Emotional trust in an hyperconnected world

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Trust is an often used term in financial services.  What is trust, how is it built, gained or lost? Has trust building changed in the last few years of emerging digital hyper connectivity and will this have an impact on banking? (see “Banking evolution: Service Innovation,” “No Off Switch“)  Let’s together explore this a little bit …
There are at least four dimensions of trust:
  • predictability – ability to predict actions of others and situations which might occur
  • vulnerability – giving others the chance to take advantage of vulnerabilities
  • value exchange – exchange of values even though there is no full knowledge about the peer
  • delayed reciprocity – giving something now with the expectations to be compensated at some future point
The trustor has logical and emotional expectations against the trustee. The logical expectations are often contract related. In case of a loan a payback including interests is a logical expectation. The emotional expectations include the level of comfort and the experiences made during the time where the loan is granted and beyond.
The following little example explores these dimensions. Let’s assume you want to make a ride home and you call a cab.
  • An ordinary cab arrives with a smiling driver.  Before you enter the cab you need to trust the driver that he knows the place, has serviced the car properly and will not crash the car while you are in. This quick assessment is nothing simple but humans have developed senses during the evolution which support this interpersonal check.
  • The cab arrives – but nobody is in. There is a screen showing a friendly face in an office telling you that he is your driver. The cab is remote controlled in a way that it feels for the driver like being in the car. You can again perform the quick assessment described above based on the reduced amount of information and available senses.
  • A self driving car arrives with a smiling man in it. He has been mandated by law to sit in the car to intervene in critical situations. You may be tempted to make the quick assessment as in the first scenario but then you notice that this person has limited chance to intervene and influence the sequence of events in an emergency situation as the available time to react would be to short. In essence you notice that you need to trust the system, its sensors and the algorithms.
  • A self driving car arrives – completly empty. That’s a different story – the interpersonal element and the usual base for quick asseementis is completly missing. Maybe you should do a short ride first to see if this is safe and then, once you gain confidence into the car, its sensors and algorithms go for longer trip. With good experience, trust is built.
There are futher factors influencing your final emotional assessment  – the taxi could be dirty, the driver may have an unpleasant driving style or the climate control may be broken. Even when the target is reached on time, the experience may not great and you may decide not to rely on the services of this company again.
I guess it is rather clear what follows now. All these situations also occur in financial services today. The chance that you meet a banker which is an entrepreneur and personally engages in the trust relationship with you are rare. Such a banker would stand up with his name for the agreement made and would do the best to meet the logical and emotional expectations.
So let’s explore the other three scenarios in a little bit more detail.
  • The secenarios have all one thing in common – the ‘driver’ has limited skin in the game.
  • Remote meetings with specialists who can come up with creative solutions for complex problems are quite the norm in business and personal live today.  Finding the right specialist may already be a challenge and arranging a physical meeting may be close to impossible.
  • You may have an assigned  employee representing the bank as a sales clerk or relationship manager. The relationship manager will talk with you and then key in the data into some engine which finally processes the agreed business. You may build up a personal relationship to your relationship manager. If this is strong, then you will be tempted to follow him if he moves to another bank. If you trust more the brand, its system and processes, then you will stay and engage with a new relationship manager.
  • You may also be routed to a customer services desk which is used to deal with requests like the one you have. With each call you get to know another person – building an interpersonal relation is not intended. 
  • You may also interact through an electronic channel with the system. A hopefully cool user interface guides you through the necessary steps to get things done.
The objective of most companies is to operate with standard processes leaving the relationship manager very limited flexibility. Hyper connectivity leads to more transparency, the logical element of the trust relationship is performed by an engine and the emotional one is more and more an outcome of the digital experience.
 
Trust is still a key element in many things. In banking the logical element of trust is more defined by processes, algorithms and infrastructure while the emotional aspect becomes more and more a result of a great digital engagement.
Trust is shifting from personal relationships to systems and experience.

