We have a lot of clients in the financial sector. So we are always on the lookout for new thinking about the financial sector. Brett King, the author of Bank 2.0 and Bank 3.0 is a guru in this field. When he speaks, you should listen.
He wrote a book, “Breaking banks, the innovators, rogues and strategist rebooting banking”
It is already broken
His premise: You can’t break something that is already fundamentally broken. Banks have been around for 4000 years. Not much has changed. And now it is too late. What was the last innovation by the banks? ATM?
The problems are:
- cost of acquisition (bank account ($ 350), loan ($1,000), mortgage ($2500))
- default rates are too high (Zoppa has a 0.8% default rate)
- the marketing strategies are no longer relevant
- brand advocacy is the new way
- the cost of distribution should be a lot lower
- mobile is everything
- friction kills (multi-channel, multi-screen, contextual, intelligent)
- cash will disappear (Uber)
- you don’t need banks to move money (used to be 100%, is now 5%)
- there is an app for that (Google has a banking license)
- the revenue models are shifting
- the unbanked are growing (2.5 billion have no bank account)
In short; legacy systems are killing the bank. Smart algorithms and better, more modern risk modelling are killing the banks. Crowdfunding and crowdlending are eating their lunch. Debit cards are eating their lunch. Trusted advisory websites combined are eating their lunch. Online banks are eating their lunch. Dwolla, M-Pessa, Uber, Zoppa, Lending circles, Fundingclubs, Linked Finance and a 1000 other startups in the Fintech space are chomping at the bit. Doing little parts of the bank a lot better.
Risk versus friction
Banks are no longer trusted. Which throws brand advocacy out of the window. The risk versus friction is won by the wrong side. Which loses you generation Y. It could be Blockbusters all over again. Why go to a shop when you can do it online?
The digital footprint is changing repayment behaviour. Which is about social media, online reputation, and dialogue. If you are not engaging online…….
Vultures picking away
I described it to a friend as an industry where the vultures are slowly picking away at the corpse. Going for the juicy profitable bits first.
Crowdfunding a serious case in point. I was at two conferences where crowdfunding was discussed. It is a paradigm shift. 600% growth. A 1000 platforms already. Doing 8 billion. Disintermediation of the banks. And we are only at Napster level. Wait until we get to iTunes levels.
The opportunities are in the data, finding moments of value, in context and advice, creating the community (like www.smallbusinesscan.com ;), the daily dialogue and the stories. For banks specifically, it is security, data, identity management and as a platform for some very cool apps. The skeleton of the corpse. Maybe an augmented version of the corpse?
Not just banks
There are lessons for any business. This is happening in your industry too. You are getting Uberised or Netflixed. Breaking you on friction, on omnichannel, on data, on brand advocacy. You could be a corpse soon too.