What’s so small about business banking? →

In Europe 99% of registered firms are classed as an SME and 5.5 million are in the UK (Federation of Small Business 2016). Each and every one of those UK registered organisations will require banking services to establish themselves, grow and survive. The sector has traditionally been served by the traditional big 4 banks with little competition or innovation. 

Whilst it appears new entrants have woken up to the profitability of the sector, it’s a market that has lacked the leadership ambition so prevalent now in retail banking, from high street incumbents to nimble fintechs. It seems SMEs are stuck in the haze between personal banker and large corporation, resulting in access to many products and services that don’t quite fit their needs.

I know banking

When taking the plunge to establish DWC Ltd I felt confident, given my background, that banking would be the least of my worries as a new business owner having worked in banking for the past decade. However, I found myself switching bank accounts on 3 different occasions in an attempt to find a service that worked for me. With each new bank I quickly found processes to be time consuming and frustrating.

From opening an account to making payments, every time I had to contact the bank it proved to be a significant distraction from where my time should have been spent; establishing my business and serving my customers. I found my flow interrupted by processes that made the simplest of things unnecessarily hard. Clunky processes built for larger corporations and then poorly adapted for smaller firms have resulted in badly designed and inefficient systems; such as one of the accounts I had requiring entirely different security data depending on whether I was using the app, online banking, or telephone services. If any of these credentials were forgotten, gulp! I was in for a 7-10 day wait before new credentials arrived by post, POST! Never mind that this was supposed to be a digital banking service.

The missing middle

Whilst mainstream banks take the time to distinguish between the needs of personal and business customers, offering different services to each segment dependent on need, what they don’t seem to do well is recognise the “missing middle”. This is a segment that needs the flexibility of the personal market combined with the business support of corporate accounts. Simple issues such as being able to log in with a single password to access accounts, apps that enable rather than restrict, and technological (dare I say APIs?), routes for engaging experts on issues such as tax, forecasting and debt management would go a long way to helping time-poor SMEs.

It's good to see the bank manager

For larger SMEs I feel a closer understanding is required, which is where the Relationship Manager adds value. Done well and built on mutual trust and respect, this role should be at the forefront of identifying more complex needs while offering tailored advice. It’s where “added value” services are introduced, from syndicated loans to alternative sources of finance for organisations constantly stuck in an overdraft. A visit to, or from, the “bank manager” should be a rewarding experience.

A study carried out by the CMA and FCA in 2014 revealed that 75% of SMEs said they did not consider banks supportive of their business. These feelings stem from the individuality of the SME sector, meaning a one size fits all approach from banks cannot and will not work. A new and flexible partnership approach to banking would enable SMEs to access resources they need on demand, while allowing them the freedom to make decisions about their own business. SMEs are not a homogenous group. Commercial banks need to offer services that deliver to a multitude of needs across customer types. As with personal banking life stages and topologies, shared values are evident in commercial banking:

·       Convenient and accessible (multiple touch-points, as and when needed).

·       Expedient (from account opening to account servicing).

·       Tailored to need (solutions and advice from trusted experts)

·       Efficient (compliments internal processes, such as accounting, payroll, taxation).

SMEs are time poor, especially micro SMEs and they require banking that enables them to choose how and when they interact – for some face to face interaction is important while others may simply need to use an app on demand. The SME customer needs to feel valued, which some banks have been able to do by visiting them at their own premises rather than asking the SME to go to them.

Forget branches, who wants the hassle of parking, queuing and hoping that it’s still open when you arrive if you aren't depositing a bag of coins when a Relationship Manager can visit your premises instead? This ticks all the above boxes while also offering a chance for the bank to better understand and support the business.

SMEs and innovation in unity

Many of you will know already that I have recently engaged with Unity Trust Bank. Our paths first crossed last year when they contacted me at DWC Ltd. Together we saw the opportunity for them to extend their value by offering commercial banking services to firms with a social conscience. Unity Trust Bank has an interesting differentiator - a “double bottom line” strategy. This means it seeks to generate a return for shareholders while making a positive impact to society through the loans provided to its business customers. They have already shown what they can do in the not-for-profit sector.

Unity Trust Bank became independent from the Coop Bank in 2015 and has successfully transformed processes for the needs of the broader SME. By rewriting the service handbook and giving customers everything they need on tap, while still investing sensibly in transformation for the road ahead, opportunities for growth are inspiring. SMEs generate roughly half of all private sector turnover,  helping them to grow holds significant benefits to all of us in society!

Are consumers closed to the open banking revolution?

I have written in the past about the open banking revolution and my thoughts on what this means for the financial services industry. The first major milestone is nearly upon us and by the end of Q1 this year, the UK’s nine largest current account providers will need to have ‘opened up’ their standardised product and reference data to authorised third parties. This means that each bank, despite their individual legacy system challenges, must find a way to standardise the way all their data is stored so that licenced third parties can access it with their own systems. Think of it like a single filing system for everyone to use. By January 2018, with customer consent, they must allow secure access to specific current accounts so these authorised third parties can read the transaction data and initiate payments.

What sparked my interest to write about this again was research I read from Equifax revealing 90% of Brits had not heard of the Open Banking Initiative. Due to be available in under a year and described as “a transformational change” by Alasdair Smith, chairman of the retail banking investigation at the Competition and Markets Authority (CMA), Open Banking appears to be one of the largest changes and best kept secrets on the high street. If we are to believe consumers are still weary and disgruntled with their banks, and digital is the solution to all problems, I find it interesting that the mainstream press is so quiet about what is happening.

Open banking promises to provide reliable financial advice based on our individual circumstances, delivered securely and confidentially. It removes the need for us to gather up our financial history in spreadsheets and cumbersome forms, steering us away from manually uploading confidential and personal information into price comparison websites. The market is set to become more customer centric and focused on applications promising to enhance our day to day lives.

Let’s quote Alasdair Smith again to help explain further: 

“Open Banking will make a transformational change to banking for personal customers and small businesses. For the first time, innovative and secure apps will provide personalised services and information to cover all financial needs in one place, and make it easy for people to find out what bank account is best for them.”

“We’re also making banks send alerts to people about to slip into overdraft to help them try and avoid unnecessary charges. Banks receive £1.2 billion a year from unarranged overdraft charges. A new alert system, combined with our order to require them to publically announce their maximum monthly charges, should mean significant savings in future for their hard-pressed customers.”

The power in your pocket.

Principally open banking will make choosing and accessing a best fit financial product easier. This will be achieved thanks to an array of new apps powered by your smart phone. These apps will utilise what are called Application Programming Interfaces (API’s) to allow different computer systems to communicate and share data about our financial transactions. This is achieved without us having to reveal our individual logon credentials and passwords, similar to how Facebook uses APIs to help us sign in to other online accounts.

All this technical stuff is about helping consumers to make the most of their time and money. For instance, imagine authorising an app to find you the most suitable current account based on your financial transactions, or automatically changing your credit card supplier when a better deal becomes available, helping to keep interest payments as low as possible. We may also see smartphone notifications alerting us to the fact that we are about to go overdrawn, offering pre-approved financial solutions at the touch of a button. If you are small business owner like myself, expect to see software accountancy firms like Xero offering better deals and loans for our business accounts integrated into the apps we already know and love. Apps will not just focus on current accounts, but on investments too, so this could mean more people have access to the investment markets, further creating competition and stimulating growth.

As Facebook, Twitter and others have done for communications, these new apps promise to revolutionise the way we bank. They will become our ‘go to’ for day to day banking, providing essential financial data as and when we need it.

A changing landscape

A notable difference in the way we bank will be the array of people offering direct financial services. We could be banking with Google or Amazon, and Facebook might extend Messenger’s ability to transfer money to offer increased services to consumers and businesses. These open APIs will kick start competition, taking mainstream financial services away from the traditional high street banks if they fail to act.

I’m less curious about the big technology firms though and far more interested with retailers like John Lewis and M&S. These are companies whose brands we are already fully engaged with and whose systems are awash with significant amounts of data about us and our buying habits. I think they are in prime position to close the information loop now by fully understanding our entire financial situation. I wonder what state their IT systems are in and how easily they can compile the banker’s mythical technology wonder known internally as the 'single customer view’.

Armed with this data, John Lewis or M&S could further personalise the financial services they offer. Just bought a car? John Lewis can instantly provide you with a quote to insure it, in addition to the personal loan they easily constructed for you to purchase it. Set up a new mortgage? Your favourite retailer may ask you about home improvements! By knowing you better these trusted brands can construct services more personal to you, which will not only save you money but can make good financial management less stressful and time consuming.

At the touch of a button

One of the prevalent benefits of open banking for consumers must be the ability to clearly see all accounts in a single app regardless of the service provider. For the first time everything will be at your fingertips. A single sign-on, to a secure platform, updates all financial detail in the moment.

