A Survival Manual for Banks: The Bank Innovation Book Review of Brett King’s ‘Bank 3.0′

Bank_30_imgBrett King’s new book Bank 3.0 might be encapsulated in four words. Banks: Change or Die.

Brett King has been beating the drum for change for years and in the past few weeks he’s offered bankers extra encouragement: His long-awaited mobile banking product Moven just opened its virtual doors to the public.

That most of the themes and observations of Bank 3.0, published last December by John Wiley & Sons, are so familiar is a testament to King’s pervasive influence over the fintech conversation. His smiling face dominates the landscape like that of T.J. Eckleburg over the wasteland in The Great Gatsby. Still, the book affords plenty of pleasures — and more than a few pain points — for anyone involved in the world of banking.

Everyone knows many bank processes are simply broken. Wire transfers, anyone? There are a dozen companies, from PayPal and Dwolla on down, that can move money better and more cheaply than banks. ACH and SWIFT have nothing on the IP (Internet protocol)-driven processes of their Silicon Valley competitors — or, perhaps, even bank partners.

King’s book aims to provide a roadmap to becoming a better bank. Put another way, King’s book is a survival manual for banks on the brink of irrelevancy, a drink of water in the desert.

There is not much that scares Brett King about the future of banking. He outlines how banks worked historically then says goodbye to all that. He explains why the branch is doomed and examines the revenue squeeze calmly and with confidence and waves away assumed objections and criticism as fear and Ludditism. The Luddites were a group of textile workers, who, frightened by the implications of the automatic looms emerging in the English Industrial Revolution, turned violent and smashed the looms and machines designed to replace them.

King doesn’t tell this story, but it fits his theme well. Throughout he tells bankers that mobile banking is here and must be embraced right now. Social media, he says, is not a fad. Ignore the crowd at your peril. Fail to meet the new customer where he lives and you’ll become irrelevant.

In other words – don’t smash those looms. Learn to work with them.

But augmented reality, as offered by, for example, Google Glasses, makes him stop and consider if the ability to be visually immersed in a rich world bursting with reviews, alerts, and suggestions might be a bridge too far. King is such a staunch technologist and booster of the new that the following sentence is very striking: “How can we interact authentically with the world around us when everywhere we look we’re prompted to check in, reminded that we have a meeting in 30 minutes, or fed instructions about which path is the best walking route to take?” He also worries that augmented reality devices might cause pedestrians to collide.

This is a rare slip. Google Glasses are here and must be dealt with. Besides, as King notes, we already bump into each other because we’re staring at our smartphone screens as we walk. Augmented reality will be dealt with in turn.

Well and good, but first we have to deal with those branches.

It’s well known that branches are in trouble. Expensive to maintain, with declining transactions, they are an albatross to the banker looking to go digital and a life preserver to the banker terrified of going digital. King calmly hammers nail after nail in the branch’s coffin, pointing out that the only reason bankers think the branch is the most lucrative channel for selling products is that customers who pick a product online are forced to come to the branch and sign a paper, making the sale.

By the end of the decade, the vast majority of customers won’t need a teller. They won’t need an advisor. They won’t want complex products. They won’t need a trusted financial partner.

They will want and need the utility of banking.

Work out a way to deliver that with the least friction, and you’ll solve your dilemma over what to do with your branch network. Insist on sticking a new-looking space over the same old processes, complexities, culture, metrics and philosophy, and you’ll score a big old FAIL!

Friction is a characteristic word in King’s lexicon. Friction is what loses you customers. King describes observing his children encounter a new screen and attempt to manipulate it as a touchscreen. If it doesn’t work, they lose interest. With the older generation, when a technology doesn’t behave as we would like it to, we try something else – Oh, here’s the mouse, I’ll use this. But with Generation Y, whom King also calls “Digital Natives,” they grew up with iPhones and your bank better work a lot like an iPhone if you want them as customers.

It’s an impossibly high bar to set – but it’s also true, hence the dilemma. Banks must show a beautiful, simple face to customers and embrace the social, connected world in which young people live, or be consigned to being a “dumb pipe” – or worse. (King’s own banking product, Moven, is a layer built on top of the “dumb pipe” The Bancorp. There must be some value in being a dumb pipe.)

Bank 3.0 – like Moven itself — focuses on consumer checking accounts. Though King discusses loans and more complex financial products, he doesn’t describe a mobile roadmap for them, beyond pointing out that banks requiring signed paperwork in the mobile era are hopelessly behind the times. He doesn’t discuss how mobile banking products with extremely lean staffs will handle the all-important question of risk management. There are some signs that he trusts Big Data will take care of this, once our financial lives are opened up and our social media presences are linked to bank accounts, as they already are with GoBank and Moven.

A word on checking accounts – King thinks the word should go away since young people are so put off by paper checks. He has said that the last personal check will be written in the US in 2018, and even in the cheque-loving UK, fewer than 1% of payments by 2020 will be by paper check.

He is bullish on mobile wallets, however, particularly Google’s, since Google owns the context – the search, the reviews, the things that can, well, augment our reality. But it must have been a blow to him that the iPhone 5 was not an NFC-capable phone. (Signs are that the next iPhone will be.) Throughout the book he describes how adoption cycles are accelerating and mobile will be the faster ever – and yet King himself is outpacing the technology in his product offering. Moven has to send users a stick for NFC transactions, and will even have to issue plastic cards.

It would be enough to drive a lesser man to despair, but it seems King as ebullient and forward-looking as ever. It’s part of his brand.

There are things that mobile alone can’t do, but King would argue that this is because banks are not investing enough in mobile to make it truly work. It seems the ultimate value proposition of mobile will not be on the table until mobile wallets are truly workable, and this may be years away. The checkless, even cashless world of the future is dependent on bandwidth and the faith of merchants, customers and bankers.

At times, in the Church of Brett King, rear-view mirror looks at the good old days feel like heresy.

The focus must be on the customer, and it must be on service. King maintains that customer service and all of a bank’s services must be un-siloed to provide a comprehensive customer experience no matter the channel.

Channels, ultimately, will go away, according to King. There will be mobile when the last branch closes, but “mobile” by then might be circuitry so small it can fit into a red blood cell. Does that seem funny? Scary? Brett King is looking a bit farther ahead than most of us, and he says it’s coming.

He’s not kidding.

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