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Blue sky thinking (and playing to your strengths)

20. January 2009 by james 0 Comments
'Blue sky' thinking in the financial services industry may not be fashionable (quite enough to keep us busy in the here and now), but for a short time I wanted to forget the current troubles and write a short series of posts that look at consumer aspects of the industry beyond the next year or so.  This first post plays fairly safe on a subject many can relate to regardless of whether they agree with it, the next post looks a little further ahead to something more revolutionary. 
Safety first... 
The idea of moving financial customer experience away from the traditional silos of branches and bank websites isn't new, the various personal finance management sites such as Wesabe and Mint have demonstrated that.  There is a tendancy to assume that banks will see this sort of thing as a threat and eventually turn up late to the party offering similar same sorts of facilities, pretty much as soon as the issue of ROI is figured out.  There is already some testing and "labs" development from the banks but it's by no means a common offering.

It isn't just a return on the investment that banks will struggle with through, it's the potential size of the ongoing investment that is required in a difficult economic climate.  The typical customer experience of any bank is geared up to providing an accessible experience to the maximum number of customers.  It may not satisfy the 'power' users who want to slice and dice their finances in lots of different ways but it caters for the majority of people using a variety of browsing technologies.

Even a relatively modern bank formed in the last ten years is now going to be typically sitting on years of legacy technologies and technical debt inevitably have accumulated over the years gradually increasing the cost of change.  Where technology works, is still cost effective, remains secure and is legally compliant it can be very difficult to justify the costs of a major architectural change which gives the customer more flexibility and control over the way they view their financial information.  I think it's pretty unlikely that there are going to be marketing and technical folk working within a bank that aren't going to be wanting to get into this sort of game.

The question is, should the banks try?  That's not meant in the lazy sense but rather, will the customers end up sufficiently benefitting and can the bank really capitalise on the investment?  A traditionally developed bank cannot compete with the nimble start-up, take a look at the user-facing releases Wesabe made over the course of three days (via WesabeUpdates twitter feed):

- We've just deployed a new version of the site with 1 change by Brian (Jan 14th)
- We've just deployed a new version of the site with 7 changes by Andre and Brad (Jan 14th)
- Released Wesabe Cutback, a tool to help you save money by finding recurring expenses to cut back on (Jan 14th)
- We've just deployed a new version of the site with 2 changes by Brad (Jan 14th)
- Clicking the 'Edit' button to edit a transaction should always work now (Jan 13th)
- Fixed that your merchant ratings wouldn't show up when editing transactions (Jan 13th)
- We've just deployed a new version of the site with 8 changes by Brad and Brian (Jan 13th)
- We've just deployed a new version of the site with 1 change by Andre (Jan 12th)
- We've just deployed a new version of the site with 6 changes by Andre and Brian (Jan 12th)

That's not a particularly unusual week and represents a site that has a small team of developers who are able to listen and respond to their community very quickly.  At the moment the level of technical debt will be low and the site has been built from the ground up with a more modern customer experience feel.  Although the scale of the changes are probably small, the lack of regulation and implications of things going wrong are far lower and it would be a very brave bank that tried such an aggressive release schedule regardless of the size of the change.

There's an argument to say that actually, sites like these in fact complement the banks.  They can't perform transactions and ultimately are not responsible for the safe holding and handling of your money, but what they can do is manage the resulting data from money movement money far better than the bank can in the eyes of the early adopters.  It leaves several options for the banks:

- Do nothing (doesn't cost much in the short term and there's little evidence to suggest customers are ready to move for the functionality yet)
- Work with their current technologies and enable functionality one justifiable investment at a time
- Somehow split the front end development from the back end to create an internal customer facing capability (a self contained startup)
- Be open with their data, but in a controlled manner.  Allow a customer easy access to data that is relevant to them.
- Work directly with a start-up/mature PFM site.  

The last two are probably the most interesting to me, the personal finance sites offers a valuable service and whilst their 'pro' functionality may cost the customer more than they pay now, the basic functionality is there for all customers.  At the lowest level, there is always the bank's uniform, basic balances and statement.  We've seen Wesabe already create a joint site with the (UK newspaper) Telegraph, but would any bank embrace a closer tie?  

This first post doesn't really gaze far into the future and we're seeing examples of how this could work right now.  Many banks offer statement download functionality but the user experience is typically poor and not obvious for the majority of customers.  There are various options (for example OAuth) which would allow a customer to grant limited read-only access to their statements from a third party site, all without having to give away their banking credentials.

So the question is, should banks really try and offer the ultimate Web 2.0 experience themselves or should they enable the customer to get that experience in the easiest way possible?

Next time - Banking on the Cloud... 
(Side note: apologies for the poor formatting of the last few posts, my laptop died and took with it the excellent Windows Live Writer.  The blog web interface just doesn't compare.) 

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