The CMA want consumers to be better informed and are encouraging banks to push through notifications alerting customers to issues with their bank accounts. These notifications can help to avoid costly overdraft fees and enable people to make better financial decisions. Tracking expenditure to show people exactly how they spend their money, like digital bank Monzo, can help to bring about lifestyle benefits. Further, through sharing financial data we should find we can access better services with context and personalisation based on our habits and financial history. For example, should a borrower be able to show they actively save and live comfortably within their means, they may be offered a better rate than a customer who is frequently overdrawn and has significant regular outgoings. All of this without the hour-long branch or phone conversation typically required today, discouraging many of us to bother.

Open minds

As we near the end of Q1 I think it is time we start communicating early offers, new apps and new services more. Consumers should be better informed already. I wonder if banks’ marketing pounds are already being pooled in anticipation of providing education on the purpose, benefits and risks of Open Banking? Consumer education is a necessity if we are to realise the full extent of the Open Banking vision. A collaborative effort is needed to inform consumers of the changes, including bank communications as well as mainstream press - as we have seen before when chip and pin was introduced. 

The Timetable of the CMA’s remedies demonstrates the extent of the technical, process, legal and policy challenges faced by the nine banks. I would now like to see the challenge of building consumer awareness and engagement to be as fully embraced.

Retail Banking Innovation and The Art of The Future

Here at DWC we have scaled up significantly over the past months to a 15 person strong team and consequently this has drawn the majority of my time and energy away from writing new content. This guest article, written by James Taylor of the Fintech Network, caught my eye though and together we agreed to share it through DWC. I think James raises pertinent questions - and from a well informed perspective - on retail banking innovation. 

I hope you enjoy James' writing as much as I have.

Daryl

ABOUT FINTECH NETWORK

We exist to facilitate and advocate the adoption of innovative and disruptive financial technologies. We do this by uniting the most influential figures in the industry to challenge the status quo and improve traditional banking systems. This happens through our industry leading conferences and original content.

As retail banks continue to jostle for position in the digital transformation race, I’ve found myself considering what innovation within banking really means and who is going to get it right.  My remit at FinTech Network requires me to speak daily to individuals who are responsible for innovation, design and digital transformation in both incumbent and challenger banks alike - and the one thing that strikes me is the variety of responses I get to the question “why and how are you innovating.” 

Some innovate to reduce cost.  Some innovate to create new products.  Some innovate to push the organisation to become more customer focused.  Some innovate purely as a marketing exercise.  There is innovation in response to regulatory change and innovation in response to the latest must have technology.  Some banks are innovating through acquisitions, JV's, partnerships and accelerators.  Some are changing their business model and culture.   

All are trying to ride the digital wave with a specific outcome in mind for their business and their customers.  But they can't all be right, can they?   

Only a few I've spoken to seem to spend their time thinking about the future and what we, the consumer, are likely to be demanding from our banks in say 5 or 10 years’ time. Based on our future experiences from every facet of our digital life how are expectations and behaviours likely to change. 

For instance, how is the way I book a holiday going to influence the way I bank?  How is the technology I carry with me going to change the way I pay for things?  Which technologies that have had marginal adoption today going to become an overwhelming feature of my life in the future?  What unknown unknowns are going to emerge that none of us could predict?    

The process of making these predictions has been referred to as the “art of the future” and the reason it’s so critical to innovation functions within banks is without considering what customer behaviours are going to be in the future, how can you innovate now to create a business and a set of products that meet those future needs?  How are you going to create meaningful customer insight and design customer focused products if you can’t confidently predict how your customers are likely to behave?  

How are you going to ensure that the sweat and tears given in the name of innovation now don’t turn out to be wasted when the technology you pinned your hopes on has been leap-frogged (chip and pin anyone?) and is now obsolete.  Or that customers are behaving in a completely unforeseen way that makes your particular proposition irrelevant?  (Pokemon Go??)  Or that you realise you don’t have the back end systems and processes in place to support the scramble towards a new model of banking?  (PSD2 and the CMA on open banking??)  The risk of neglecting future customer behaviours is pretty significant then.  

It sounds like a luxurious use of time when there is data to be analysed, a customer journey to be mapped, a new proposition to test and a partnership with a tech partner to be negotiated - but all these other tasks could be meaningless if we don’t have our best guess in place on what the future is going to look like.

The art of the future should be the very first step in any innovation process.  What do you know about your customer’s behaviours now and what can you confidently predict about them in the future?  What are the trends, technologies, emotions and desires that shape future behaviour going to look like in 5 years time?  How do you begin to apply this thinking to the range of demographics you serve to ensure you don’t leave anyone behind?  Most importantly how are you going to build in flexibility so that you can adapt as real world information starts to inform your prediction.   

Once you have a picture of the way your future customer is likely to behave you can begin the process of aligning this with your vision, your products and your culture to deliver the experience you promise your customers.  Then the challenge of gaining stakeholder buy-in begins!!  Good luck with that.  

Fortunately I don't actually have to do this.  (Please take note of the number of question marks used in this article.  I have questions, not answers!) But if I did, this is what I'd be betting on:

• We’ll bank exclusively through a piece of wearable tech, something like Google Glass, which in turn utilises the augmented reality principles of Pokémon Go to create a fully interactive but personalised environment that is both local and connected.  Everything we see, we will see through our banking platform and we'll be able to interact with it.  No need then for mobile or internet banking solutions.  
• This “view” of reality will be overlaid with data.  All the data that we generate in our digital life will be amalgamated in one place to inform all our banking decisions.  Think about looking at a digital menu above the check out in your favourite lunch time haunt and making your decision based on what you've eaten previously, how far you walked that day, what your friends eat and anything else you'd like to see.  Your order will be made from your banking view straight to the vendor.     
• Through this “view” we’ll also have the option to access a sector agnostic retail platform.  Something that combines the best bits of Amazon, John Lewis and MoneySuperMarket.com.  A banking platform that allows us to access the best deals based on our data, location, habits, likely future behaviours and gives us reviews and advice with an excellent customer experience.  Like those trainers that guy in the gym is wearing?  Your banking platform will know where you can get them for the best price, your size and the insert you need for that dodgy leg.  All delivered in time for your next session!  
• Something like Siri with advanced AI machine learning and natural language recognition provides a fully interactive, dedicated personal assistant to remove any friction from our banking experience.  It knows who are friends and family are, our financial situation and our likely spending patterns.  We just need to tell it what we want to do and it will speak directly to the seller through open banking principles, simultaneously offering us advice.  That monthly, budget crippling impulse buy will be a thing of the past!    
• We'll be protected by advanced biometrics for security and authentication so all of this will be secure and just for us.

What's your prediction?

UK Regulator fosters innovative collaboration in financial services

Last month and after many weeks of planning, we supported the FCA to deliver a highly collaborative two day hackathon focused on improving access to financial services. You can look this up on Twitter using the hashtag #FCAsprint. To our knowledge, this was the first event of its kind by any regulator worldwide and saw big name brands come together with a shared purpose including KPMG, Visa Europe, Funding Circle, Lloyds Banking Group, the Post Office, iProov, HCL Financial Services, Fidor and the Financial Services Consumer Panel.

Chris Woolard, Director of Strategy and Competition at the FCA had this to say:

"The TechSprint was a new way of working for the FCA. Over the course of two days participants came together to generate solutions and foster innovation at pace".

"The enthusiasm, energy and creativity shown during the event demonstrates that there is huge potential for collaboration between the FinTech community and those more established within the industry".

This event was lively; the energy in each room and across twitter was inspiring. The friendly competition between break out teams, within the context of everyone being in it together was a truly unique experience. Post event I remain inspired by how individuals broke down their usual barriers to work together. Could it be that the interaction between companies who may otherwise consider themselves competitors was the genuine innovation?

“Competition makes us faster. Collaboration makes us better.”

Collaboration between different organisation types can yield benefits if managed well. Small Fintechs are attributed with being agile and more open to taking risks, however they can be held back by the financial complications of such an approach. Small and large working together leverages the best of both, with the small Fintechs having the financial backing of the large established organisation to take the chance.

There are great examples of large organisations utilising the benefits of small agile start-ups to test and grow an idea before sweeping in with the scale and customer base to make it commercially viable. BBVA Compass announced their strategic partnership with Atom in 2015, in order to utilise their digital banking services to serve a growing demand in the UK. Atom has the right product in the right place, and BBVA the experience and stature to drive growth in line with changing customers’ demands. Early in 2016 JP Morgan announced their new service Chase, which through their partnership with alternative lender OnDeck, enabled them to break in to the online lending market.

It is not just finance organisations enjoying the fruits of collaboration to improve customer experience. For instance, I hear of fashion designers working alongside publishers to directly link consumers from the clothes they see in glossy magazines to a retailer with the item in stock. This mutual effort gives the consumer a fantastic experience they will not forget.

When the time is right

Designing collaboration into strategic ventures from day one is where I see innovation actually transcending. Currently we have cash rich established firms with the route to market taking quick wins from start-ups who have developed their innovation far enough to get noticed. Innovation labs and accelerators have tried to start these relationships earlier by offering mentoring and support for businesses. Take for example, Lab 126 that enabled Amazon to bring products such as the Kindle and in the US the Amazon Dash Button to market.

