Product Designer at BCG DV | Researching products for distributed intelligent ecosystems
Banking on decline
As people are less and less interested in the traditional way of banking and largely perform most of their financial operations such as depositing a check, cashing a check, or making a transfer via their mobile phones there is still a large amount of population that visits their local branches. 84% of banking customers still visit their local branch at least “occasionally,” according to a Federal Reserve report. When it comes to more complicated operations such as taking a loan people still prefer to talk to someone in person. It would be unwise to close the physical branches for the customers since there is a demand for in-person services.
Here comes the opportunity to repurpose the physical branches and create a bridge between the physical space of the brand and digital banking. It might seem straightforward to think that with the decreased amount of physical interactions people have in bank’s branches people would value less the experience they receive at the spot. On the contrary, people became even more concerned about the physical experience they encounter in regard to brands since these interactions are so few, the expectations are much higher and more determining. And banks are not the exclusion in the competitive space of retail. I do believe that with the increasing amount of fin-tech applications the brands that will expand to the physical space will win their customers. Nothing is as much important as the tangibility of the brand and building trust especially when it comes to money matters.
40% of Millennials say they would consider banking with Google and Apple, while 36% would buy insurance from them and 46% would look to them for investment advice (source: Accenture). It is because these technology giants have become experts in tailoring their services to the individual needs of the customer. Source
They said they wanted simplicity and convenience, plus a more personalised service. Despite recent data concerns, it appears we want our banking to be as modern as our Instagram account. Source
The meaning of experience and the competitive space of retail
“Banks are not just competing with other banks anymore,” says Shires, “they are competing against the experiences that consumers have when they walk into an Apple Store or when they buy a latte at the hip coffee shop that accepts mobile payments.” And with the recent announcement about the apple credit card, it seems even more inevitable that tech giants are out there for our bank accounts. Since they have mastered the user experience to the perfection they have no competitors in that space and people are going to trust them. What is the future of the physical bank branches then? Is the apple going to transform to provide us with the ultimate in-store and in-mobile experience tackling our health, financial lives?
Banks are striving to obtain more customers as well as educate already existing customers and bring new services to their doorsteps. The aim is to create more human-friendly spaces where people engage with the brand on a more emotional level and leave the stereotypical notion of banking system behind. We can see a shift towards “the apple store experience” where conventional banking setup is gone and is being replaced by a friendly, more casual way of engaging with a customer. It embraces the startup notion where the bank creates a product in close collaboration with a customer and leaves the authoritarian facade behind.
To retain their customers in such an environment, incumbent banks have started transforming faster than ever before — and investing in new capabilities and scale to create stronger value propositions. Source
Capital One bank has opened cafes where you can bank, plan your financial journey over Peet’s Coffee® with money coaches or just enjoy your time there as it is fully equipped to serve as a coworking space.
Umpqua Bank is another example of a new age of banking face. They call their branches stores to get rid of the bank tag from the past. On the contrary to what is happening in the banking field where branches are being stripped from the humanness in response to the digital disruption, the Umpqua Bank is going the other direction by bringing the community together.
“Our locations are about community and experience as well as banking,” Read explains, “and we believe it’s important that our stores add value beyond the transactional.”
“We host events in our stores like yoga classes and movie nights for kids,” says Callahan. “The store is a place for people to come browse, shop, enjoy free Wi-Fi or sit and read. It becomes a community hub.”
The border between what a banking experience is and can be shifted as we focus more on the human experience and how people respond to triggers presented to them and how the design of the space and activities can influence people decisions and emotional attitudes towards the brands.
Open Banking and modular architecture
If we think about the current fintech space and current distribution trends it would be logical to think that we don’t need one brand taking care of our entire financial life but rather it would be a set of companies, teams or individuals working in tandem to deliver you all the services you need since one of them is specialized in each separate product and they have the required knowledge and technology. From a large pool of data, they would be able to draw certain trends around financial concepts and deploy services addressing these issues/ trends. The idea bridges from the Open Banking concept but i would rather divert from the concept of a bank and go towards a financial hub idea. But let’s start from defining what is Open Banking.
Open banking is a system that provides a user with a network of financial institutions’ data through the use of application programming interfaces (APIs). The Open Banking Standard defines how financial data should be created, shared and accessed. By relying on networks instead of centralization, open banking helps financial services customers to securely share their financial data with other financial institutions. Benefits include more easily transferring funds and comparing product offerings to create a banking experience that best meets each user’s needs in the most cost-effective way. Open banking is also known as “open bank data.” Source
The financial platform could be created in the image of the open banking where users’ identities are formed and governed and different API’s can be created on top of it. The way these API’s would be deployed would be governed by the central financial identity. Next to the central financial identity, the banking system should also circle around a digital banking platform to orchestrate customer interactions across any touchpoint. Distribution is going to work with a strong core centre. And each branch/ channel within the distribution network has to be properly governed. The central point can align the channels together just like with the central financial identity in order to create cohesive experiences that do relate to each other.
