Monday, 27 October 2014

Service design in banking

While banks are struggling to catch up with the digital offering of new comers like Moven, Venmo and many other start ups, a survey called the Millennial Disruption Index, indicates that the attitude of millennials to banking put it at the gates of disruption: 50 percent of millennials expect Google, Amazon and Square to overhaul banking, while 33 percent think they don't need a bank at all.

This situation is very worrying for banks if we take into account that these are the customers that will eventually inherit the baby boomers wealth; and  it seems that banks don't understand their needs and preferences and newcomers do, and that's why they prefer them. The risk already has a business figure: according to Accenture as much as one-third of traditional retail banks revenues could be eroded by these new digital non-bank competitors*.

Banks need to understand and learn how to appeal and acquire these customers and this means a significant change in their touch points. Banks need to create more dynamic and engaging user experiences based on real needs both emotional and practical of their customer needs. They need to deliver real live services that solve real problems for them.

Design comes to the rescue

Design is gradually moving from just being an aesthetic function to becoming a more strategic function across organizations and industries. Design can accelerate innovation in the banking service offerings and provide distinct experiences that meet customers' expectations.

Although normally overlooked in the last several years, mainly explained because banks have been struggling building a business case for the investment in customer experience, we have slowly witnessed some new initiatives in customer experience resulted of the partnership between banks and design firms. More recently, we have also seen some banking providers making important investments in service design:

- In May 2013 Accenture announced the acquisition of Fjord, a global service design consultancy that specializes in creating digital experiences and services that engage consumers across platforms including smart devices, tablets and PCs, helping clients to deliver innovative experiences and deeper engagement across platforms in ways that bridge marketing, commerce, and service interactions.

- Just one month later Monitise acquired Grappel, a mobile innovation and design agency delivering smartphone and tablet solutions for leading European brands. Grapple was incorporated into Monitise Create, a division focused on designing and developing world-class digital strategies and user experiences. The goal: ensure that Monitise key customers and partners can provide their customers the most cutting edge and intuitive interface possible.

But 2014 represents the largest investments by banks in service design:

- BBVA invested $117 millions in the acquisition of Simple in early 2014, bringing to the group a talented team in UX and technology.

- More recently Capital One has announced the acquisition of Adaptive Path, a pioneering consultancy that has pushed the evolution of experience design from interfaces to services since 2001, and very appreciated for the events the produce. This announcement really shocked many in the UX and web development worlds.

Will more banks acquire UX Design Firms? I doubt many of them will have the will, the resources and the vision to lead the digital transformation with such a bold move. But over time, many other banks will realize
that Design is a powerful competitive weapon and will start to dedicate more and more resources to it. This will eventually lead to the evolution of the Digital Banking function to the Customer Experience function, with no difference between digital and physical as everything will be Digical.

* To forecast revenues at risk, Accenture performed scenario modeling using Europe as a proxy. Accenture analyzed the composition of revenues for major banks in Western Europe and studied seven areas of digital disruption (including consumer and SME peer-to-peer lending, alternative payments, low-cost checking alternatives)—leveraging disruption case-studies to model market share erosion by new entrants and margin compression and pricing pressure on banks. In scenarios of high consumer adoption of digital entrants, Accenture found nearly one-third of retail banking revenues at risk within five years, with major deposit margin compression.

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