Edition 28 - Putting the services back in financial services.

Hey folks ?????

Last week’s edition, which reminded you folks that you can only impact the future, not the past, saw a flurry of positive comments so I’m hoping I altered your perspective in some way or another for the better and hopefully that helps you impact your future. :)

Every few weeks I like to remind you lot what I do for a job and talk about banky things, and this is one of those weeks.?

Today I’m going to dive into a subject that’s very close to the heart of why 11:FS exists, and why I wanted to start this business in the first place.?

It seems rather odd to me that in an industry that by definition has the term ‘services’ on the label is so monumentally devoid of delivering them to their customers. But this has to change.

Every walk of industry that customers love today is service centric. It is as much about owning the product and the things it does for you every day as it is selling the product. So we fundamentally have to put the service back in financial services.?

Let’s double click. ????????????

The Past.

Way back when, pre 2008 financial crisis, in fact back even further into the gooder older days, big banks were set up in a way that was functional for serving their customers needs.?

They were financial instrument making machines - credit cards, current accountings, savings, mortgages. These financial instruments were manufactured and then distributed via their lovely empathetic, caring, community focussed humans. Later this was done via telephony and then even later, when the humans started to be costly, via a channel they called web.

While these banks were foundationally built using someone else’s rails, with the emphasis being on product creation, the bank owned their distribution channels and increasingly they were sales channels with service falling by the wayside.

We moved fundamentally from service led humans to self service with the internet channels, albeit cost effective, were not empathetic or service led.

If a customer wanted a thing they could apply for it, but in terms of understanding how to use these products to enhance their lives, very few knew what they were doing, they just knew they needed it.

So then a customer had a few options as to how they could get some support. Back in the days of branch banking you’d have your own personal banker that knew your family and financial situation who could point you in the right direction as to what to do with your money. Back in those days, service was at its peak.

But then something changed. We entered the era of digitized banking where hand-in-glove service was stripped back and in its place was online and mobile banking. All the same features and functionality were mostly there but without the understanding of how to use it. This made, and still today makes, no sense.?

For the general population, very few people in the world, unless you’re financial services nerds like us :), wake up thinking ‘Ooo I’d like to make more payments today’ or ‘how do my transfers work’. These features are fundamental yes, but what banks failed to see was that money is emotional and what their customers really want to understand is how they are going to afford XYZ, or how they are spending in comparison to previous months so they can manage spending better. It is the feelings that matter, not the features.

This is where the fall down started.?

The Now.?

Let's do a little exercise. Think of an app on your phone that you love. My first thought was Amazon. Why do I love Amazon? It is simple, they have all of the things, I can be very confident in their offline capability (delivery) being as good as their online ones, infact I know I am probably paying more for products on Amazon but because the service is so good I don't care!

This isn't the same in banking is it? While over the past decade new entrants have caught on to the fact that in order to really serve their customers they have to get as close as possible to the problem and their day to day behaviour then there is still a very long way to go.

We’ve seen fintechs spring up to challenge each slice of these basic banking features in order to inject good service back into financial services at the point where customers really need it.?

It isn’t just about dumb analogue products anymore but intelligent digital services that preferably, can be embedded in end to end customer journeys to ensure we are putting the solution as close to the problem as we can.?

We have the likes of Klarna tackling lending by offering BNPL and supporting customer cash flow, Pension Bee simplifying pension management and Monzo making savings easy with its multiple pot function.?

They do this while also building a brand that really speaks to their customers. Historically big banks had the name and with that the reputation to hold on to their customer base while these challengers entered the scene. But now, with the emphasis being put on creating a lovable brand which actually speaks to your everyday human as opposed to complex banking terminology, we’re seeing more and more customers gravitate towards businesses that make them feel seen.??

As a result, fintechs are winning on service.?

How Can Banks Win.?

Although the banking battlefield has become densely populated all is not said and done. In order for banks to become dominant once again banks have to get good at services. The end.?

There are 3 things they need to do:?

1. Know deeply what their customers need.?
2. Deliver software exceptionally well.
3. Bring together talent and technology to make these things happen.?

Sounds easy, but having worked in banks I know that with the current operational setup, these things are hard. The fact of the matter is, to be great at services you need to iterate. A lot. All the time. Every single day because practice makes perfect right?

Customers shouldn’t have products put upon them by people who think they know what good financial set up looks like. In any B2C business the clue is in the title, business to customer. So being in a position where you listen to customers and design for their needs quickly, is what differentiates businesses from commoditization.?

When big banks look to fundamentally change how things are built and launched then on top of having a respected legacy brand, they could really become the challenger once again.?

If they don’t then legacy aside it will be relegation to the back office. Product manufacturing in an industry shifting towards services isn't a good place to be with such a significantly bloated operating cost in the back office. Just ask the mobile network operators.?

Fundamentally it's alway been in the name. This is the financial services industry folks. We need to focus on services that add value to the everyday lives of everyone in order to get back to what made this industry great. Services.

If you want to chat more on this stuff then comment below or drop me an email [email protected] - I could go on about this forever. :)?

See you next week.

Dx