Taking this further could potentially see traditional competitors working side by side on developments that will see industry benefit. All parties come to the table with open books and share responsibility and results from their research. Together these teams develop a solution that is better than would be produced working in isolation. I can think of a few opportunities in financial services where this makes sense.

Stop, collaborate and listen

By collaborating organisations and industries stand a better chance of finding the innovative solutions to the issues they face. This isn’t as easy as putting two groups of people in to a room and letting them get on with it. It requires a shift in attitude by employees who are more comfortable keeping developments closely guarded until they are ready for launch.  The decision to be open needs to filter throughout from board to project team members. Individuals who share make learning faster and better for the teams around them. Individuals on teams created with innovation in mind need to understand their common goal and what they and those around them bring to the table. Teams need to respect each other’s contributions and be open to their ideas being developed, dropped, changed, reworked and critiqued. Facilitators employed within teams can help make the interactions happen; they understand who is doing what and who can help them, and bring the two parts together.

It’s more than an office

Moving from a large corporate machine to managing my own business this year has exposed just how different these environments are. To be effective however, leaders must find a way to merge different organisations to create an environment conducive to stimulating the minds of the team. The physical space can be an enormous influence. Innovation rarely happens around a conference room table in a boardroom. Space needs to inspire and be flexible enough to encourage and facilitate interaction. Budgets need to be considered, along with the governance and process to draw down funds quickly, it is possible to alienate individuals from smaller organisations by expecting them to have the same processes seen within large companies.

Finally, having the right tools to enable effective sharing of documents and test ideas safely and seamlessly is essential.  There is no bigger barrier to collaboration than systems fighting each other. If sharing becomes laborious it stops and in turn, collaboration breaks down. Simple systems that can be accessed by all are essential. These may require an adjustment to traditional procedures for some companies, but finding a secure process everybody is comfortable with will make or break collaboration.

All of this assumes the right leadership to begin with and as I reflect back on our #FCASprint, it strikes me that our real success was the innovation in how things get done. A handful of people wanted to try something new and in communicating this, many others volunteered their time and resources to make it happen. This begins with visionary leadership, pulling your head up to see past today and towards a future more compelling for your customers and employees. 

Click here to watch the #FCASprint video!

Rising to the challengers

Challenger banks have been a black cloud looming over the “big four” for the past few years. The traditional high street banks have been braced for these challengers to shake things up and create an entirely new environment, just as budget airlines did to the aviation industry in the nineties. And with the FCA keen to see consumers benefit from “effective competition” for regulated financial services, the time seems right. However, while those working in the industry are tracking every move of the challengers and what they offer, this awareness has yet to filter down to customers. With the big four still holding over 90 per cent of the UK market, and consumer awareness of challenger brands failing to gain momentum, is the impending shake-up going to happen, and if so, when?

The big four are portrayed as clunky behemoths held back from innovating by complicated legacy infrastructure that is creaking at the seams. In just the first few months of 2016, customers of some of the major banks have experienced cashpoint outages, data breaches and system failures. What is interesting, and at odds with consumer behaviour in other industries, is that customers are not reacting by switching brands in their droves to new suppliers – despite the seven-day switch service introduced by the Government in 2013, which makes switching current accounts easier than ever. So why the complacency?

The path of least resistance?

New challengers are offering faster, cheaper transactions with greater flexibility than ever – yet customers are still hesitant to switch. Banking is seen by customers as a chore, and many customers lack confidence in financial planning matters. Consequently, spending time researching and understanding different banking products, switching to a new bank or account, and then getting used to a different way of doing things, is something that many customers avoid. This is why UK customers are collectively losing out on £3 billion through money sat in low-interest savings accounts. And it’s why the challengers may well continue to struggle to gain traction against the tried-and-tested big banks.

Step forward the challengers

The challengers to traditional retail banking take several forms. First off, supermarket retailers such as Tesco, M&S and Sainsbury’s were quick to head into the banking space with uncomplicated current and savings accounts. It made sense; these are heavily data-rich organisations, putting them in prime position to offer customer-centric services. They have the on-street presence through stores across the UK, and can interact directly with their customers without huge start-up costs.

The next wave of challengers concentrated on putting the customer at the centre of their communications. Virgin crashed into the market in 1995 with Virgin Money, branding their high street outlets as stores, rather than branches, with a new focus on customers’ individual needs. Metro Bank arrived in 2010, introducing a softer side to the retail banking market with their mission to create “fans not customers”. Growth for these new players has not proven easy, however – Virgin Money only has 75 stores nationally, compared to Lloyds’ network of nearly 1,300 branches – and there has also been a string of banking start-ups that have failed during the same period, the most well-known of which is Prudential Banking’s internet bank, Egg, established in 1998. The costs of creating a high street presence to rival that of the big four make the direct high street challenge almost impossible, and without a high street presence to back them up, online banks have historically struggled to gain traction and retain customers for the long term.

Don’t talk, tap

A new breed of mobile-only and mobile-first banks is hoping to reverse those trends and succeed where others have struggled. And in an age where laptops are being replaced by mobile devices, where people trust new brands like never before (think Uber, Netflix and Airbnb), and where we are moving to mobile for more and more of our daily tasks and activities, these new banks may just have their timing right.

Atom bank intends to build relationships with customers by never being more than one atom away from them, using mobile technology to enable seamless integration into everyday life. Atom, along with Starling, Fidor and Open bank, all recognise that the new age of customers demand to use services on the go. These customers live on their mobile phones and expect to be able to complete all of their transactions that way. These new players hope that customers will value the fast and convenient features and services, from biometric authentication to digital wallets, above a traditional high street presence.

This low cost-base proposition allows the mobile banks to lead with low-interest loans and high-interest savings. And the new breed is also tapping into cultural trends, such as social networking and online communities, to appeal further to today’s customers and to help them self-serve. Fidor even links its number of social followers to its interest rates, and is using a community-centric model to help enable it to serve its 300,000 customers with just 32 employees.

Unify to achieve scale

Whether the challengers succeed or not, customers will benefit from this period of market disruption, as it is forcing traditional banks to reassess their services and ensure they remain competitive.My view on the future of retail banking is ultimately one of unity. I expect there will be further challenges to the incumbent banks, but there will be two long term survival strategies: stick to a niche market, serve that market well and own the space; or work together with the traditional banks to gain scale. The incumbents will need to innovate faster and faster, but tied down by legacy systems and processes, they cannot do it alone. The challengers offer technological innovation and slick customer experience in spades, but may struggle to gain traction against customer inertia and to navigate the regulatory banking landscape. Joining forces would be mutually beneficial to both the incumbent and the start-up – and ultimately the customer.

RegTech Innovation: securing compliance in a disruptive market

2016 has seen interest in RegTech skyrocket, placing it as a key strategic area for innovation for many technology solution providers. RegTech solutions have the potential to cure a number of headaches for financial services as it aids more efficient and effective compliance management. But more than just a cost saving, know your customer (KYC), financial inclusion and an enhanced customer experience are all driving forces behind the development of RegTech innovations. RegTech at its simplest is regulation technology. Technology to help organisations make better use of their resources, better manage data and integrate relevant regulations within their systems. The sheer quantity of data financial institutions now hold is staggering. Innovations that make better use of this data, whilst feeding into compliance reporting and risk management, stand to aid competitive advantage and should help to deliver increased profits. RegTech solutions are enabling organisations to look at compliance issues strategically, to find efficiencies and cost savings rather than tactical responses which makes compliance a drawn out process, placing a huge drain on resources.

Rising further up the agenda with each passing month

FinTech innovations are bringing new entrants into the financial services market. With disruptive technology changing the face of the market, regulation needs to adapt at a similar pace. This is creating a heavy burden on an industry that is already immensely regulated. Financial headlines are filled with news about RegTech companies growing in success. In the past week alone we have heard news of AQ Metrics, who provide a cloud-based platform to address regulatory risk and compliance, receiving $3.25 million in funding. Further, fresh from winning Central Banking Award 2016 in the category “Technology Provider of the Year” in January this year, BearingPoint, a regulatory software solutions consultancy, has been ranked in the 2016 Chartis RiskTech100. With ongoing interest and investment, it is clear to see RegTech is establishing itself as the poster child for technology innovation in 2016. Let's explore why, here are my top 5 picks.

Maintaining the digital experience with online verification

Increasingly consumers are going digital. Digitalization is nothing new but the ever increasing expectations of customers and their speedy acceptance of digital tools is. With mobile devices offering the same functionality as desktop computers, users expect to be able to complete all their tasks in a single process. If they need to prove who they are, they do not want to go back to finding paper copies of birth certificates and going through the hassle of getting them verified. We all want and expect in the modern age, a simple process of verifying our identity online. Today’s customers are comfortable with the prospect of biometric forms of ID&V to create accounts, which they then access and use on mobile devices.

