Technology and Innovation – The Future of Banking

Last week I was invited as one of the panel speakers in the Innovation Leaders Panel in FST Media’s 2nd Annual Technology and Innovation – The Future of Banking & Financial Services in Jakarta. Various C-level execs took the stage before the panel, all sharing their ideas on the latest technological innovations they’ve deployed and their take on what the next big thing will be. With a few notable exceptions, most of their presentations went like this:

1. This is the market condition. Look at the challenges and opportunities!
2. This is the shiny new technology that enables faster/more/timely interaction/transaction/communication/service. We’ve launched it and it will totally address the challenges I’ve just mentioned.
3. This tech is so good! It’s something that every customer needs, but for some reason not all of our customers have it yet. The market’s just not educated yet. So, those challenges, yeah, they’re still there. But one of these days, just you wait. One of these days now….
4. We need to educate the market or just wait it out, but it’s important to innovate ahead of the curve. Not because that’s what everybody else is doing and we’ll look like idiots if we don’t do it too. It’s because of the customers. Really, it is.
5. Oh, and something-something-government-needs-to-fix-the-regulation-something-something, but I’ll only say this as an aside, so please don’t quote me on that.

Painful jabs at the industry? Maybe. But it’s only painful because it’s true.

Less than a handful of banks actually understand that the number one role of technology is to serve the customers, not the banks and especially not the technology itself. It was well halfway into the conference before anyone actually brought up what customers really need, want, and feel.

What is technology?

When I was a kid, I used to watch this old television show called Beyond 2000. Apparently, we should be zooming around in flying cars by the year 2000. It’s well over a decade after the millennium, and I’m still waiting for my jet pack.

Once upon a time, we used to think technology is anything that’s operated with levers and buttons. Then, we thought technology is anything that runs on electricity. Now, we think technology must have something to do with The Internet of Things and mobile phones.

How about the guys who came up with the word? This is how the Greeks defined technology:

In a nutshell, technology is “systematic treatment of art and craft”.

No mention of any fancy doodads, but that definition is actually closer to customer’s understanding of technology. And, it’s the customer’s definition that matters most, isn’t it?

Innovative Solutions – Whose problem are they really solving?

It may be painful to admit, but customers actually don’t care about your technology. In fact, customers don’t care about you either. Not one bit. They care about themselves. Sure there’s some room for altruistic behaviour, but that’s reserved for saving drowning polar bears, not for your brand.

This is the underlying reason why most “innovative solutions” fail. Most companies exist in different phenomenological field than their customers’. That’s just a fancy way of saying you wake up thinking about your brand; your customers don’t.

Whose problem are your tech solutions actually solving? Yours or the customer’s? (click to tweet)

This is basic stuff, but most of us must’ve skipped class that day. Consider the myths that still surround technology in banking:

MYTH #1: Technology creates market differentiation

REALITY: Technology is a hygiene factor

No one ever says, “Ooh, that bank offers augmented reality! I’m going to switch to that bank!”

Customers don’t want fancy technology. They want invisible technology. They want to live life without thinking about money. When they absolutely have to deal with money (that’s your cue, banks!) they want to deal with it as seamlessly as possible. They don’t care about NFC or mobile payments technology. They just want to get their stuff and go. Customers don’t really care about the plumbing as long as water still comes out of the tap.

(Of course, if you ask them in a survey, they’ll say they care about it, but “care” is a relative term. I care about global warming, but I still drive a car instead of taking the bus.)

Customers don’t want fancy technology. They want invisible technology. (click to tweet)

MYTH #2: New technology adoption improves customer relationship

REALITY: Better customer relationship improves new technology adoption

Getting your app in your customer’s phone is like leaving a toothbrush in your girlfriend’s apartment. It’s a significant gesture with complicated implications to your relationship. The customer will only allow this gesture if she’s sure you’re committed in the relationship, that you’re ready to move in. If you’ve built a great relationship base with your customer (usually marked by above-industry NPS scores) then great, ask if you can start leaving your stuff in her personal space. If you don’t have that relationship base yet, don’t jump ahead and start leaving your stuff in her apartment. That’s just creepy.

Better customer relationship improves new technology adoption, not the other way around. (click to tweet)

MYTH #3: The more online you are, the better

REALITY: When everyone’s zigging, you need to start zagging

Both global and local research shows that the most important interaction between customers and their banks happen at the branch. While online and mobile banking (and specifically in Indonesia, banking via ATM) might handle the bulk of transactional interactions, when it comes to relationship-building interactions (you know, the kind that customer actually values, the kind that will actually make you significant amount of money) people still rely on your branch. Our research shows that branch experience is what actually matters most to customers when it comes to choosing their main bank. Of course, competitive rates and reliable tech infrastructure matters, but as previously mentioned, those are hygiene factors. Everybody’s offering competitive rates and bank-anywhere capabilities. You need to embrace the Experience Economy and offer exceptional branch experience.

Branch experience is what actually matters most to customers when it comes to choosing their main bank . (click to tweet)

Here’s a bit of trivia: Thailand has more ATM per capita than Indonesia, but the average Indonesians use ATMs almost 8x more than people in Thailand. It’s not because we love ATMs. It’s because we hate going to the bank.

If you’re in Indonesia, this is good news, because you don’t have to work very hard to become exceptional. Most banks here are clueless as to what makes a great customer experience. Many still think that it’s a matter of making sure employees follow the dress code exactly as outlined in their behavioural guidelines (which include things like how wide you should smile when greeting customers), or that it’s all about getting the line at the teller to move faster.

You can’t completely blame the banks for this daftness. The research/consultancy industry is also to blame. There are certain research/consultancy companies that conduct annual national studies using simple-to-measure-yet-ultimately-irrelevant metrics to measure customer experience. They then publicise the results, give award to the “winners” and wait for the "losers" to contact them, asking how to improve the results.

Irresponsible, ridiculous, but effective marketing for these research/consultancy firms (yeah, you know who you are). Until banks get their metrics right, they’ll forever be bullied by these (bogus) research companies.

The Tech Gap That Matters

According to the Greeks, “technology” is “systematic treatment of art and craft”. Taking this definition, the one tech gap that separates the leaders from followers in consumer banking is actually culture.

Yes, culture is technology.

Banks need to stop thinking that a culture of innovation means coming up with the latest “innovative solutions” (and then later try to figure out how to convince customers that they need this stuff). Instead, banks need to realise that a culture of innovation starts with empathy. It starts with feeling what customers feel in their daily lives, and it continues with building meaningful relationships. Then and only then will your innovative solutions actually mean something to customers.

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Like this post? Find more like it here: https://empathic.marketing/blog/

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PS: As noted above, the conference did have some notably exceptional speakers and panelists. Have a look at their profiles right here on LinkedIn: Drew Unsworth from Commonwealth Bank (Australia), Ruben Salazar from Visa, Jerome Amara of Diebold Asia Pacific, Anand Natarajan of ANZ, Leonardo Koesmanto of BII - Maybank, and Ari Fadyl of AXA

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PPS: I'd love to get YOUR thoughts on this, especially if you're in the banking and financial services industry. Are the ideas above spot on, or way off course?