People's relationship with money: the future of banking

It was good to be able to take some time to visit the MoneyNext Banking Transformation Summit last week, do a bit of networking and hear from industry peers on their take on the future of the industry.

The talks were good, varied and you could really see the influence of technology and organisational change on FS organisations. Being ‘banking adjacent’ for the last few years you can feel how the industry (read incumbents) has acknowledged that it cannot rest on any laurels and see its offerings as a commodity. Neo banks and FinTech have a lot to thank for that.

As noted in my immediate post-event post last week, for me, the customer was largely missing from the conversation.

The tech was there. The processes and organisational innovations were there. But not so much those that use the services. Or, for that matter, how finance might be reimagined in the future.

Narrow focus

Let’s use the analogy of the current Euro 2024 football tournament.

Not only were England made joint bookmakers, favourites to win the tournament but pundits spoke of the tournament as being England’s to lose or that they ‘must’ win the tournament with the team they have.

Why? It was certainly not based on data. Prior to the tournament, England’s past 6 results read as follows:

2-0 win

1-1? draw

0-1? loss

2-2 draw

3-0 win

0-1? loss

Hardly world-class results. In fact, the hype-cycle seemed to arise as far as I can figure pretty much squarely because Jude Bellingham was part of a Real Madrid team that won the UEFA Champion’s League. How many of England’s players were title winners this season? (Let’s not include the League Cup in this analysis because, well, it is the League Cup.)

Six is the answer. 25% of the squad were ‘title winners’ this season. League or FA Cup. Again, that does not suggest a world beating side by any stretch of the imagination. I appreciate that there are several other potential accolades and data points one might explore here to indicate the perceived quality, ability or ranking of a team but that is kind of the point. That this work simply was not done.

So then, why the hype cycle? At best, it was hopeful, albeit ill-informed journalism and a clear display of some classic confirmation bias and at worse, as I suspect is the case, it was a case of superiority bias. In other words, the pundits and bookmakers excluded or did not search for information about other parties (form, quality of opposition, proposed level of player across each team, mental fortitude etc.)

But what does this have to do with the future of banking?

Exactly this, that the industry should not become as pundits, oblivious to the outside world but rather utilise the tech, processes, and people at its disposal to improve its offering and the experience of that offering for those who will be using it.

Transformation is Table Stakes

The saying goes that history repeats itself, first as tragedy, then as farce. (The irony of a Marx quote in an article about financial services is not lost on me.) In banking, both cases might be attributable to the idea that customers care more about brands than about their money. They do not.

Let’s put that a different way and explore simply, from a customer perspective, what money is for.

Money is used to square up accounts for borrowed funds or services in the past (e.g. paying off debts and bills), used for pay for one’s and one’s family’s sustenance, existence and leisure today (e.g. rent, loans, shopping and entertainment) and, if there is anything left in the pot, put something away towards the future (e.g. mortgages, savings, investments and rainy day funds).

By looking at the money from the customer’s perspective in this ‘past, present and future’ manner we can think that it is quite simple. And any one of these functions could be facilitated by any number of different institutions or mechanisms, not all of them banks.

I find that this is quite a liberating way to thing about things and allows one, as an industry practitioner to adopt a different mindset towards the services that you provide. In the same way that the fundamental function of say a coat whether that be a coat from Primark or Prada is to keep one warm and dry the function of money is to do some very functional jobs.

Reframing the relationship

When we reframe it and think from the perspective of experience, or status, or purpose or wellbeing or any manner of different reasons why one might prefer a coat from Prada than Primark (or vice versa) we can unlock more interesting conversations about ourselves and our customers’ relationships with their money.

And that means that, as institutions, rather than think ‘we must transform ourselves not to stagnate’ or ‘to remain competitive’ we can see transformation as simply a facet that allows us to do more for our customers, be more for our customers and serve a higher function for their money.

Customer loyalty must be earned, constantly and consistently based on the experience that brands provide. Banks are not immune to this.

But considering the relationship that customers have with their money and our place ?or not in that environment and ecosystem, we can be liberated to do more, embed finance in non-traditional spaces, operate as platforms and ecosystems rather than silos and truly transform finance for the future.