Multipurpose Traverse

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As today’s business challenges span across boundaries within and external so too must leadership. The ever-increasing complexity of today’s world calls for a critical transformation in leadership from managing and protecting boundaries to boundary spanning ( see Never fail to fail, Giving Direction, Dance on the VUCAno) With that it’s business model reflects towards a multipurpose traverse offerings supporting the client’s dynamic behaviors and journeys ( Banking evolution: Service Innovation, Banking Today)

Under the context of digital offering(s) is its simplicity of a single-purpose business model/ offering/ app the wave of the future?

WeChat, or Weixin in Mandarin, is quickly becoming one of the most popular multi-purpose platforms, not just in China, but the world. Released in 2011 by Chinese internet giant Tencent, With nearly 800 million active monthly users, its user base has grown consistently in every single quarter to date. More importantly the point that I would like to focus is it’s actual embodiment of the app.

It’s safe to say that the most ardent of technophiles have at least 100 apps on their smartphone e.g. Facebook Messenger, WhatsApp, Telegram, Skype, Google Hangouts and Duo for instant messaging. Uber, Lyft, Citymapper, Waze, Tripadvisor, AirBnB and Skyscanner for directions/maps. In addition for gastronomy related: Deliveroo, Just Eat, OpenTable, Zomato, Yelp or Urbanspoon. That’s 19 apps to cover three essential functions. WeChat includes capabilities above and more.

WeChat lets users do everything you’d expect it to – instant messaging, sharing life events and chatting to family members. But its feature list extends far beyond custom emojis and profile pictures. WeChat allows you to arrange a catch-up with a friend, pre-order food from a restaurant, book a taxi to the restaurant, get directions on foot, pay for the meal (or split amongst your friends at the time of payment), check movie times and book tickets, and also purchase other items. All without hitting the home button.

The possibilities for brand-to-consumer engagement on WeChat are almost unparalleled anywhere else in the world, and this is almost entirely due to the way the app manifests itself in as many aspects of daily life as possible. By knowing a person’s current location and when they usually have dinner, all in one app, fast-food brands can hyper-accurately target consumers when they’re most inclined to purchase. And by tapping into the app’s data on payments and money transfers, marketers can get a good idea of when, where, how and why users spend their money, before using this to hyper-accurately target their audience when they’re most likely to buy. With such understanding of a client’s behaviour enables to proactively provide financial wealth services be it from suggesting dynamic relevant payment methods to making recommended investments, wealth management and advisory, etc…

The need for banks to traverse beyond its current boundary is imperative to regain expediency with the new paradigms ( see Digital Tur Tur).

Banking evolution: Service Innovation

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Not so long ago we introduced banking capabilities (see “Towards a digital barter economy?”). Then came the pursuit of product offerings from basic to highly exotic types. With globalisation and increasing market competitiveness banking institutions must now drive innovativeness in their operation to gain sustainable competitive advantage. We are now in an era of competing, not only with incumbents but new challengers outside the financial sector, on the basis of services rather than on the basis of physical products as it is hard to distinguish between products of competing brands in a given product category. It is the services offered by the banks that manifest true value. Differentiation in services must be based on the need to have a vision (see “Giving Direction“) … and not ‘just’ innovation but with the sense of purpose.

Service innovation involves intangible resources for a more innovative service(s) that challenges the conventional attribute-based view of services delivery designs. This requires going beyond current restrictions of product innovativeness that involves assimilation of improved service processes by means of designing and redesigning service delivery capabilities. The pervasive influence of information and communication technology has revolutionised the means of social interaction which will impact how banks will integrate in the client’s ecosystem.

As services become more important for society and customer’s demand more complex and personalized solutions the need to understand and build up innovative processes is vital. Globalisation, information on demand, and ubiquitous communications are pushing innovative services to become more open, flexible, integrated, complex, multi-actor, and networked-oriented).

There are various models of service innovation:

  • “4Ps model by Bessant and Todd (2011)” – 4Ps represents product innovation, process innovation, position innovation, and paradigm innovation. All four aspects formulated for “innovation space.”
  • “Six Dimensional Service Innovation Model by den Hertog, van der Aa and de Jing (2010)” – this defines services innovation as a new service experience or service solution that consist of one of the following six dimensions: new service concept, new customer interaction, new value system, new revenue model, new delivery system and technological.

