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The ecosystems incumbents should build

Posted on: Wednesday 21st of February 2018

In my previous post I suggested that when creating their Open Banking app store offerings, incumbents should seek to should leverage their strengths in risk management and product creation, along with the high levels of consumer trust they enjoy – and not compete on the dimensions where the new banks and the GAFAs will be stronger. So what does that mean?

Simple – solve customers’ bigger problems.  Help customers achieve the outcome they are after, not just sell them a product that is only part of the solution. Consumers don’t want a mortgage they want a home, they don’t want a loan they want a new car (or at a higher level, to get from A to B as and when they want, cheaply and conveniently).

The problem with most customer journey mapping exercises is that they define the journey from the company’s point of view – from when the consumer starts to touch their product (and they ignore the data exchanges required). But that slice is only a small part of customers’ overall journey. Helping consumers navigate from the very start to the end that delivers the outcome they are after creates huge value. And the personal data that they will share in exchange is immensely valuable in a world where information advantage is increasingly becoming the most sustainable form of competitive advantage.

From the consumers’ point of view, there are four stages to achieving the outcome they are after – for example buying a home. Firstly identifying what it is that they really want so they can specify their requirements and priorities. Next comes reviewing their options against their prioritised requirements so they can select the one that provides the best fit. Thirdly they have to act – execute all the transactions required (and when buying a house there are many). Finally, there is managing what they have bought – making sure the house is insured and heated, council taxes are paid, the property is maintained and improved. The majority of businesses completely miss the specify and manage phases. And their focus within phases two and three are product-centrically defined.

Within this extended journey, the majority of problems that consumers face as they try to progress through it are information-related – not product- or service-related – particularly in the specified phase. For example, in the first phase of the ‘Help me find a new home’ journey, consumers need to decide where they want to live. That means understanding what properties cost in that area, how much council tax is, how long the commute to work would take, how good the local schools are, how good the reception with my current mobile provider is, etc.?

Similarly managing a home once it is purchased is equally information-intensive – who is the best broadband provider for me, who provides the cheapest energy, what type of insurance do I need, how do I begin the process of renovating, how do I go about building an extension?

Recognising that customers primary challenges to achieving what they want are information-related has a major implication for partnering strategy. The key to delivering a superior experience is not about plugging FinTech product offerings into your open banking platform – most incumbents can create the vast majority of banking products they need to meet customers’ needs.  It is about using Open Banking and the spread of standard APIs to incorporate Personal Information Management Services (PIMS) to help customers achieve the outcomes they are after.

Since our inception nine years ago, Ctrl-Shift has reviewed over 500 PIMS providers, identified over 200 micro PIMS capabilities and over 12 ways of generating revenue from the personal information gathered if a business is trusted. But for most banks, the real value in this data is the insights it generates into what customers really want. Being able to solve their information challenges encourages consumers to communicate their intentions – define what it is that they are looking to achieve, the most valuable insights a marketer can have.

What all this adds up to is that the future of banking is not about banking, nor is it about finance more generally. The future of banking is about life management – helping customers achieve the life outcomes they are seeking. That is, I believe, the path to true differentiation and one that incumbents are strongly positioned to take.