How the financial platform should work is best described in the example below. The platform should know about your current life situation, living conditions and learn about your pain points and know that by connecting these needs with financial solutions you can really make people happy by providing them with tailored solutions. “In an effort to enable more consumers to own a car (which translates to the better potential for meaningful employment), Shinhan Bank Japan leveraged the internet of things (IOT) and GPS technology to limit the risk of loan default. This gold winning innovation for social, sustainable and responsible banking involves installing an IOT device in a newly financed car that can identify the location of the car and deactivate the engine if a customer repayment falls overdue. In this way, the bank limits its risk and expands the universe of consumers who can qualify for a loan”–writes The Financial Brand.
With a modular architecture in place, it’s possible for banks to innovate in the same way — fast and in line with customer needs. A modular architecture empowers a bank to go beyond responding to market realities, to actively creating them — in conjunction with the customer.
In a post-digital world, the concept of money seems to be old-fashioned. People look way more behind what the money can give access to. People seek for unforgettable human relationships, experiences, services that that money can give access to. Money became like a tool to access what people need and desire. Furthermore, in a highly capitalized world searching for other meanings rather than material values seems like a must. The demand for new modes of experiences is increasing. So how would I go about redesigning the monetary/ value experience? Let’s start with by taking people out of money association mindset. Let’s create a relationship with customers that purely talk about their needs and interests and guides them across the spectrum of what might be relevant to them. By learning about the customers you create their profiles and your brand becomes more tailored around these personas. The product should reflect a human and who he/ she is at their core. And money as a service/product is not different here.
“Stefan Heidenreich’s book recently published by Merve Verlag is titled For a Non-Money Economy (2017). What it presents is not exactly a polemic against money, but rather a convincing speculation that soon we may not need money at all. While the notion that currency might soon become obsolete sounds like science fiction to many, Heidenreich argues that we are likely already within the first phase of a media transition leading to that point. Given the complex information infrastructures that have already been developed for documenting transactions, tying consumer habits to identities, and accurately predicting future exchanges, the substructure of a new kind of economy is now in place.” Source
The new proposed system would abolish the storage of value and assets, and replace the functions of value and payment with the algorithmically supported distribution of things and activities. The first fundamental aspect of creating a new non-monetary economic system is creating alternative money-less forms of distribution that will spark new sort of connections in vastly connected ecosystems. The amount of data that we produce proposes a solid background for forming a non-money economy. The prices are currently calculated by the algorithms taking into account large amounts of information about users online behaviour, digital trends, economic situation. That information is not effectively used in order to shape the economic systems around us that would reflect the societal behaviours.
Stefan Heidenreich proposes a matching system which carries along with a value-driven system creating meaningful transactions based on individuals needs, possibilities, desires and abilities. The system mediates between transactions, advises participants in their decisions, shows opportunities, accompanies negotiations, and marks the results. Just like two people can be connected by a dating agency, the same way the programmers can be brought together to develop a project, or trucks coordinated for shipping purposes.
Seen from the users’ perspective, every process of matching begins with a desire or a need. The algorithm then suggests various solutions. If one of them fits, the other participants — producers, suppliers, inventors, machines, or algorithms — are contacted. If an agreement is reached, the transaction is carried out and noted. The impulse to make a match can emerge from each of the four participating sides: from those interested, from those offering, from the product itself, or from the algorithm.
Why phygital experience zones?
Banking becomes air, becomes oxygen
–Yang Qiang, an AI consultant to WeBank and a professor at the Hong Kong University of Science and Technology
The open financial system will not only be about managing the money but about generating, owning, accessing, sharing and transacting everything from data, money to goods. One would ask why do we need a physical space for these interactions if they will happen online or via the use of smartphones. I do believe it is about creating a brand new experience and taking people out of their phone screens for a moment so they can reconnect with their lives and see a bigger picture of what the future transactions can be and what can derive from them and how people situate themselves in the future in regard to their financial/ value-driven selves. They need to forget about what they know about money and stereotypical banking experience. You need to create an exclusive environment, a place they can fully immerse themselves in and build their trust and disconnect for a while in order to connect with an image of a brand and a service provided. The idea for the value-driven financial phygital space would happen next to the digital platform which users would have access to.
Obtaining financial products should become as accessible as tanking your car. They should become shoppable and easily accessible to the public by having many branches around the city so it can reach a large population and having one major HUB where people can access more services. You would need to look twice to make sure it isn’t a mobile phone store.
I do think that people’s financial knowledge is drastically low and it is due to the old fashioned system governing the banking system. On the other hand, people are becoming more and more comfortable with online banking and automated services. Where is the sweet spot? People should have seamless access to financial products in one place and then be guided towards choosing the best options in relation to their current situation. That’s why I think if we want to make a change, creating an application itself or another marketing campaign won’t be sufficient. We need to streamline the process in the form of reopening branches under new names, new ideologies corresponding to the current technical developments and people’s mindsets. How the personalization should be defined in a new financial experience space?
Setup ideas for space:
If you are interested in learning more about my approach to designing an identity for the distributed autonomous economy you can read my other articles titled Designing a decentralized profile dApp and Distributed self-sovereign identity both published by UX Collective.
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Disclaimer: These are the projects that I do independently in my free time out of my passion and they are not connected to any organization and I am not collaborating with the companies mentioned in the article.
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