Can banks use these models as a baseline to evolve future service innovation models?

Nevertheless we need to work towards sustainability competitive advantage and embracing service innovation as an integral part of the bank’s strategy in order to move continuously towards being customer-centric and services-centric. Although there will still be a wave of financial product innovation based on programmable money we should not be limited to product and/or related process innovations but we must emphasise on business model innovation, market innovation, and most importantly paradigmatic innovations.

Ubiquitous Computing

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The term is not at all a new trend or technology. Previously known as pervasive computing where due to technological advancement and cost feasibility the trend of embedding computational capabilities into everyday objects. This makes them effective in communication as they are network interconnected and performing activities of the end users without a centralised system.

Ubiquitous computing integrates via different devices, industries, environments, applications (e.g. wearable devices, appliances, fleet management, sensors). The goal of it is to make devices “smart” in the form of creating a sensor network capable of collecting, processing and sending data via the context and activity that it is under.

We had seen first phases of such capability involving wireless communication and networking technologies, mobile devices, and RFID tags. With the exponential advancement in internet capabilities, usage of voice recognition and artificial intelligence, the growth and adoption of embedding ubiquitous computing significantly increases now often associated and known to be the internet of things (IOT)

Gartner predicts approximately 8 billion connected objects to be use by the end of 2017 and it appears to be growing. In order to cope with the growth of IOT a heavy incorporation of artificial intelligence (AI) fueled autonomy will be required. An AI-driven era of IOT becomes the key building block to herald an increasingly seamless experience and hyperconnectivity as users and their digital counterparts concurrently transpose from one medium/device to another, between multiple environments, the physical and digital ecosystem.

Banking Today

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The word bank immediately depicts the picture of queuing in branches, limited quality products, and legacy processes ( e.g. time to process transfer or payments, etc…). The list goes on and on whether it is overdraft charges, processing/ service fees, overseas call centre. Although in the past, prior to the digital revolution, communication and processing were performed physically and was an important valued service appreciated by its consumers (Change is inevitable, Importance of a brand’s digital behaviour). However in the digital age, this will change with the introduction of financial capabilities not through new capabilities from existing incumbent banks but by new players outside the financial sector.

What will these players offer? Will they offer radically different products, new approach(s) to customer service and radically different ways of integrating to the customer’s ecosystem offering customers genuine and value added financial services? Or will these new ventures, like many of our existing banks, simply pay lip-service to such ideas?

What would we expect these new ventures to provide? To say the least the following:

  1. Fewer but relevant and value-based products base on the customer’s preferences. Keep it simple, make it fun, empower the customer.
  2. Financial services anywhere anytime (Omni-digital). Ubiquitous and available when we need any forms of financial services through the customer’s ecosystem. Services that interstate with their connected life.
  3. Personalized services and recognition. Knowing the customer personally. Listening to the customer
  4. QR code a standard for payments where payments happens instantly with limited to no infrastructure required
  5. Work the way customers work. Be where they are, be there all hours, respond now.
  6. Be the kind of financial services that I want to work with: be involved.
  7. Rate and fee sensitive/ free
  8. Be the overall financial caretaker. True advisory relationship.

What are your expected capabilities?

Simplicity in a complex environment possible?

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In all of our sophistication(s), humans react to the world in simple ways as our ability to cope with its complexity is limited. Do we seek simple solutions that hide or ignore the complexity?

Human senses are constantly producing far more data than their brains can process. Our brains cope with complexity by identifying important features and filtering out unnecessary detail(s). An example such as on seeing that the space you enter has four walls, a floor and a ceiling, you know you have entered a room and usually ignore the details. As individuals we deal with complexity by removing or hiding it. Our mental schemes are one way of doing that. Habits are another.

We also simplify complex decision-making by using received wisdom (e.g. advice of others, conforming to the beliefs and attitudes of what we may be associated to).

Society has many ways of managing complexity, one common approach is “divide and rule” approach to management which leads to hierarchical division of large organisations. Hierarchical breakdown introduces its own issues as the need to define early what are the decisive factors. Although structural changes can take place but only of rather limited value. Such systems have a tendency to go for the local optimum in each branch (see “The first step is key…”).  Another approach is to define laws, rules, commercial standards which creates limits and restrictions.

