Get this stuff out of my head.

The Future of Banking...

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I have a friend who works in the innovation team of one of the big banks.  He recently asked an open question about the future of retail banking.  I’ve had the questions running round my head for past few weeks and feel that I have some thoughts that are fermented enough to be aired.  Aden, please forgive me if this stuff is just old hat to you - they are just random ramblings of an over active mind, not the result of any market research. My first thought about a concept of banking follwoing a utility model.  At present we commit to provider for a financial product and service i.e. deposit account, personal loan, mortgage, home insurance.  We commit to this provider based on explicit criteria (lowest interest rate, best cover) and value judgements (trusted brand, customer service).  When we want to swicth between providers we have to go through a world of pain or pay exit fees. Now if we could give an online agent our criteria and allow it to move our deposits and loans between providers we would have a utility model for money. The problem is what needs to happen to enable this:
  • standardisation of services - not necessarily just one product (like 240 volts of electricity) but at least a way to be able to automatically compare products.  The comparison websites are already moving the industry in this direction.
  • low cost of service setup for the providers - I have no idea how much a credit check/score costs a lender, but if this cost is passed on to the customer as a fee, it becomes a form of tie-in.
  • better data exchange facilities between customers and providers - if I can’t quickly, easily and automatically setup my direct debits with my current account provider, I am prevented from changing providers.   Again, a tie-in, but this time imposed by the destination provider.
  • and, most significantly, a significant provider in this marketplace to introduce financial services on this basis.  Actually the real problem is that it needs more than one provider else there is no choice of provider.
I find the likleyhood of two or more financial service providers who are willing to disrupt the market by moving to this kind of model pretty slim.  Especially as it moves the whole marketplace further from a value-add model to a price driven one. Crazy thought eh? My second thought was more grounded.  In this age of tightening purse strings I am wondering why my online bank is not providing me with visualisation tools.  Something that lets me see where my money goes each month and therefore where I could make the most significant belt tightening moves. Sure I could (and occasionally do) download my statements and import them into a spreadsheet to categorise and analyse my outgoings.  But, surely my bank could save me a lot of trouble by not only allowing me to view my outgoings as graphs and charts.  It could use its understanding (or the aggregated knowledge of all its customers) to automatically categorise my expenditure.  Perhaps visualisations of my outgoings over time would also help me too.  Particularly if they could be compared against the aggregation of other users too. So how about it banks?  Two options there, one that leads you to compete more on price, the other that adds value to your online services.