Inclusion for harder to reach customers

Digital identities are able to mediate relationships and verify individuals. An estimated 2 million UK adults do not currently have access to financial services, which puts them at a disadvantage when looking for financial support, and can result in them paying a poverty premium of up to £1,300 annually. The impact of enabling financial inclusion through better identification and reducing barriers to services would reap benefits for those who need them most. Digital verification also has the potential to offer life changing benefits for migrants coming to the UK who are able to prove their identity without paperwork. The government service GDS Verify helps people prove their identity online, in order to access government services such as viewing their driving licence or submitting a tax return. A similar system that enables online verification of previously excluded individuals would make access to finance homogeneous.

Knowing every customer

KYC has resulted in significant operational impacts within banks, who are now required to have "good customer information across the board". KYC changes how customers are identified, segmented and communicated with. Over 60% of respondents from the financial industry in a JWG survey carried out in 2014, considered compliance reporting to be under most pressure from “Know Your Customer” initiatives. Whilst the regulations have floated around for quite some time, the changes to laws are adding complication to the process of holding data and evidencing compliance.

A niche to bring substantial financial gains

It is recognised that RegTech has the potential to reduce the human resource required to maintain compliance, through the automation of low-value processes and enabling verified complex data to be accessed quickly and formatted to aid analysis. Solutions will be based on current standards but adaptable for future changes, easy to integrate with legacy systems, cost effective to adopt and dependable to avoid costly sanctions made for incomplete data exchanges. Data systems that deliver insights internally in addition to meeting compliance standards will top the shopping list.

It’s a two-way street – regulators are set to benefit too

The quantity of data that the banks are gathering is of interest to regulators. Being able to access this data in a usable format will become increasingly important to them. APIs that ensure data can be delivered in a single format to create a holistic view of the market will be required. These APIs will need to facilitate the transfer of data across multiple legacy and cloud-based systems, without further imposing on these already heavily burdened organisations. 

Innovators in RegTech have the potential to bring organisations and regulators closer together. It is essential that regulators recognise the need to get to know their industries better. With FinTech providers sitting on the edges of the industry, regulators need to understand where responsibilities lie, making sure that any activity that requires compliance standards are captured within regulatory control. As the lines between technology firms and financial organisations blur, maintaining this control is of utmost importance. Only by working closely with the industry will they be able to manage this effectively.

PSD2: Banking without walls

Earlier this year I wrote about open banking, the opportunities it brings to financial services, and my belief that the competition and innovation enabled by new regulation in this area will drive a revolution in customer experience and a new emotional connection to banking.

Since then, the Payment Services Directive (PSD2) has received parliamentary support and has been passed to the European Union for official endorsement. PSD2 sets out to standardise, integrate and improve the efficiency of payments within the EU – offering consumers better protection and service through innovation and cost savings. The directive facilitates competition in the payments market, which will mean more options and better value for consumers.

The directive requires banks to share their customers’ data with anyone that holds the required licence. I cannot emphasise enough that this is a big deal. Opening up this data brings new opportunities to existing players, and lower barriers to entry will enable new suppliers to enter the banking and payments scene. Likely candidates are applications that aggregate multiple accounts, facilitate comparisons between products, allow you to switch accounts at the touch of a button, or apps that make payments and “do your banking” without going near your bank. Anne Boden’s Starling Bank summed these changes up well (and with humour) in its blog Explaining PSD2 without TLAs is tough – I recommend you take a look.

Countdown to better customer experience

PSD2 has received a lot less mainstream attention than it deserves. This is the single most revolutionary change that has happened in recent times in the banking industry, and the result will be an unprecedented change to customer experience. Now is not a time to bury heads in the sand – traditional banks need to consider their position and response. When the EU gives its approval (and it will), banks will have just two years to comply. Many banks will suddenly find themselves bogged down in the task of meeting compliance by making their legacy systems compatible – but this is just the distraction that could mean they miss the larger point.

What does PSD2 mean for banks? 

There are two ways traditional banks could react:

1. Take a step back from the customer and allow their infrastructures to facilitate transactions, while consumer brands (such as Apple, PayPal or new players) engage with customers directly. 
2. Use their scale and brand to adopt open innovation approaches and create enhanced, customer-focused packages to sit alongside standard services. These additional services would become revenue streams that fund further innovation and commercial growth.

Which approach is best? It depends on what kind of business you’re running, but here are some considerations. 

• Is your brand trusted to look after people’s money and identities? Is it also trusted to provide the best products and experience?
• Are your customers emotionally connected with you?
• How do you differentiate yourself? If your answer is “service”, can you articulate exactly what this means and is it genuinely perceived by customers?
• How strong is your organisation at building compelling experiences in a digital world, relative to the class-leaders? 
• What part, if any, do your products and services play in distinguishing your brand?
• Is customer-led innovation a core competence and pervasive in the culture of the organisation?
• Does your business have the scale, resilience and operating model to process transactions reliably, quickly and at low cost?
• Do you partner with smaller, newer companies to offer alternative products that complement your own (e.g. alternative funding services)?
• Is your B2B team clear on the impact of PSD2 and already negotiating the necessary commercial partnerships to leverage a new position opening up
• Are tools and systems (not just IT) encouraging agile and empowered decisions?
• How are you managing your relationship with the regulator today, and how do you plan to invest in this relationship in a post-PSD2 world?

Learning from our peers

PSD2 echoes the “Local Loop Unbundling” regulation change in the telecoms industry back in 2000, when the communications watchdog forced BT to open its exchanges to competitors for the first time. At first the effect was negligible, with a few competitors springing up, but none that posed a real threat. Over time, though, the regulation change had a massive impact, as a more competitive broadband telecommunications market emerged and organisations had to fight harder to attract and retain customers. Quality increased and prices decreased. BT faced previously unknown challenges, and after some difficult years it eventually came back with a compelling service offering. It now faces a new challenge in light of Ofcom’s plans to force it to open up its fibre-optic network in April 2017.

PSD2 could bring similar disruption for the banking sector. Without a clear strategy now, banks are going to be hit hard by competitors who already have the user experience nailed. Only those with a clear vision of who they will be in this new landscape, and a strategy to get them there, stand a chance of holding their ground while the industry finds its new plateau. It is a time of shifting perceptions, monumental changes and experimentation. For some banks, this is where Heads of Innovation are now proving their value – slowly but steadily influencing the cultural and leadership changes needed in a post-PSD2 world while creating the new partnerships and platforms for innovation to grow and thrive.

Customers set to win out

The potential customer benefit from the regulation is what makes this story so compelling. If Midata opened the doors to more competitive banking, then PSD2 has taken down the walls and removed the roof. PSD2 will offer customers a greater choice of services, together with a means of comparison to understand their options and make the best choices. 

Midata promised customers the opportunity to compare accounts, and the 10-day switch guarantee made it easier for customers to move to a new bank. But it didn’t happen. It is still too complicated to uncover meaningful differences between providers and accounts. PSD2, however, promises much greater innovation, adding a level of transparency in payment and account services, which will mean that banks have to differentiate themselves and compete in a very different market and with a very different strategy. In this new landscape, the customer will have more power and drive bigger change – forcing banks to deliver customer-centred innovation and more personalised services. How the services will look remains to be seen, but one thing is sure: customers will win from the changes driven by this regulation.

Artificial Intelligence: The rise of the humans?

I recently enjoyed the series of TV programmes on Sky News and the BBC profiling developments in Artificial Intelligence (AI) and robotics. But while the subject has always fascinated me, what really struck me was the underlying theme of fear that pervaded both programmes: the fear of what advances in AI might mean for the job security and the future of humans. There seems to be a war-like philosophy – if we develop them, they will overtake us, putting our very existence in danger. Robots will take over the world, and we will lose control.

Personalising processes

Discussions and research about the use of robots can be dated back to the first millennium, but the conversation today is indeed a world away from the musings of days gone by. Whereas we used to think robots' potential was limited to repeatedly performing the same process-based tasks (typically on factory floors), we are now creating machines that can replicate a human’s ability to think, making decisions independently based on patterns, past performance and logic.

This phenomenon is a subset of AI known as machine learning. Whereas the robots we think of on those factory floors are programmed to perform, machine learning was defined by pioneer Arthur Samuel as "a field of study that gives computers the ability to learn without being explicitly programmed".

The robot in our pocket

Although the process has progressed slower than many anticipated, the concept of machine learning is now steadily infiltrating our lives, and millions benefit from it daily. Google Search, used daily by around 300 million people, uses machine learning. Every time a term is searched and a link clicked on, Google's search engine learns from the user’s behaviour. It then hones what is displayed in the search results on subsequent occasions. To do this, complex algorithms analyse multiple behaviours in a bid to create a more personal response for the individual.

On our mobile phones, too, we see AI in action. Intelligent personal assistants such as Siri and Cortana can take a stream of speech, interpret it and offer solutions by individualising responses and delegating to other applications to complete tasks. Our media consumption has similarly been transformed. Netflix, Spotify, Amazon and Apple all use machine learning to make recommendations to customers of films, programmes, albums and books they might like based on their own choices and those of other customers.