New technologies are usually introduced to simplify our lives, but inevitably they have unexpected side effects on society. An example is the introduction of robotics/ labour-saving systems set off cascades of social change, such as the decline of the nuclear family. In addition instead of addressing and replacing the complex systems with more efficient adaptable ones, we add additional layers of complexity by keeping legacy systems and integrating them with the so-called new and simpler ones. On top of that there is a continuous addition of business process which makes consolidation almost impossible. It makes life simpler to rely on others to provide solutions to complex problems.

This inability to fathom complexity leads to a belief that any worthwhile solution to a situation must be simple. Any change introduces complexity into people’s lives. Rather than face issues that are complex, some retreat into denial, preferring to believe in a simpler future in which there is no change and continue with their paradigms.

In an era of post-truth and pseudoscience, avoid dismissing uncomfortable facts out of hand. Complexity arises from the richness of interconnections between things. Can we continue to ignore the wider context and the side effects of actions and ideas? The continuous adoption and extension of programs are vital to humans over time.

“Our brain is not to think – it is to keep us alive”

 

Towards a digital barter economy?

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Barter is a system, used since many centuries ago, of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.<

Thus a barter economy is one where money does not exist or has ceased to be functional. It means consumers have to gain goods or services through exchange. Limitations introduced are:

  • Difficulty to produce or find the demand of specialised goods only wanted by a proportion of the population
  • Indivisibility of some goods/services
  • Seasonal; perishable
  • Subjective means to judge how much good and services actually are

Then came the development of using commodity money whose value comes from a commodity of which it is made (e.g. cigarettes, gasoline, precious metal, etc). The system of commodity money eventually evolved into a system of representative money as gold/silver merchants or banks would issue receipts to their depositors – redeemable for the commodity money deposited. Eventually these receipts became generally accepted as a means of payment and were used as money. To date most countries adopted fiat currencies that were initially fixed to the U.S. dollar as it was fixed to gold. However in 1971, the U.S. government suspended the client convertibility of the U.S. dollar to gold and many countries have thus de-pegged their currencies from the U.S. dollar. In our current state most of the world’s currencies became unbacked by anything except the government’s fiat or legal tender and the ability to convert the money into goods via payment.

Can the use of fiat currencies continue to sustain in the forthcoming digital ecosystems? Would money evolve to become cryotofiatcurrencies? There is the notion of “private money” set out by the noted Maltese “lateral thinker” Dr Edward de Bono which he argues that companies could raise money just as governments now do – by creating it from thin air. The idea of private currency was treated as a claim on products or services producers by the issuer. An example is company x can issue “ Company x currency” that would be redeemable for its products and services but also tradable for other companies’ currency or for other assets in a liquid market. According to Dr de Bono, to make such a scheme work, the company needs to learn to manage the supply of money to ensure that the monetary base and its capacity to deliver are matched and that inflation does not destroy the value of their creations.

This will introduce a new financial market where companies instead of issuing equities, it issues money that is redeemable against future services. In the case of startups, this money would trade at significant discount to take into consideration the risks inherent in the venture. But once it passes this state, the value of the money will rise provided products/services are available and more importantly used and preferred by consumers. With potential tens of millions of such currencies in circulation either being traded on futures, options, foreign exchange markets this leads to the question of usability and extremely complex transactions that people can not comprehend. The notion is that an individual’s “digital me” will be conducting these transactions with other digital representation of the physical individuals.

“Digital me” (see Be your digital self …) will be entirely capable of handling complex transactions and/or negotiations with other such as matching demands and supplies of financial assets, determine prices, or make settlements. Communications will be in real time and activities take place instantenously.

Will digital tokens be the form of “private money” described above to be the defacto in the marketplace? There will not be any centralisation to manage new forms of money. Tokens won’t only be issued by companies and tokens that implement on the values of communities will become prominent in the transactional space.

“Every day, in every way, the future of money looks very much more like its past” – Dave Birch