Rethinking Retail Banking

Rethinking Retail Banking


Deanna Oppenheimer

My remarks at a speech given to the Financial Services Club in London on March 12th:

For over 25 years, I ran the retail division inside large banks in the US and UK.  In both countries, I led industry change through employee empowerment, scores of acquisitions and launched new distribution channels including online, mobile supermarket and conventional branch transformation.  We entered and dominated new markets and turned around financial performance, customer advocacy and employee engagement.

Also, we were recognized as innovative. In fact, our bank was named as the most innovative company in America in 2003.  However, nothing could have prepared me for what I’ve seen over the past 2 years with my advisory and board practice in technology, financial services and retailing.  While there has been great innovation in my executive banking career, the speed, trajectory and scale of today’s change is exponential.  The B2B and B2C models talked about then are now being disrupted by H2H—Human to Human.  This is where consumers are doing business to and not through corporate institutions.  As a result, entire industries have been (and will continue to be) radically changed in a matter of months or years when previously it would have taken decades-- if at all.

Linear v. Exponential:

Slide 2 above gave me a breakthrough thinking moment 3 weeks ago when I heard Dr. Peter Diamandis, founder of Singularity University, speak:

  • 30 linear paces = 30 metres
  • 30 exponential paces = 1.1 Billion meters or 26x around the earth

Because of the computing power that is now at every consumer’s fingertips, the disruptive stress or opportunity has arrived with a power we have never seen before.

We are taking exponential steps as shown by the dramatic in these areas:

  • Computation: I’ll never forget starting at my first bank job and someone showing me the computer BUILDING.  I believe all of the computing power in that building is now represented by 1/10th of the power in an iPhone. Moore’s Law, the doubling of computing capacity every 2 years, is projected to continue to 2030.
  • Data: 90 % of the world’s data has been developed in the past 2 years and is projected to continue to grow exponentially in line with computing capacity.

With the ability to utilize computing power big enough to move all this data and artificial intelligence fast enough to process it, the consumer has reached a tipping point of capability.  They are applying instant complex data to their every day lives. Here are some statistics from Bain Consulting surveys:

  • 71% of customers have used the web to learn more about a financial services product and 17% of social media users have purchased a financial services product based on social media content; by 2020 95% of all retail banking transactions will be digital.
  • 60 % of book sales occur online (but internet booksellers account for only 6% of first time book discoveries)
  • And my favorite:  90% of 18-29 year olds sleep with their phones

Fueled with this computing power, it is estimated that by 2030 an additional 5 billion people in the world will access mobility and the Internet from the current count of 2 billion.   That change, coupled with significantly shifting population, will have a drastic impact on changing consumer trends.

By that time, half the world’s population will live in Asia; Africa will have doubled to 2 billion people, during which time the global middle class will have doubled from 30 to 60%.

As a result, your bank’s biggest competitor for tomorrow is not necessarily your traditional industry competitor today.  Your most feared competitor may be the “Exponential Entrepreneur” who is your competitor, collaborator and customer all at the same time:

  • Not just Pay Pal…
  • Starbucks (probably the largest digital wallet in the world)
  • Google (Google now)
  • Amazon
  • Multitude of EEE’s (emerging exponential entrepreneurs) like Square and Monitise to name a few and thousands who are incubating from Shoreditch to Pioneer Square.

Most significantly for you in this room and right here in London, consumer expectations are growing exponentially.  Gone are the days of compliant consumer behavior.  They are using technology to drive extreme engagement and you are now dealing with:

  • Opinion Leaders—Tweeting and posting any brand experience, good or bad:
  • Shareholders through crowd sourcing—Edward Norton’s Crowdrise has raised $100m in 3 years for non profits
  • Gamers  —3% of all Internet bandwidth in the US is playing League of Legions.  32 Million people came online live for their first ever championship round played in a sold out staples center.  By comparison, the 48th annual Super bowl in the US (the most watched American broadcast in any category) was watched by 100m people.
  • Co-creators—McDonalds Germany first crowd sourced hamburger—115,000 burger creations in 5 weeks with 12,000 new ad campaigns.

Rather than continuing to tell you about new consumer practices powered by social, I’ve invited from Silicon Valley, the CMO of Lithium, Katy Keim to share with you a couple of case studies.

[See slides 3 through 6 above for customer case studies]

What I’m seeing as I speak with bankers from Seattle to Shanghai

  • Digital distribution channels—Mobile has been embraced as a banking distribution channel and consumers have noticed and rate you for it.
  • Red herrings abound— There is a lot of focus on today’s frustration rather than tomorrow’s vision.  Some have lost sight and mind share of the consumer through distractions with the regulator, lack of senior management mobile skills and other non-customer concerns.  Too much attention can be given by bankers to what they can’t control, rather than doing something about what they can.
  • Rearranging the deck chairs on the titanic—As a result, there is a lot of linear rather than exponential thinking that does not match the exponential times we find ourselves in.

The future belongs to those who rethink and not merely rearrangeproducts, services, and business models. Things like:

  • BBVA Purchase of Simple
  • Barclaycard’s Ring credit card
  • Ally Bank—Make what you have world class

Reinventionis bubbling up from digital natives (no matter their age).

  • In the US, 72% of online adults use social networking sites and 60% of US 50-64 year olds are on those sites.

They are voting with their feet in the physical world as well.  While there is much written about the death of physical retail, consider Apple stores:

  • 416 globally (no density issues there—they are flagships)
  • Each averages 1 million visits per year with total sales of $4.5B.
  • The stores were a key part of catapulting Apple to No. 1 Global brand.
  • They attribute 3 key drivers for consumer appeal
    • Technology (enhancing human interaction)
    • Lots of live staff incented for service
    • Showcasing products for customers to touch and play with

Lead Exponentially with Vision

Vision is neither a strategy nor a forecast; its value is not its predictive power but its inspirational force.  It is very difficult, but consumers are seeking and rewarding inspiration.

Think differently:

  • Build agile networks not static silos—Lead on the Diagonal
  • Be a Jim Collins Level 5 Leader—Humility
  • Be Bold, be brave, and embrace change. The next decade in banking is not for the faint of heart.   Thicken your skin, stoke your passion and inspire.

I’ll leave you with the words of Rumi, “Yesterday I was clever so I wanted to change the world….Today I am wise so I am changing myself”.