The Bold War

In the Hot Seat

An extract from a recent interview I conducted...


1. Let’s start with an easy one.  Who is going to win the mobile payments war?

If I knew that I probably wouldn’t be standing here right now.  For me, it’s really about whoever wants it the most.  No-one has come to grips with mobile payments yet and this includes the likes of PayPal and Google.  If I was to be really critical, it feels to me as though they are still not really sure where it’s heading.   This is especially disappointing considering the talent and money that they have at their disposal.  PayPal Mobile is still in the shadow of its web cousin. It’s the same with Google Wallet.  It’s actually funny seeing these original disruptors playing a little bit out of their comfort zone with mobile.   They don’t quite have the confidence and panache to pull it off like they do online. So who will win? I think it will be someone we haven’t heard of yet.  If you go back seven years and said who was going to win the social media or mobile war, you would have picked MySpace and Nokia. So let’s go with someone new.

2. Do mobile payments present a significant threat to the banks?

Of course it does, and it has for many years.  The reason banks have struggled with payments is that they have so tightly defined what they do.  They always saw themselves as taking deposits and lending money.  If you think about the core structure of the bank, and what it revolves around, it hasn’t moved beyond that.  They have totally missed the payments boat. In much the same way as they are missing the big data opportunity.  Whilst some are starting to catch up, by the time they catch up, their non-traditional competitors will move ahead again.  It’s like watching an F1 car approach a chicane.  When two cars approach a chicane the distance between first and second reduces significantly.  So much so, that you think they are closer than they are.  As they exit the chicane, you realise that they are the same distance apart as they were when they entered.

3. So who owns the customer?

Nobody…nobody is doing a good enough job at the moment.  If I was to say anyone at the moment I would still say the banks.  The majority of payments are being done (from the customer’s perspective) through the bank.  Whether that be using online or mobile banking, a bank cheque, cash withdrawal from an ATM or the customers debit/credit card.  At the end of the day, the consumer sees that they are storing that money in the bank, and every time they make a payment, they are retrieving it from their bank to pay someone.  The banks relationship is being diluted so much though.  People love their iPhone or Android. They love Apple and Google. They love the apps they use on those handsets.  The bank isn’t always front of mind anymore.  Kids especially are forming a close bond with brands online that is going to change their opinion of banks forever.  When I was growing up, it was just expected that I would open a bank account with one of the big four.  I don’t think kids have that attitude anymore.

4. What impact will NFC have on payments?

NFC is a real game changer for the industry.  I am still a big supporter of NFC.  I know a lot of people have jumped off the band wagon a little this year but I just love the concept.  Even without the additional bells and whistles, I just love the idea of being able to view my balance, select an account, make a payment and not worry about knowing what money I have in my account, or collecting the loose change.  It also delivers instant gratification to both the payee and the receiver in this case the merchant.  Why I see NFC working is that it is not just applicable to payments.  It will be used by other industries and businesses to deliver a better customer experience.  Transport, health and security are ripe for NFC, just to name a few.  It could have a ‘hockey stick’ moment soon, and that’s half the excitement around NFC.  No one quite knows when it will take off, but in my opinion it’s inevitable.

5. So what is holding NFC payments back?

All the main challenges that the payments ecosystem has with NFC are actually self-inflicted.  The main culprit is the lack of communication and collaboration between the different parties in the ecosystem.  What this has led to is constant stagnation especially in the US and Europe.  Now, if you look at South Korea where NFC is well established, the handset manufacturers have worked very closely with the different industries to deliver services to the end consumer.  They actually talked to each other and came together to achieve a common goal.  This is will need to change and hopefully it happens soon but the news about the delays to the Oyster rollout in London highlights that the same mistakes are still happening. 

