Dan Moultrie May 13, 2015

Six tactics for developing banking products

In the wake of the popularity of the American Sniper movie, it might be helpful for bankers to think of product development in terms of some key lessons learned from special operations warfare. Consider these key six tactics typically utilized by special operations teams:

Purpose. Each mission has a purpose that the entire team understands. Does everyone involved in product development at your bank understand why you are changing products? If not, get them on board; otherwise, you will meet roadblocks later. To help achieve clarity, a project charter, agreed upon by the entire product development team, can provide both a statement of purpose and a set of guidelines that your team can use to guide future decisions when information is ambiguous or contradictory.

Simplicity. While products that feature a lot of bells and whistles are fun to build and will surely keep your call centers busy with client questions, they are not always the best answer for your bank or for your clients. If a platform banker can’t explain an account or product in three sentences or less, it’s too complicated. That doesn’t mean, however, that every bank should just offer its own flavor of free checking and the 30-year fixed rate mortgage.

Driving customer behavior through targeted incentives, specific to your customer base and your bank, is the only way to keep checking accounts profitable. Finding innovative lending solutions that meet the needs of millennials will be critical to banks looking to fend off peer-to-peer and other non-bank credit providers like Lending Club and Kabbage. Using behavior-driven pricing and product strategy allows your customers to bank the way they want while you maintain profitability.

Many banks have a lot of different products that treat all customers the same, rather than focusing on building one product that treats their customers differently based on what they do (their behaviors). The best banks – those that listen to their customers and respond – take customer behavior into account and provide flexible solutions for individual financial needs, without introducing unnecessary complexity.

Speed. The advantages of speed and surprise in a war zone are obvious. Speed in new product development allows your bank to take advantage of market opportunities as they present themselves.

Are your systems and processes optimized for speed in taking advantage of new revenue opportunities, or are they tuned for the status quo? If you need to get custom programming from your core provider to introduce a new product, and if your review and testing process takes half a year, your revenue is going to suffer.

Security. Keeping the details of action plans secret until implementation keeps enemies guessing the next move. I expand this corollary beyond just information security to the security of knowing your product plan takes into account all possible outcomes, which is easier said than done.

There are plenty of schools and training opportunities for bankers looking to learn how to underwrite credit, manage compliance or configure network servers, but exceedingly few for those looking to learn how to deliver a successful product in a timely fashion. Trial and error can be painful so engaging a third party with extensive experience in the product you are launching can help keep you from missteps that can take years to unwind.

Repetition in processes and training is critical if you want your team to work together effectively. Creating a repeatable, scalable process in product development starts with a well-documented plan that allows all team members to give input while keeping the project moving forward.

Projects stall when well-intentioned team members put up roadblocks due to lack of resources, misunderstand a project’s purpose or fail to recognize the market potential of the new products. Following a process that is agreed upon in advance of a new product project helps keep unaddressed critical issues from causing a failed product launch and minor issues from derailing a project in process.

It is very helpful to have a senior bank leader champion the development of the process documentation to ensure that everyone on the team buys into the new framework.

Surprise. Surprising your clients with unexpected benefits in a new product or service drives engagement and adoption. The surprise can be as simple as a phone call from a banker making sure a new debit card arrived as requested or as complicated as a tiered cash rewards structure for an advanced checking account.

Ideally, the surprise factor starts a positive feedback loop of new clients evangelizing your new product to friends and family, followed by them opening new accounts and telling more friends and family. That feedback loop is the least expensive and highest value marketing your bank can do and it all starts with a surprise.

Purpose, simplicity, speed, security, repetition and surprise – easy to say, understandably more complicated to put into practice. The new world of banking that we work in requires a new approach to keep product development as the engine of revenue growth rather than the anchor holding it back.

Mr. Moultrie is director, Advisory Services, for Franklin, Mass.-based Saylent Technologies, Inc., which provides financial institutions with analytic software and services that improve profitability and product innovation. He can be reached at dmoultrie@saylent.com.

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