While these applications of AI have been widely accepted, other developments are causing more of a mixed reaction. Driverless cars are hitting the headlines and grabbing the attention of everyone. While advocates try to reassure people that removing human error can make driving safer, sceptics are terrified by the prospect of cars "driving themselves" around our cities and countryside. Can a car be programmed to act more safely than a driver would, to take into account the magnitude of variables including other humans' behaviour, weather and the environment? Science says yes, but this is a concept that many humans find difficult to accept.

AI penetrating banking and telecoms

In my own industry, financial services, machine learning has a multitude of applications, some of which are already well-established. One example is the use of complex machine-based algorithms during credit card transactions to predict the chances of a transaction being fraudulent. To do this, banks use a finely developed understanding of user behaviour patterns – saving millions in the process.

The appetite for using AI in financial services and telecoms has shown exponential growth in recent years, and shows no signs of slowing down as banks and mobile phone operators seek new ways to cut costs and maximise customer convenience.

• Barclays has recently announced the use of IBM’s Watson to provide services such as money transfers and ‘rudimental tasks’.

• Nao, a 58cm tall robot, has been employed in the Bank of Tokyo-Mitsubishi to perform reception-style duties to visitors, offering pre-recorded responses in a number of different languages, dealing with requests effectively and delighting customers as a result.

• Pepper, ‘the first humanoid robot designed to live with humans’, can recognise emotions and tailor its actions accordingly. It is now greeting and interacting with customers at SoftBank Mobile, a large mobile phone operator in Japan.

We can laugh or wince, but all of these developments will iterate further. A rise of the machines is inevitable. Afraid?

Fear not: imagine the freedom

For many people, the prospect does not sit comfortably. Concerns range from the immediate to the apocalyptic. If machines take over all our jobs, how will we earn money? What if machines develop so much that they overthrow the human race, Terminator-style?

I cannot help but think this is an extremely short-sighted view. The reality of AI integrating our everyday lives in this way is hundreds of years away, and the landscape in this imagined future will be very different from the world we enjoy now.

So what if we turn the question on its head? If robots are going to be doing all the work for us, performing all the tasks that look after the economy and drive through innovation, what else could us humans be doing? Why do we fear a time where we are not tied to a computer screen or breaking our backs with manual labour, and instead have time to experience the wonders of the world we live in? Can anyone who owns a dishwasher really say that they miss the time they used to spend washing dishes? Do car owners long for a horse and cart to make the 30 mile commute to work every day?

Or maybe we could spend our time putting right the wrongs that our generation and the ones before it have made. It seems bizarre that in a time when our news headlines are full of the extremities of war and the impact this has on human life, as we sit in our offices reading about families fleeing for their lives and putting themselves in extreme danger because of the actions of other humans, that we fear our species’ risk is from mechanical devices rather than people. As a race we have the opportunity to nurture the growth of AI, such as a parent does with a child, to create a future where both can co-exist. If we get this right, our robots will enrich, rather than endanger, our lives.

The weight of MHealth future

If you follow me on Twitter or Facebook you will have noticed that my great passion in life is fitness, followed closely by gadgets, particularly mobile devices and apps. I have exercised with weights for 25 years, paying equal attention to nutrition, recovery, joint and tissue health. This is a lifestyle choice, achievable through the application of goal-oriented habits. It is also a massive exercise in data analytics, in which I use figures to monitor, count and adjust things to achieve optimum performance. As such weightlifting is an obvious candidate for “applification”, and with this in mind, a tweet I read recently really got me excited. It hinted to news I have been waiting for – Apple may be getting ready to release an app to support weightlifters.

No time for intuition

This news got me thinking. The mobile apps that are redefining the fitness market are slowly becoming integrated into our everyday lives. People are guided by the information they receive from their apps. Intuition and guestimation have all but gone, thanks to mobile devices and apps like MyFitnessPal, which tracks calories and macronutrients, or Reps and Sets, which logs your workouts. I have used the Push band for many months in my own workouts; it helps me to assess the intensity and performance of my weight training by measuring the velocity of the bar during each exercise I do. This helps me to understand the relative fatigue at a given load (weight on the bar), and serves as a guide in determining the optimal load of subsequent sets. Today’s apps go beyond mapping routes of runs or counting calories. They are becoming more sophisticated, precise and useful for optimising our exercise programs and goals, and increasingly they are also being used for monitoring health flags such as heart rate, blood sugar, blood pressure, and hydration.

The doctor will see you now

The use of mobile tracking devices for general medical surveillance is on the rise, as is the level of investment in accurate measuring devices. Google has recently launched its wristband, with the lofty claim that it can monitor vital signs to such a degree of accuracy that it is suitable for use in clinical trials. It is only a matter of time before this, or something similar, hits the shelves for general consumption.

New online health support services such as Babylon are giving patients instant access to doctors by email or video link, removing the need to visit a local GP in person. Patients simply log in to a virtual waiting room online, and wait until the doctor is ready to see them. Whilst this is mainly prevalent in the private health care market at the moment, the ever-increasing pressures on NHS GPs to provide services to more people more effectively mean that video consultations are likely to penetrate the public health service in time. And with technology enabling remote access to the doctor, the natural next step is the remote download of your vital signs for analysis by the doctor on screen for a more thorough online consultation.

Remove the gamble from health

Accurate monitoring devices can take some of the guesswork out of health issues. In appointments of the future, instead of the doctor asking how you have been, you might instantly share your data set, and a system could generate a report on the fly that provides an instant and comprehensive review of your current health. Taken further, if this data was to be periodically fed into monitoring systems, your doctor could flag up issues before you have even noticed anything is wrong. This preventative care could not only save the NHS significant sums of money, it could also help us to live much healthier lives with less disruption from sickness.

Data, data, everywhere

With the advantages of mHealth devices and apps becoming increasingly apparent, businesses are now looking to reap some of the benefits. Fitbit has revealed that the fastest growing area of its business is supplying companies with devices to monitor their employees’ health. It sounds creepy to some, including me, but it is optional for employees, and it provides employers with opportunities to monitor and support their wellbeing.

Using the data gained as a cost-saving tool for insurance policies, employers are turning to mHealth devices as a perk that benefits both themselves and their employees. Providing services such as the Babylon app as an employee benefit means that employees can deal with medical issues more flexibly and at times convenient to them. While this is great for reducing stress on employees, it also minimises lost working hours for employers.

A healthy future

As I have said before, I believe strong, productive minds are sustained through the development of physical strength and health. Technology is enabling health enlightenment like never before. As mHealth devices and apps continue to develop, they will further empower our decision-making on health issues and help us to achieve our personal health and fitness goals.

Imagine if an app could alert you to the best food or drink to consume in a restaurant or bar, taking into account your current health statistics, training goals and the food selection available. Over two decades ago this was a subscription service that I offered when operating my own nutrition and personal training business. To see how technology is enabling these support services to evolve is both fascinating and personally rewarding. Making better decisions leads us to making better lives for ourselves, and for our families and friends around us. The information is at your fingertips: it’s up to you whether you use it.

Computer says no, but we have alternative funding.

Alternative funding organisations offer customers borrowing capabilities that traditional banks are unable or unwilling to support. Bank finance and alternative finance is currently run very separately, but with the threat of legislation upon banks, as suggested by the Basel Committee, which could force them to to give more information to customers about alternative lending options, there is now an opportunity to get ahead of the regulations and find a mutually beneficial way to work with alternative funding providers.

With a new approach to working together, banks and alternative funding providers could create comprehensive financial packages that promote entrepreneurial spirit and support SME growth, while being more transparent and making it easier for SMEs to understand their options and choose the best one for them.

The many guises of crowdfunding

The term “alternative funding”, sometimes referred to as “alternative finance”, covers a wide range of funding sources. Crowdfunding is the one that has hit the headlines and created mass awareness of these opportunities. Crowdfunding sites have given individuals a new route into the investment market, as well as giving community-based projects a way to channel their messages and gain donations.

The primary alternative funding models are summarised below:

o      Investment-based crowdfunding is where investors fund projects in return for a financial gain, either in terms of equity or interest payments.

o      Equity based crowdfunding is a lending model whereby a person or organisation can appeal to many investors to buy equity in their business in return for funding. Using online platforms, brands such as Indiegogo, GoFundMe and Crowdfunder connect would-be investors with new start-ups, brands, or causes that need a cash injection.

o      Peer to peer lending  sites, such as Funding Circle, connect businesses with multiple small investors to acquire the funds they need. The business pays interest on the amount borrowed. In April, Funding Circle announced that it had completed $150m of fundraising, resulting in the business being valued at $1bn in under 5 years.

o      Donation-based crowdfunding is popular for charities, arts, and cause-related fundraising in situations where an investor is generally motivated by a social or moral cause to participate.

o      Reward or incentive based crowdfunding typically offers an escalating level of reward in return for increased investment. Rewards may include discounted products, VIP access to new products or events, or simply an email of thanks or a mention on social media. Kickstarter is a great example.

o      Online loan platforms enable users to set and control the amount of money they require, and select a suitable repayment term. Some of these platforms demand astronomical APRs, but they can feed a need for quick turnaround of cash provision which can be available within days or hours instead of weeks or months.

