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

 

No “OFF” switch

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Hyperconnectivity or “the sharp increase in the interconnectedness of people, organisations and objects that has resulted from three consecutive waves of technology innovation: the internet, mobile technology, and internet of things (IOT).” By 2020, according to the world economic forum, there will be 50 billion networked devices. This level of connectivity will have profound social, political, and economic consequences, and increasingly form part of our everyday lives, from the transportation that we drive to the food that we consume, to our jobs and the governance system we live in.
The challenge in hyperconnectivity is that by definition it transcends geographic borders. Data sovereignty and different rules on data privacy and taxation are becoming more prevalent. Will we be able to truly switch off/disconnect, or maintain distinct credential(s) in both online and offline worlds?
With further extension to hyperconnectivity people will find it harder to disconnect themselves, switch off or reveal distinct aspects of their credential(s) in different situations. We are heading towards an increasingly networked state where boundaries between online-offline, work-social are blurred with the merge of different spheres of contextually identifying credentials. This is becoming to be increasingly important due to the transformative consequences of social and technological changes.
Social digital ecosystem(s) differs from traditional communications technologies allowing users to create,share, consume and collaborate in instantaneous mediums. Governance of online credential(s) will become increasingly important and will bring out issues of ownership and privacy.
Rules of governing the dominion of digital information are dramatically different to those of offline possession. For example an image posted online could be retained or used by othersin ways that is not allowed or intended by the original author.
Hyperconnectivity is often synonymous with the loss of anonymity and a threat to privacy. The willingness of individuals to disclose information in exchange for access to services combined with the financial value to be gained from exploiting customer data mean that individuals cede control over what happens to their data. Even of individuals of limited to no online presence may be identified online, e.g. tagging in uploaded photos or movies. Therefore  individuals may no longer be the primary creators of their own online credential(s).
Identitifying credential(s) will change significantly as online credential(s) are becoming part of the many overlapping attributes held by individuals. Context is crucial in understanding an individual. An individual may have multiple effigy(s) simultaneously. At times, in some places, one digital self or another would be utilised depending upon context. An individual’s sense sense of self are affected to a greater extent by their ecosystem such as the events, community, family, and friends and not due to big events or global trends. Understanding the context and which effigy is most relevant  is crucial to predicting behaviour.
Hyperconnectivity represents a step change. The world is now a highly connected environment where its citizens are globally networked individuals. Events taking part anywhere in the world leads to real and immediate impact(s) elsewhere. Hyperconnected individuals have been provided an efficient and powerful means of communication but equally miscommunication can take place.
In the increasingly hyper connected ecosystem(s), identifying attributes are resources that can have personal, phychological, social, and commercial value. Trust is fundamental to relationships between citizens, between people and commercial organisations, and between citizens and the state. Ethical issues will become more complex and relevant as varying credential(s) come into conflict. A need to maintain balance between privacy, freedom and protection will become a key priority as we progress into the hyperconnected future.

