenched with mainframe technology, usually using the Hogan Platform. The simple process of adding just one iteration takes 18 month to fix.
There needs to be a better delivery process, and they can’t do it with their legacy infrastructure. Their current operating model will completely block them from being competitive in the year 2023.
To wrap up, you have a new book coming out. Can you talk about what you’ll be focused on there?
Yes, the focus is on innovation wards and cultural capability models to thrive in the new world. It comes out in Q3. You can check out my current book here.