6. Where are the inspiring mobile banking apps?

They are everywhere.  There are some amazing apps out there at the moment, but they often go unnoticed.  They might have seamless registration, short passcode login or great security.  Some win kudos for having a fantastic, flawless user interface.  I love the ‘no login to view balance’ apps such as ‘Cash Tank’ from Westpac NZ and ‘Shake and Bank’ from Southbank.  I appreciate how hard they would be to get approval for in a bank. I really rate the Commonwealth Bank Kaching service which includes Facebook, email and mobile number payments support.  Barclays Pingit more locally is a great service and is also available for non-Barclays customers.  RBS GetCash allows customers to withdraw cash without a card from an ATM.  Finally, the much heralded USAA Autocircle app.  It allows users to make a car insurance claim straight from their mobile device.  If I just looked at the functionality I mentioned you would think it was Google or Apple who was delivering those services, buts its banks. 

7. What does the average mobile banking customer look like over the next five years?

Everyone will be a mobile banking customer because everyone is dependent on a mobile phone.  Our mobile device has become an extension of us.  It's our sixth sense.  Initially, against popular predictions, a lot of avid mobile banking users where low income earners who loved the control that a mobile brought to their finances.  Then we started to see both affluent and younger consumers take the reins.  We are now seeing significant take up in older customers.  So we are already seeing this great cross-section of the community who are using mobile banking.  Different customers will use it for different things, but everyone will use it.  At the moment we probably have 20% of UK consumers using mobile banking.  I think it will probably reach around 70 – 80 per cent over the next five years. 

8. As mobile banking proliferates, what type of new services do you expect to see?

Banks need to evolve their mobile banking solutions into more than balances and payments and really start to add value during the overall customer lifecycle.  They need to evolve from just helping customers manage their money.  They need to start providing services that allow customers to maximise their money.  They can support home buying, car buying, insurance, product sales, marketing; it can be used to support activities across every channel.  Instead of verifying yourself in a branch with your card, you could do it with your mobile.  Instead of withdrawing cash at an ATM with your card, you could do it with your mobile.  Instead of seeing an ad in the paper for a product you like, you could use a QR code and be taken straight to a product acquisition page.  These technologies are all available today and can be leveraged so it isn’t some pipe dream.  We will also see specific services for Small Business and Wealth customers.  Retail customers are really the only ones to benefit from mobile advancements so far.  This will start to change.

9. What are the regulatory and operational implications of mobile growth?

As mobile moves away from being a replication of existing services from other channels then the real fun can begin.  With more bespoke functionality it will be interesting to see how banks and regulators adjust.  If you look at some mobile functionality nowadays, you know they would have been deemed unacceptable a few years ago.  Luckily, social networks and gambling have already fought those battles.  It will be difficult for regulation to keep up, and in a way you probably don’t want it to.  From an operational perspective it will be difficult for banks to manage the sheer volume of transactions being conducted via mobile.  Moving from an average five logins a month for online, to 20 or 30 for mobile is going to create huge pressure on legacy systems.  Additional hardware and capacity is going to be required.  New functionality also means that banks will find it more difficult to use their existing online banking customer services team to support customer enquiries and ring-fenced mobile support teams will start to be established.

10. Will banks continue to use partners or develop in-house?

It’s a strange conundrum.  I have never worked with a mobile supplier and thought there is no way we (as a bank) couldn’t do that ourselves.  The benefits of using a supplier can often have nothing to do with the technology they offer.  I would say its 70% talent, 20% attitude and 10% technology in the mobile space.  Because they are specialists in mobile they can attract and retain better talent in the field.  They are better at communicating and often have extensive links with other suppliers and partners that can add value.  The other thing is that banks can be so bad at delivering things you almost want to do whatever you can to move delivery to someone else.  It just helps reduce the bureaucracy and politics.  The interesting challenge though is that mobile is not going to go away anytime soon.  So as a bank, do you just bite the bullet, decide it’s a key part of the strategy and go it alone.  The risk is higher but so is the reward.  You own the IP and therefore have a greater chance to differentiate.  It really comes down to the individual bank.


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