In terms of understanding consumer behavior and providing the online and mobile services accountholders want, Brett King believes if banks don't innovate, they run the risk of letting outside competitors steal business by providing the technology first.
King's newly-released book, "Bank 2.0: How Customer Behaviour and Technology Will Change the Future of Financial Services," focuses the evolution of customer interaction, channel improvement opportunities within retail banking and trends in innovation and technology. As a consultant and founder of the professional association and training institute, International Academy of Financial Management, King said an impetus for the book was a belief that banks were missing opportunities to win consumers by using new technology to provide services and opportunities.
"There wasn't an appreciation for the fact that technology could really change the value of a bank to a customer," King says. "It was just seen as this technology investment and not being sure whether right now if it's time to invest. Technology is just a tool at the end of the day. If you get that tool right it can make a big difference. But if you get it wrong, if you don't understand the interaction, then it becomes a useless investment."
While King says banks have been paying more attention recently to user experience and interaction design, there is still a trend toward working in compartmentalized silos, leaving the IT team to define what the customer wants. That in turn has given third-party startups new opportunities.
"I think what we're starting to see now is we have a whole slew of competitors coming from left field in the banking area here," King says. "PayPal or Lending Club and Prosper, these guys are all chipping away at the traditional banking model. Bankers know that something's happening."
King says banks should look at how other industries, such as airlines and travel are innovating in the online and mobile space. Banks could learn from seeing how other types of companies are using online and mobile apps to sell services and provide products customers want, he says, rather than banking, where missed opportunities abound.
"Banks have to change the way they measure customer engagement," King says adding that an argument from banks resisting Internet and mobile is that they aren't making much revenue via those channels. "But when you actually login and check out the services you see they aren't selling anything. There are no sales messages."
New apps and services are opening up person to person payments, remote deposit capture and mobile payments. King says it's a matter of time before the contactless payments become the norm, and could even be done through mobile phones.
Banks need to refocus with the consumer at center, and look toward a not-too-distant future where the branch model becomes less visible and the bank itself is seen as more of a utility-type service, powered by its own ability to give customers all the products and services they might need, but entirely through online and mobile channels, King says.
"When I talk to banks about this shift, first of all I ask them if they've got a plan to phase out checks," King says. "The second question is, how are they going to handle scaling down their ATM network, because that's going to have to happen. They're not even close to thinking about that now, and they have plenty of time to think about it. But what's happening with the technology is the adoption cycle is getting shorter, the rate of adoption is speeding up."
It's not a matter of being ahead of the curve, he adds, or simply building the services and expecting customers to adopt them. Rather, it comes through an understanding of consumer behavior and needs that banks can revolutionize services.
An company King says does a good job of understanding consumer behavior is Apple.
"If Apple today announced they built a new iPhone, and with it came contactless payment technology, how quickly do you think customers would adapt to that from a behavior perspective," King asks. "It would be overnight."
Were a shift in mobile payments at that scale to take place, King says banks need to be ready to move with the technology and provide the services up front. Part of that comes down to developing ahead of the competition.
"As we start to see the handset manufacturers like Apple or Google's manufacturing partners really get into this mobile wallet space, that's going to be a whole new level of disintermediation for the banks," he says. "If you don't need cash as much, if you're no longer using checks, then you're just not connected with the bank so much. The bank becomes the backend network. That's the critical point where banks are going to struggle, because how do they sell their products if people aren't walking into the branch to do those transactional things. Having a value proposition to get someone back in the branch is a real challenge."
While no single bank provides an excellent example of all the principles King says should go into the next generation of financial services, he says some are doing well across various channels. King says Citi and Wells Fargo have done well with online banking and looking at the Internet as a channel to sell services, while among big banks, Chase and Bank of America have done well to provide iPhone apps and mobile services.
In the end, King says, banks need to continue to increase their understanding of consumer behavior before they can revolutionize the industry.
"There are pockets of stuff, but no one really has reorganized their bank around thinking about customer at the center and these different channels as engagement options," King says. "They are still very siloed. Until we can find a way to create different metrics to measure the customer engagement and the customer experience, those silos will still dominate and that's going to slow down the ability to leverage this stuff."