Digital Engagement

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Current digital offerings provide generic experiences and if there are forms of personalized  content, it often suggests content or offers that are inappropriate or simply uninteresting. This is because brands attempted to provide personalisation without considering clients’ social identity, personality, underlying motivations and contextually relations.  Digital makes this tangible for personalisation. What makes it even more challenging is the scale and velocity of the digital ecosystem(s) that makes it hard for businesses to understand what are the value-driven service offerings and to whom they are serving to. Although a few may begin to create rich online experiences building on emotional value-based connection with targeted personas, many are still leveraging outmoded approaches of segmentation and category targeting.
Understanding of the target client must be at the core of every great brand. In order to nurture, service, and retain client loyalty, the understanding of the clients must permeate throughout the whole organisation.
Drawing on decades of research models to understand and predict human behavior, one leading model known as “Big5” also known as “OCEAN” which represents: openness, conscientiousness, extraversion, agreeableness, and neuroticism. The intent is to assign a percentage score of each of these attributes to any individuals, thereby being able to develop the persona and the analytic insights.
It is vital to note that personalisation capabilities are about aligning the right product or service to the right client at the right time and situation. Business must take into account the different personalities of their clients in order to ensure personified experience. Context is king.
Failing to understand what makes people engross  and comfortable with a particular brand or message tends to leave businesses competing in price which is ultimately a race to the bottom. The challenge of achieving this level of understanding requires businesses to continuously give up on margins as they try other means of attracting clients (e.g fee discount)..
It is evident that the missing link of clients’digital journey has been developing client understanding. Discerning the personality traits of  clients and the motivation behind their digital behavior (“He is online even if he is offline”) is the key to a more personalized and relevant client journey promoting the overall brand experience. Investing in personalisation to encompass the entire client journey ensures greater client loyalty and integrating into the digital ecosystem of people who genuinely like the product(s), service(s) and/or brand.
The challenge is to understand the journey to achieve such personalisation especially in the digital ecosystem where clients’ are unknown, anonymous or inaccurate digital persona(s) are associated to an individual interacting via various digital mediums. The essence to achieve personalisation requires trust to be established or else you will never uncover and understand the true client ( see “Be your digital self …”). Personalisation must consider context with the appropriate timing.
Adoption to new technology and mediums along with new data sets are required in real-time and at massive scale in order for businesses to attain insightful information on the personalities and behavior of clients. This enables genuine personalisation in every aspects from service to product offerings..

November on FINthinkers

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November 2017 was the first month for the FINthinkers blog. Below is a short summary of what covered so far
Change
Our blog started with Change is inevitable looking at diverse types of change ranging from evolution to revolution. We also touched on Conway’s Law which states that organizations designing systems are constrained to produce designs which are copies of the communication structures of these organizations. Following Conway’s law companies need to change the organization to create the systems required to stay relevant in the new normal. In Next stop – FinTechGiants ? we look at the available dimensions to outperform others and at the relevant structures which each company has. Many companies seem to apply a Tur Tur strategy to change looking giant from far away but very small if one gets closely.
Client Experience and Brand
Noisy Channel(s) to Channel-less highlights the need to think from the client’s perspective. No client talks about channels but we all like to have seamless and ubiquitous experience to reach the desired outcomes. So brand’s digital behaviour becomes vital when services are transparent in a digitally augmented world.
Security
Homomorphic Encryption started a series of posts on security and related topics.
We hope that the posts inspired you to think about the topics. The nest posts will follow soon … thanks for reading.

 

Importance of a brand’s digital behaviour

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As the digital landscape and mediums expands, the ways people experience and expectation of a brand’s digital behaviour have significant grown higher and become more complex.
Brand is the holistic sum of customers’ experiences, composed of visual, tonal and behavioral brand components, many of which are shaped through interactive mediums. The complexity of the digital landscape introduces the challenges of overcoming digital distrust and must be preserve by fostering digital engagement, showing empathy, and working with transparency and authenticity.
The emotional impact of a brand is the strongest and most reliable assets. A brand must radiate their core emotions on every digital platform at any touchpoint
Constant brand value reassessments by staying relevant requires keeping your digital behaviour up to date. Understand through assessing customer behavior and moving fast and being smart about every decision regardless minor or big.
Digital behaviours differs between generations (Millenials, Gen Xers and Boomers) and a brand needs to clearly understand its customers ( or intended customers) and its value proposition. For example millenials have the highest social networking penetration of any generation and they account for most in consuming digital content through various mediums ( eg digital video)
Change is the new constant is also relevant in the digital behaviours of customers. The dynamic rate of change will significantly increase and the need to monitor and understand the different becomes very important in a time dependent manner.
This introduces the shift from persona profiling to behavioural segmentation. Persona behavioural segmentation focuses lesss on who the individual is and more of his/her distinct actions in regards to the product or service. The need to correlate the emotional aspects become signifcantly important. Knowing whether a particular product or service becomes more relevant due a strong emotional impact. Or are consumers posting emotional responses that shows the receptiveness to a certain brand offering? Does it relate to certain moment(s)?
Persona profiling base on simplistic and static demographic data points are no longer sufficient and are poor predictors of actual persona behavior. The goal should be to get rid of generalised segmentation and replace it with data enabling hyper-personalised products and services offerings in order to maintain the relevance of a brand’s digital behaviour.