We’ve already said no

Many in the banking industry fear alternative funding providers, but I believe this fear is unfounded. Those who look for alternative funding typically do so only after approaching (and being turned down by) traditional banks. John Allan, the National Chairman for the Federation of Small Businesses, recently reported that 35 per cent of SMEs are still being refused loans by the big four banks. Faced with a closed door, these businesses are looking at alternative funding solutions for the means to make their ambitions a reality.

Another reason why SMEs are flocking to alternative funding providers is that they can move quickly; Ezbob claims to be able to approve loans of up to £120,000 online in just 30 minutes. By uploading business accounts, bank statements and other key financial data, the computer systems are able to calculate risk and determine an offer for the customer without the applicant leaving their desk. This may be more of a concern for the banks, who are often saddled with clunky legacy systems that do not enable them to move quite as fast this, but even if they could, the risks of lending in this way would currently be too great for the banks to take on.

Alternative funding providers can take the risks traditional banks do not allow, and offer customers increased flexibility in the face of rigidity. This model can work in harmony with the banks’ lower-risk policies without giving the banks anything to fear – after all, these are customers who they have already turned down.

The rise of alternative finance

Alternative funding is growing at an astonishing rate, almost doubling in value year on year for the last five years, to an estimated value of £1.74 billion in the UK alone in 2014. Total lending by the industry has now reached £3.15 billion. This growth is partly attributable to the financial crash, which saw traditional banks less able to take risks with business or personal loans. Along with social trends and technical advances which have seen an increase in online peer to peer collaboration and a decrease in the monopolies of traditional organisations, conditions have been perfect for the exponential growth of alternative funding.

Reining in the crowd

In October 2013, the FCA announced plans to impose new rules on the crowdfunding market, afraid that naive investors could be lured into crowdfunding in search of healthy returns for their savings, with little awareness or consideration of the risks. The new rules came into place in April 2014, introducing criteria for investors’ eligibility to ensure they are aware up-front of the risks of their investments, and able to withstand any losses they may incur.

Investment-based crowdfunding platform providers are now only allowed to market crowdfunding opportunities to regular investors, or those that take regulated advice, or those who can confirm their investment does not exceed 10 per cent of their net assets.

And it is not only the regulator who is apprehensive about alternative funding practices. Research carried out by Nesta and the University of Cambridge (Understanding Alternative Finance: The UK Alternative Finance Industry Report 2014) found that would-be customers also have concerns about using the services. A lack of regulation sparks fears over safety and longevity, and a lack of understanding of alternative funding business models makes it uncomfortable to proceed. I would be remiss if I didn’t also confess to having concerns when reading about some of these practices during the research for this blog.

The vital role of traditional lenders

Removing some of this anxiety and concern for customers who are dealing with alternative funding is where banks could come into their own. As trusted experts in the lending markets, the banks could take up the role of offering help and advice to customers who have not met the criteria for traditional lending services, but need guidance in finding an appropriate alternative finance solution.

A long-term lending package, in consultation with a bank, could combine alternative finance solutions for a business while they are still considered high risk, with the conditional acceptance of a more traditional bank loan further down the line. This would set the business up for a financially healthy future, as long as they can get through the more risky early stages.

Being open to working with alternative funding providers could help banks to re-establish their reputations as enablers rather than obstructors. Embracing innovative and colloraborative alternative finance models would allow banks to access new markets and new technologies, while demonstrating that they are modern ‘full service’ customer-centric brands, focused on helping customers find the most appropriate solution at the time of need. Collaboration such as this would bring good old-fashioned banking principles to our digital age – and not a moment too soon.

Your bank has sent you a friend request

The banking crisis of five years ago left the image of banks in tatters. The PPI claims, the controversial charges, and all the headlines placing the blame of the UK recession firmly at the feet of city bankers, are not easily forgotten. While not entirely unjust in some cases, this perception has undoubtedly been difficult for the banks to shake off, and the industry is in dire need of a facelift. As banks try to restore faith in their customers, the more enlightened ones have realised that the market has moved on. We can no longer use the messages of old to rebuild reputations.

I can buy a can of beans after 5pm

Thinking back to ‘traditional’ bank marketing, we might remember high interest rates headlining adverts to encourage savers, or lower mortgage rates to encourage borrowers. These transaction-based messages focused on the net financial result of choosing one bank over another, and were successful for a time.

More recently, faced with a stagnant market, banks moved away from transactional sales pitches, turning instead to messages that promised better customer service. But some of these customer service based messages (and offerings) came too late, failing to resonate with modern customers who were accustomed to living in a 24 hour society. If people are used to being able to buy a can of baked beans in the early hours at a 24 hour supermarket, why would they be impressed that their bank is open after 5pm or over the weekend? It should be a given, rather than an outstanding feature to headline an ad campaign.

Proteins, the building blocks of life and brands

Consumers are becoming brand savvy. They know and interact with brands who give them fantastic customer service, who take them on a journey and become a part of their lives. Even the least likely of brands are now picking up on and embracing this change in customer mood. For example, I am a big fan of the brand engagement activity of an incumbent company established in 1977 in the health and fitness industry (Universal Nutrition’s ‘Animal’ brand). They have mastered the art of social media engagement, with compelling mini-movies featuring fans and sponsored athletes. I recently shared an example of their work on my Facebook. The choice of music, production quality of the YouTube videos, and the exchanges they have inspired on Twitter, Instagram and Facebook, have netted them a loyal and engaged community of fans (aka customers).

Bear in mind this is a company that sells dried milk and egg (protein) powders. If a brand selling tubs of dried milk powder can express empathy and establish authentic engagement, I am certain the same can be true of the banks – after all, they enable some of the biggest emotional decisions of our lives such as buying a home, planning for retirement, launching a business, and helping us through tough times.

Adding value by consolidation

Apple is the poster-child for brand advocacy and fan-based customer communities. They have deployed a strategy to embed themselves in to the everyday lives of their customers and tie them to the brand. For many of us it started with a phone. Then when we wanted a tablet, it made sense to opt for an iPad so that our devices would work together. And so it goes on - we buy apps through the Apple Store, a Mac instead of a PC, and when in the market for a smart watch, we all know which one will be strapped to our wrist - why consider another brand when we stand to lose so much in experience? We are tied to the ecosystem, and most of us realise this and actually love the brand because of it. Apple’s customers are happy to go with the flow because they know and understand the products, value the service they will receive, and most importantly, trust Apple to deliver.

The same tactics could be applied by banks, but so far they have largely failed to do so. Unless there is a value in having multiple financial products (such as current account, mortgage, and savings accounts) held by the same bank, people will no longer do so. What the banks need to do is figure out a way to do what Apple has done and offer products and services that enhance each other. Loyalty should pay, and banks need to offer motivation for customers to consolidate all their financial products with one provider. For this to happen, both the product propositions and the user experience with the brand across all their products are equally important.

The John Lewis effect

A sure sign that banks are responding to the need to make more meaningful relationships with their customers is the plethora of emotive TV commercials they are currently putting on our screens. Indeed, you might be forgiven for mistaking some current banks’ TV ads for mini-dramas. From nostalgia to tear-jerkers, the current trend focuses firmly on emotive connections, a strategy far removed from the traditional transactional messages we have come to expect from banks.

These TV ads show a desire for the ‘John Lewis effect’ – the banks hope that an emotional response to an advert will be transferred to the brand. In this approach, I believe authenticity is key, especially when exposed to the raw critique of social media. Openness will create the brand of the future, with robust and trusting relationships that benefit both parties. Emotive advertising is not enough – it may make customers take notice, but unless it is backed up by consistently authentic customer experience along with a real incentive for customers to consolidate financial products with one provider, it will only take the banks so far. When we openly show our heart, customers might drop their scepticism and accept the friend request. 

Move fast and build things!

Over the past weeks I've had the pleasure of catching up with leaders from two prominent (digital) start-up banks – Alex Letts who founded Ffrees, and Tom Blomfield whose new proposition is Mondo. I’ve also spent time with the project teams of some of the world’s most innovative tech firms, who are doing some terrific work with payments, rewards and loyalty.

Given my day job, you may wonder why I spend time with the competition. You might think they are motivated to put people like me out of a job, or “eat my lunch”, but nobody I know in these communities speaks like this. Instead, they talk about their products and services. They have a glint in their eye, and are intently focussed on creating banking experiences that “just work”, and “will change everything”.

These are the people in banking who are “moving fast and building things” – or, in corporate terms, are agile.

