Brave Banking

By Kim Furman, Synthesis Marketing Manager

Imagine a world of less admin, less adulting. A world designed to make your life easier, happier, and simpler. A world where you are less confined to the box of banalities. This is the world imagined by Synthesis Chief Disruption Officer, Tom Wells, on a recent podcast with Howard Feldman, Synthesis Head of Marketing & People, called Brave Banking. He describes what life could be like if banks changed how they operate.

Brave Banking

How could banking make your life better? Wells has the answer.

First, it is important to understand Wells. He is an energised, enthusiastic visionary with years of experience creating software and solving problems for banks across Africa. Talking to him is being exposed to a novel way of thinking.

Second, that according to Wells, there is an opportunity for banks, even South African banks, which are on the cutting edge. He explains: “My whole day is driven through systems that automate and make my life easy. I’m able to deliver food to my house. I can get groceries delivered. I can watch anything I want on TV. I can find content and learn about literally anything on any topic on YouTube etc. Everything is accessible on-demand at the start, but over time becomes so knitted into my routine that they become my routine—guiding and prompting me along a pathway. Whether it’s a good pathway or not is up to me to decide, but nonetheless, this has become the default way of consuming products and services today – on-demand and personalised through behaviour or group-based recommendations.”

“However, when I think about my bank, I think, oh… this is the Old World. Every time I need to do anything that relates to making a payment, or doing something financial… I feel I have to flip my mindset back to that of my childhood. The memories of accompanying my dad on his seemingly endless mission of visiting the bank branch every month, parking, queueing, filling in paper forms, having them be stamped by the bank branch cashier—and all of this really just to move a few hundred rands between bank accounts to pay our family bills—and then still having to pay R2 to exit the parking! For me, banking still has this “feel” of “adult mode”. Open the app, complete the OTP, click on payments, capture beneficiary details, enter the payment amount, capture your email address, get the confirmation via email, forward it to the beneficiary—it’s really the same experience. Less walking, less overall time spent, but really the same cognitive burden. Re-imagining this experience is one of the big opportunities in banking.”

Wells sees the next couple of years as an opportunity for banks to be brave and cross into a digital model that is truly customer-centric (versus product-centric) and where they can re-define themselves as a part of their customer’s life, rather than being simply a service provider to their customer.

The question still stands, how will this make life better?

“Banks need to become more involved in my life and, if I think about their potential to do that, it’s immense.” Banks hold a plethora of data at an individual level that can be predictive of behaviour. “If you look at your spending patterns, that probably tells you a ton about who you are as a very specific individual. Your particular needs, desires, profile, whatever it is. And I just think that banks have not figured out how to cross over to turning this into value for both sides yet.”

Wells says they have crossed this threshold with fraud. For example, Howard has the example of receiving a fraud alert when a purchase was made from his card at KFC. This was outside of his buying pattern, so he received an alert. Wells points out that buying patterns are being used to protect against negative outcomes but not yet to create positive ones.

According to Wells: “If you know all of this stuff about Howard (for example) what else can you do to make his life easier, more efficient? How do you help make Howard a better financial citizen? And therefore how do you make him a better customer?”.

“So take this fraud example, but now imagine pivoting that into a more positive sense, which is to say: Howard, we know that you generally go on an annual vacation in November. We can see this in your transaction history. We know this. We know how much it cost you last year. We know where you went. We know how long you saved for it because we can see it. We know that you came back, and you were in some sort of deficit. We know you overspent!”

“Why don’t we pre-emptively start to work with Howard to say, you know what if you want to have another holiday like that one where you drove to Cape Town last year. It would be great if you started to put away R2 000 a month for the next four months. That’s really going to make your holiday so much better, and you won’t have to suffer as much as you did earlier this year due to being in overdraft. Isn’t that an awesome spin?”

“I’m quite happy for banks to build a profile of my behaviour, but then use it in a way that makes me a better person and improves my life. Then I’m hooked.”

Do we want banks to have this much control over our lives, even if we see the benefits?

As financial institutions, banks have secure systems in place to protect data and prevent fraud. As consumers, we trust them to protect our money. Shouldn’t we trust them over social media platforms to protect our data, especially if this will improve our lives and help us become better financial citizens?

Bridging worlds

Technology can make life easier and bridge divides. These are divides that we have never even thought of because they are standard in our lives.

Wells explains that: “If we think about payments today, especially on the Internet, we have really two very distinct channels.” One channel I call the “content network”, and that’s the usual stuff we do online, shopping, watching videos, social media, etc. The other channel is the “payment network”, which you get to experience anytime you need to make a payment for something—typically via a credit card payment provider. These are two completely separate networks—and although it can sometimes feel that we transition between them seamlessly, generally it feels pretty clunky, and that’s really because they are completely disconnected.

“However, Interestingly, with the discovery of blockchain, we are starting to see the potential for a collapse of these two distinct networks into a single channel where content and value can be delivered in a single transaction, and I think that’s a very interesting model. It means now suddenly the Internet is not just a content delivery network, but it’s also a value transfer network. And as soon as you start to see that you ask the question, where does the bank now play? Because if you think about it—the bank itself is really a custodian of the payment network—they are disconnected from the content network. From a consumer perspective, I have to make the switch to another medium in order to make payments—and really where is the value for me as a consumer? It’s in the content channel.”

“Now what we’re seeing with the realisation of ideas like the “Ethereum World Computer” (and of course many other smart contract-based blockchains) is that we can bring these two networks together. We can have a payments experience that is just between the two of us. We don’t need a third party to intermediate in order to have this conversation, and so why not use the exact same channel to transfer value to each other. The economics and opportunities in this new model is a very interesting thing that banks have got to start to figure out.”

Another real world example of this is Twitter which is experimenting with a tip jar. If you like a person’s content, you should be able to tip them. Twitter would have to use a third party payment provider and its users would have to step out of the social platform. Ethereum and other blockchains are trying to bring this type of experience into the browser, explains Wells.

“The future is where there will be a direct payment experience between two individuals. No third-party intermediary.”

How can banks be brave?

Wells compares the banking industry to the telephone industry in the 80s and 90s. It had the monopoly on communication, but the internet disrupted that. “You just have to reinvent yourself and figure out where you still add value in that new world, right? As the custodian of people’s money, payments, security and everything that is stable in the world, but at the same time be innovative, relevant and adaptable.”

A mind shift

The future is a change of perspective according to Wells. Instead of banks seeing loans as transactions where a person owes them; why not rather see them as investments in people. “It’s flipping from having a debt-driven sort of view to more of an investment-driven one.”

Banks that provide real value to consumers will be unafraid to dance with chaos: “We’ve got to start in a chaotic mode, because that’s the best way to experiment and understand these things… So the winners are the ones that act in this new world earlier on the adoption curve.”

I know I can imagine a world where I am seen as an investment, where I admin less, travel more and where my bank makes me a better and smarter financial individual with fewer steps to getting what I want, particularly whatever it is that is in my current cart. Can you?

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