First Principles Approach
Brett King, CEO of Moven Bank and author of multiple best sellers on fintech and broader technology, elaborates on the Elon Musk’s first principle approach towards the future of banking. Elon Musk learnt by approaching new things from a physics framework. It teaches you to reason from first principles rather than an analogy. Brett King espouses on the very idea and states that
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“Technology will not just change the skin but it will completely redesign the financial system.Banking will move from ‘Product’ to ‘Experience’. Stripe away the product and get to the core functions of banks. What banks do?
- It stores value
- It transfer value
- It gives access to value aka ‘credit'
There will be no place for a piece of paper or a signature in future. The Future of Augmented reality is not far. When we will be wearing virtual glasses, you won’t get a pop up to buy a credit card, but you will be given contextual advice on how much you should borrow and where to spend it.”
The first principles approach can be seen in China itself. The implementation of payments in phone a step away from debit cards or typical checking account to a simple ‘mobile value store’ was infact a ‘First principles’ approach. It was a shift from the 'product' of a debit card to the ‘experience’ of money movement.
What banks need to do, to not go the Dinosaur way?
If banks need to stay relevant, the answer lies in creating an immersive customer experience that resonates at a deeper emotional level. Banks need to go beyond transactional relationships and get immersed in the daily lives of customers. The banks should tag along with customers even before and after the financial transactions.
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What do we mean by this?
We are today in the phase of Smart Banking which answers the ’how’ of banking. It leverages technology to deliver a seamless banking experience. On the other hand, Immersive banking answers the ‘why’ behind it. It focuses on building deeper emotional relationships with customers.
And data can help banks engage with customers on a deeper level. Chris Skinner, a renowned independent commentator on the financial market and fintech makes the case for data so much so that he wanted to name his book ‘Digital Bank’ as ‘Data Wars’. According to him,
“The future of banking is all about data. It is the new battleground for commerce and the new oil which greases the flow of business, commerce and economics the world over. And as we all move towards wearable computing through the Internet of things, we see a fundamental transformation of society, government, economies, business and banking.”
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“Wearable Technologies will transform society like never before”
Jim Marous, publisher of ‘The Financial Brand’ says:
“Banks of the future will be Value aggregator, Advice provider and access facilitator at the same time. Banks will go beyond ‘selling’ and will interact in the same way as Amazon’s Alexa and Google Home. They will interact in real time and would offer opportunities based on the consumers’ history.”
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Banking-as-a-Lifestyle platform
State Bank of India, India’s largest financial institution by assets launched YONO app a ‘Banking & Lifestyle’ platform. The acronym stands for ‘You Only Need One’. As its name suggests, the app platform enables customers to avail lifestyle-based services under many categories ranging from Booking, eCommerce, financial products(Credit card, insurance, Investments, loans) to a smart-spend advisor and chatbot for conversational banking.
With the vast amount of data at their disposal, Banks have become a sort of digital repository of customers. Ranging from travel history, Insurance and investment record, banks are the verge of becoming 'go-to' organisations for the customers which can give purchase recommendations, health and dietary recommendations, travel and hospitality advice etc.
Obviously, everything will not be provided under one roof but with the help of APIs (Application Program Interface) -a strong collaboration ecosystem can be created.
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Superior Branch Experience
‘Brick and mortar’ is not going away but their design is undergoing a massive transformation. In olden days, when someone was picturing a bank branch, a dusty looking building with siloed departments with lots of paperwork, would come into mind.
But gone are the days of ‘disinterested’ banking.
The largest bank of India-State Bank of India has undertaken a massive transformation to change itself according to the passage of time. SBI has created special digital branches which compete with the likes of the designer apple store. Those are called SBI InTouch branches where the customer interaction will be only on digital channels. In such branches, opening a bank account is a smooth paperless experience. A customer can walk out of this digital branch with his account number and an ATM card within minutes.
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“Phygital Branch Experience will delight customers”
Such modular and adaptive- ‘phygital experience’- physical+digital is enticing millennials to visit the branch again. Not for traditional functions such as borrowing or deposit but more for the ‘value-added-services’. ‘customer segmentation’ is the buzzword but more than that, discovering individual customer preferences and guiding them throughout their financial journey will make the banks stand apart now. ‘Phygital’ branch experience is necessary because if the millennials term ‘mobile banking’ as their first choice to interact with banks, then it is imperative that banks create a stronger in-branch experience linking the online and offline effortlessly.
With such trend, Millennials and Generation X is expecting branches on the lines of an Apple Store or Mobile showroom in a swanky high-end mall.
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Digital advice with Predictive Analytics
Banks will have to start embedding ‘Facial recognition software’ and such technologies in its offering. It will recognize the age, ethnicity and emotions of the customers. And based on that prediction, personalized products and investment advice will be offered to the customers.
It can be safely said that everything should be taken with a pinch of Salt. Automobiles were invented in 1887. But it took around three decades to penetrate them deep into society. Automobiles were far more efficient but people just liked their horse-carriages more. Therefore, we must remember Amara’s law or Gartner hype curve.
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run”.
We might be overestimating the future of banking embedded in the immersive and contextual experience when there are 2 Billion people in the world who are still unbanked and devoid of any Financial Services whatsoever. But, in the next decade, technologies like Blockchain and Distributed Ledger Technologies will profoundly change the way humans use, invest and move money in the 21st Century.
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Note: This document with all the information in it is shared here to boost our knowledge of blockchain and crypto ecosystem, the original document can be found in document source, I have no ownership right over the document.
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