The curse of the committee 

We have all been to energy-sapping meetings – running through roadmaps, looking five or ten years into the future, discussing where we want to be and how we might want to get there, but not really producing anything (besides paperwork) with any sense of urgency. Look back at your meeting notes from five years ago and challenge yourself to be honest about your progress. A lot of big, long-term corporate projects fail in one way or another – they are “de-scoped” so much that they lose their uniqueness and value-add, or as I hear all too often, are renamed and reworked, or simply lost in corporate restructures and strategy changes (often to resurface months later under a new name). I often wonder if more of those projects talked about so intently would live to see the light of day if everyone had just been able to move forward faster.

We know the ability to respond to market changes and differences in customer requirements are essential to exploiting a competitive advantage. Whilst an organisation’s history and experience can enhance reputation and trust, their past can also be as much as a hindrance when responding to change. Through authoritarian leadership styles clinging on from the past, many companies have experienced a lockdown of individuality and empowerment – replaced by quality management systems with exacting processes and procedures dictating how things should be done. These systems often take years to produce, requiring specific infrastructure projects just to store and maintain them, but often offer little in the way of practicalities for dealing at speed with an ever-changing marketplace.

History repeating

The influx of internet-based businesses in the late nineties made a significant impact on the landscape of many organisations, with established brands taking an unanticipated hit. Over the following years Britain lost well-respected names from the high street, such as Borders and Woolworths, who were unable to respond to the trend for digital services in time. Now the Internet of Everything is re-shaping the world all over again, and it will be equally crucial this time around for businesses to respond in time. The economy is emerging out of recession, entrepreneurs are willing to take risks, and financial backers are prepared to fund them – in these conditions, the influx of new market-changing services will be quicker than ever. Now is a time for businesses to be truly agile.

Agile needn’t mean fragile

The Agile Future Forum, comprising of leading employers including Lloyds Banking Group, Cisco, Microsoft and Ford, recognises the potential of an agile workflow for economic benefit. KPMG, also a member of the Forum, compared organisations’ ability to be agile using the four areas of Skill, Leadership & Management, Systems & Processes and Capacity. Analysing fellow members of the Forum, they discovered that many were on the cusp of exploiting the benefits. They reported that empowering people to make change, a culture of listening to ideas, and the ability to monitor performance en route, were all aiding agility. But for most, there was still a way to go. Disparity between teams, incumbent technology, and a lack of follow-through on plans held back the rewards of agile thinking.

Empower employees so their skills make an impact

True agility requires an entirely new mind-set for organisational culture, one where employees are empowered to use their intuition to make changes. There are no half measures for this approach. In an agile workforce, it is understood that the consequence of not making change is more costly than the fear of making change. In an empowered agile culture, employees do not fear change but are supported through it, and are able to take responsibility for their actions. This requires a shift in management focus, from input and presence towards recognising the value and impact of the output and facilitating a culture of trust, honesty and individual performance.

Managing this way requires a great level of trust. Employees may be working remotely or implementing strategies using new technologies and procedures. And there certainly will not be the same level of risk avoidance as most managers are used to. But the rewards are great – empowered teams and individuals who “own” their work and have the ability (and motivation) to move fast and build things.

Organisations that have embraced a more flexible approach to working have also found they are better placed to respond to their customers’ needs. The introduction of Annualised Hours in KPMG’s Office of Tax Excellence, for instance, has enabled employees to be rewarded with flexibility in the quieter times of the year (sometimes taking months off work at a time), in return for working extended hours at peak periods, such as January when returns are due.

Introduce systems that support the strategy

Empowered employees need to be supported with the systems that will enable them to maintain this working style – from mobile devices that allow flexible working, to Cloud-based remote file storage and sharing. Bring Your Own Device is another opportunity, enabling employees to use the systems and devices they choose in their personal lives at work. The devices’ familiarity, along with the personal learning that employees have already invested into these personal devices, yields greater productivity. Enabling employees to avoid fruitless attempts to find their “IT Administrator” and spending hours stuck in the corporate IT service desk loop can only be a good thing.

A strategy of getting things done

The Internet of Everything is changing the markets we work in daily. Responding to this change by replacing bureaucracy with agility requires a co-ordinated and efficient approach, and commitment from absolutely everyone in an organisation. In return, agility enables teams to focus their energies on activities that support the future of the organisation. It makes every project count, and helps every individual to feel empowered and responsible. Organisations that embrace change and seek out how to use it to their advantage, rather than responding and adapting, have the best chance of success.

Put simply, agility will drive customer advantage for the long term, and make responding to change easier for all. I spend time with the disruptors from the FinTech community because it reminds me, and inspires me, to hold to a strategy of getting things done.

The potential for Digital Britain

I recently hosted guests visiting my team and I from HM Treasury, and the Department for Business, Innovation and Skills. It was a short visit and one that reminded me of the importance of developing a Digital Britain. Stances about this in the run up to our recent General Election were surprisingly similar across all parties. The subject rarely tops the list of the voting public’s agenda, and tends not to capture the headlines either, but I believe it is imperative for maintaining and building our technology leadership across international markets.

The journey has already begun

Over the past five years there have already been positive steps made by the UK government on the journey towards digital excellence, with central departments successfully implementing strategic digital services. The gov.uk website has emerged as a central resource, replacing some 300 separate websites, and creating a unique hub of advice and tools for consumers and businesses alike.

Many government departments have made big moves towards digital service delivery, including the DVLA, who switched to paperless tax discs last year, and the DWP, whose new digital service to manage the Carer’s Allowance has been designed with the customer at the heart of delivery. The DVLA’s new paperless driving licence isn’t quite simple enough yet – members of the public have to generate a licence check code online if they want to hire a car on holiday (https://www.gov.uk/view-driving-licence), which may catch some travellers out in the transition period. But it’s a step in the right direction, and overall the gov.uk website is transforming many of the government’s processes.

Through the high profile Government Digital Service (GDS) initiative, founded to deliver the “Digital by Default” strategy and service standard, continued investment in innovation from the government is certain. With eight live projects including voters’ registration and student loan services, and sixteen others in the testing phase, the GDS is seeking to deliver a “Government as a Platform” service whereby localised departments are interoperable. External organisations are also able to link in via APIs to provide value-added services, such as enabling customers to purchase car tax at the same time as they buy their car insurance.

Lock in firms to Britain for the long term

While this is helping the government to foster an innovative private sector, too often we are still seeing our home-grown organisations develop leading products, receive international recognition, and then get lured away to new shores. Autonomy, who were acquired by HP in 2012, and Wolfson Microelectronics from Edinburgh, acquired by California’s Cirrus Logic, have left the UK in recent years. And with promises of better support, more control and lower operational costs, it’s easy to see why.

It is essential that the government makes the grass as green on our side of the fence as it is on international soil by providing better value and higher reward to innovative businesses for continuing to invest in their home country. In the short term the provision of tax breaks for medium sized organisations provides some incentive, giving them the space to scale up, but in the longer term this may not be enough. Businesses need ongoing support for their risks, and help in managing their successes, in a way that doesn’t drain their resources or restrict their movements.

Having international brands developing here has a huge effect on both the economy as a whole and the lives of British people. These organisations breathe life in to the economy, inspiring start-ups, feeding innovations and sustaining complementary industries.

Providing the infrastructure for innovation

For the building blocks of innovation to join together and create a truly Digital Britain that can compete on a global stage, solid foundations are imperative. A reliable infrastructure is vital to enable UK innovation to thrive. Currently the UK lies down in 18th position for internet speeds across the world, but plans to increase broadband coverage to 98 per cent by 2016, followed by ultrafast broadband in 2017, will drastically improve access for organisations and individuals alike.

The focus is on local government offices to foster the skills and resources to support local infrastructure development and enable implementation of this improved infrastructure across the UK. The roll-out of GDS initiatives such as GCloud, an online marketplace for public sector tendering, and the digital marketplace that connects customers with the technology they need, are the first steps in empowering local adoption of technology. Through the public sector the wider adoption within local infrastructures will facilitate long-term growth and innovation.

Flying the flag for innovation

The future of Britain’s economic stability relies in no small part on our ability to grow world-leading technological services, run by organisations that remain on British soil, for the long term.

For innovation to continue to develop across the UK, and for a truly Digital Britain to evolve, the government must ensure that a firm infrastructure, coupled with support and rewards for innovative businesses, is embedded in the fabric of Britain. This will lock talent into the British economy, enable us to retain our most forward-thinking businesses and individuals, and cement a culture of innovation across the UK that stands proud on the international stage.

The benefits of Digital Britain will be far reaching, and this is why, in my view, it deserves to rise up the agenda of both the politicians and the UK public.

The digital wallet: a friend with benefits

The lure of the digital wallet is being able to leave the physical wallet at home, and being able to do the things we do with our physical wallets more efficiently without them. The millennial-minded are increasingly looking for an easier life – and that means less baggage and fewer things to remember.

