The flood of activity in mobile commerce is eerily reminiscent of the Internet boom a decade ago when banks developed the host of eCommerce capabilities that are commonplace today.
Upon deeper examination, however, the evolution of eCommerce within banking proved to rely on an unfortunate trend of common templates and repetitive boilerplate that littered the web with acceptable e-channels but demonstrated a limited amount of true innovation and market disruption. Banks spent a majority of their time reacting to massive cultural shifts in behavior generated by Amazon, eBay and the rest of the leading retail eCommerce and information portals.
Now it’s deja-vu all over again as bankers find themselves scrambling to successfully respond to rapid advancements in mobile commerce. Cultural shifts are again being led by the creativity, vision and managerial courage of the leading e-retailers. And despite banks’ best efforts, they’ve fallen short in evolving their consumers’ current and future behavior, expectations and needs. Financial institutions continue to default to the role of fast followers rather than innovators.
Meanwhile, banks must regain some level of confidence in their partnership with their customers. Innovation can help in this regard, and leveraging an asset banks already have at their fingertips – customer information – is an ideal place to start.
Oceans of Change
While segmentation has returned as a key strategy throughout consumer banking, all too often banks seemingly pause at the point the e-retailers thrive. Where is the belief that customers will respond, follow and trust their banks with the depth and level of information they offer the icons of e-retailing? One can almost hear the faint laughter and sighs this question provokes at this specific time and place in banking’s history.
But, by not forging ahead with contrarian ideas (aka leadership), bankers are taking a far greater risk. In fact, increased regulation, commoditization, and permanent shifts in consumer banking’s traditional revenue streams has created, not limited, opportunities. How so? By forcing the best and brightest to look towards blue oceans.
In their seminal business management book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, W. Chan Kim and Renee Mauborgne argue “that to win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition.”
The key element missing from banks’ current mobile commerce strategies is that of game-changer, a vision so creative, so daring that the business case presented has no resemblance whatsoever to current commoditized offerings. The goal for true banking leaders must be products and services that offer their customers optimal solutions in an entirely new and unprecedented fashion. This must include looking at marketing and its relationships to the customer ecosystem like never before.
Kim and Mauborgne stress that “creators of blue oceans … didn’t use the competition as their benchmark. Instead, they followed a different strategic logic called value innovation.” In essence, value innovation rebels against the belief that companies are forced to choose between the two strategies of creating greater value at higher cost or reasonable value at lower cost. The authors argue that “value innovation requires companies to orient the whole system towards achieving a leap in value for both buyers and themselves.” Banking, instead, is rife with companies competing within the same best-practice rule set.
In the face of continued economic malaise and increased regulation, the opportunity to take a stand and create a new level of leadership is ripe for the taking and a must for future relevance.
While investment dollars will be difficult to find and long-term return on investment unpalatable to many Boards, banks can ill afford not to push through these growing pains as companies line up to disintermediate them from mobile commerce.
Can banks become the social agitator of the why, what, when and how of consumer decision-making and discretionary spending? They must, with mobile commerce providing the impetus for a sorely needed evolution in consumer banking. The blue ocean starts here. Abandon the focus on consumers’ use of mobile payment vehicles at the commerce transaction point and, instead, build mobile banking platforms that drive decisions and positively affect the customer experience.
There are a handful of tangible hurdles to overcome such as privacy, accuracy of data and a challenging revenue environment to name a few, but these need to be viewed as any roadblock would be on the path to re-inventing a business model. Banks vying for consumer leadership need to radicalize their thinking as their place within the social fabric of consumer awareness and commerce is literally shifting beneath their feet.
Let’s examine a simple example, based on the current holiday season. Assuming your bank has sufficient data analytics and strong retail management, you know as much about your customers as any retailer. The Muppets, one of the holiday season’s top movies, was sure to be a family hit. Due to your bank’s strategic relationship with Cinemark and Coca-Cola, you sent a personal mobile text the day before and the day after the movie’s premier to applicable customers, offering two free children’s tickets with the purchase of an adult ticket, plus one free Coca-Cola product with the purchase of another, as long as the customer uses your bank’s mobile payment vehicle.
This may not be so revolutionary for companies such as Groupon and Foursquare but the untapped potential is enormous for banking, and not just from a revenue standpoint. Loyalty, trust, branding and social significance, a measure of great importance over the next generation, are all entwined in the above activity.
Repeat this across other strategic partners within the retail and services world, leveraging the vast amounts of information banks have at their fingertips to predict – and drive – behavior. Sale items at major retailers based on inventory flows targeted towards customers based on a wide variety of data (segments, historical spending patterns, etc.) can be marketed in real-time across the mobile channel.
Traditional retailers will need strategic partners as mobile commerce continues to evolve; banks can fill that need as mobile banking itself has become a major catalyst for purchases. In a recent survey of mobile users, Aite Group showed a strong correlation between the use of mobile banking and mobile commerce. Within Generation X and Y, 43% and 45%, respectively, of those with mobile banking capability made mobile purchases. And who owns mobile banking today? The same companies that must find a way to own mobile commerce tomorrow.
As personal technology solidifies itself into the de facto method of consumer interaction and transaction, banks must weave themselves fully into the fabric of mobile activity. Fortunately, banks still hold an incumbent seat in the world of personal finance despite the doom and gloom of the last few years. A study just released by Market Strategies International shows that nearly half (46%) of consumers aged 18 to 34 prefer established financial services companies for mobile payments over technology companies and telecom providers.
The keys for success lie written on white boards and stacked in strategy decks where they do no good. It is time to bring them to life by looking to blue oceans.
Mr. Voth is a Managing Partner at New York-based CTPartners, an executive search firm. He can be reached at email@example.com.