Before the launch of the Apple Watch, Apple pre-sold an amazing one million units in a single day in the USA alone – almost as many as the total number of wearables sold by all suppliers up to that point. With Apple Pay integrated in to its core, we can expect Apple’s watch to be the catalyst for a rising demand from consumers to make seamless transactions via digital wallets. Although the adoption of the digital wallet has not yet hit the heights industry experts predicted, payments by phone have risen in the first quarter of the year. Globally, over a quarter of online payments are being made by mobile, and interestingly this rises to 44 per cent in the UK [Ayden’s Mobile Payments Index]. 

Lightening the load

To truly become a viable alternative to a physical wallet, a digital wallet will need to do more than just enable payments – after all, we don’t use our wallets just to pay for things. Digital wallets have the potential to offer everything we get from our physical wallets and more, offering seamless integration between our online and offline lives, and delivering benefits that reward us for our activity and help inform us in making decisions. But until a digital application can act as the central point from which customers can access and make use of bank accounts, ID cards (driving licence, work access pass), receipts and loyalty cards, we’re likely to still carry around squares of cardboard in pockets and bags.

Painless payments

Currently our payment options are varied and complex. For every transaction we make, we make a choice at the point of purchase between loose coins in pockets, notes in wallets, debit or credit cards (contactless or chip and PIN), Paypal services, or even the good old-fashioned cheque. With a digital wallet, we can make these decisions once by setting default options for payments of different kinds, and then forget about them and go about our daily lives. Our payment preferences are set, remembered and thenceforth actioned on demand with a simple swipe, finger scan or PIN authorisation. Payments are tracked, balances are checked, and we get simpler transactions together with more useful information when we need it.

Redefining rewards for customer loyalty

Customer loyalty schemes are another area of our lives that could be transformed by digital wallets. Many schemes are based on flimsy loyalty point collection cards that are more likely to be languishing in a kitchen drawer than sitting handily in your wallet awaiting the moment of purchase, particularly in stores that you use only occasionally. If we were to carry loyalty cards for every store we use, many of us would need a wallet the size of a small country.

And once we manage to collect our points, we want to be able to spend them on things that add real value to our lives. Customers are becoming increasingly disenchanted by schemes failing to offer simple redemption processes and rewards that feel tailored (or even rewarding). Do you feel special when you find out that everyone around you is also sipping a freebie coffee?

Starbucks have managed to move their users on to digital loyalty cards by providing an app that processes both the payment and the reward transactions. It’s working for their customers, but is limited to the single brand. Moving this ideology to a central arena where multiple brands can operate will make tracking rewards much easier for consumers.

Digital can open the doors to targeted loyalty programmes that reward individuals like never before, while in turn providing companies with unprecedented amounts of data with which to tailor their offerings (and, of course, rewards). For instance, simply using your digital wallet to download an album could be a trigger. Listen to the album daily and add it to your favourites, and these actions (or more accurately, the data that these actions could send to loyalty reward scheme providers) can be used to reward you with money off, priority booking, or even VIP treatment at a future gig.

Brands could go a step further and use GPS location data to alert customers to local ways to boost their points balance, or even to bestow instant acts of kindness on their most loyal customers, such as the chance to come into a nearby store and receive a – targeted and relevant – freebie. By using data smarter, brands achieve greater loyalty and word-of-mouth advocacy, and customers receive personal and meaningful rewards, leading to an increase in brand affiliation. And of course, if a reward scheme is accessed from a digital application, that makes it easier for the customer to share it with their friends and family – straight from the phone that delivered the reward to them. Bragging rights can fuel positive engagement on social media with huge marketing value. And let’s not forget that every moment shared on social media could be a moment of potential reward or relationship.

The answer to the question of who will be first to offer a digital wallet that can truly replace – and improve on – our physical wallets, remains to be seen. But until we see a solution that performs multiple functions – payments, loyalty, ID, and maybe even a digital version of those crumpled up passport photos of family and friends, our wallets and phones will remain separate necessities.

Securing our future - openly

Open banking is a new initiative from the government, designed to promote competition in the UK banking sector, whilst helping to put the UK financial market at the forefront of the international map for innovation. At the heart of this initiative are two pieces of a regulatory puzzle that together have the potential to reshape the banking landscape.

The new Midata component , launched on 26th March, aims to drive competition through the UK banking sector by making it much easier for customers to evaluate (and choose) banks. Through price comparison sites such as gocompare.com, consumers are able to upload 12 months’ banking data and generate a personalised review of the accounts that are best for them.

Open data initiatives will allow Fintech developers greater access to data stored by banks, enabling them to develop apps with user-friendly intelligence. Consumers will in turn benefit from the increased transparency of their financial information by gaining an increased understanding of their finances. Ultimately, opening up data enables customers to make clearer judgements about their financial activity and the products and services that are best for them.

By standardising these APIs, which is the second component of the initiative expected late 2015, banks and third party developers can work together to create compelling new app-based services with a structure and partnership akin to that of the Apple App Store. In this situation the bank acts as the equivalent of Apple, hosting apps developed by a community of innovators in their own banking app store and leveraging the full potential of the developer community together with the ethos and service standards the bank holds true.

Friend or foe?

I believe that much of the hesitation surrounding open banking is misplaced. I frequently hear concerns about the increased visibility from price comparison sites resulting in customers switching accounts in their droves (it hasn’t happened so far), customers being able to switch accounts on a whim, the increased competition this brings driving down value from services, and as a result, the constant need to invest more resources into innovation to maintain the services customers demand.

While there are already financial apps that allow customers to compare bank products, they are limited because they work by scraping information from the customer interface. While this provides a certain level of information to the user, the security of such procedures leaves much to be desired. There are safety concerns about providing third parties with personal banking logins and passwords, and by doing so customers may be breaking their bank’s terms and conditions for online access. Using these services can leave customers vulnerable to personal liabilities. As custodians of the industry, we are obligated to make these processes as secure as they can be.

Getting closer to our customers

The opportunity for open banking goes far beyond these price comparison sites. The real opportunity is to develop apps that deliver new services to customers by pooling resources from the best brains of Fintech and the banking industry. If seen as an opportunity rather than a threat, such activity can offer massive benefits for banks’ customer retention programmes. Credit Agricole has already seized the opportunity by creating CAStore, an online portal that facilitates the development of apps by bringing together those with the ideas with those with the skills to develop them.  

We all have apps on our mobile devices that we wouldn’t be without. Imagine asking some of the 250 million Facebook app users to uninstall it from their phone – many would look at you as if you had asked them to cut off their right arm. Facebook has become a part of their everyday, and in some cases every hour, life. People rely on the information that it feeds them from their friends and family, and they feel a real need to have this information at their fingertips. The same could be true for banking apps of the future. By working together with developers, not only allowing but actively encouraging them to access previously closely-guarded data, banks can offer their customers life-enhancing apps that become a part of their everyday activity and change the relationship they have with their bank from the transactional to the emotional. Ask any marketing department, and they will tell you that this is the Holy Grail in customer retention and advocacy.

Sharing is caring

The open bank project in Germany has funded diverse projects, from apps that turn your account into music, to services that give charities a way of safely sharing financial information with stakeholders. There is a fantastic opportunity for banks to work alongside the Fintech masterminds to create customer-centred digital services that integrate seamlessly into existing banking products and services. The opportunities are endless, from cross-platform sales to arranging meetings with a bank manager, and from pinging a message about savings to a customer at the point of need to providing instant up-to-date money management guidance at the point of purchase. The opportunities are only limited by our hesitation to share.

Better the devil you know?

One key question in the debate surrounding open banking APIs focuses on the issue of liability. If a customer gets incorrect information from an app or there is a security breach, who becomes liable for any losses? The answer to this question is likely to shape just how the market will structure itself and who will lead on developments.

Even despite conduct concerns, there is a sense of trust in the banking industry from customers to manage data security well. Now banks just need to integrate the skills of the Fintech developers into their systems, and both the customer and the bank will see the benefit of a secure place to keep money coupled with easy-to-use ways of managing it.

We live in the Social Information Age. Consumer demand for greater collaboration is evident in our leisure pursuits, online behaviours, and our politics. Why should banking be any different?

The need for speed

As many access 4g networks for the first time, it begs the question, at least to the less tech savvy of smartphone users, why are we already focusing on the development of 5g networks? The answer is that 4g simply will not cope with the rapidly increasing proliferation of connected devices that is the Internet of Things.

From topping up a fridge with milk to instantly finding an available seat on a train, the Internet of Things involves devices gathering data from multiple locations and turning this data in to useable information. With the exponential growth of smartphone usage (50 to 100 billion devices are expected to be connected to the internet by 2020) and the ever increasing number of applications available to manage lifestyles, there is a draw on data capacity like never before.

Life-changing data

Applications driven by the Internet of Things have had an increasingly life-changing impact on our daily lives, and if we lose connectivity to the internet while using such applications the consequences can be severe. For instance, faultless reliability and continuity of network data delivered to driverless cars is essential: should a break in communication occur, lives could potentially be in danger. This is also true for healthcare services that use connected technology to monitor critically ill patients.

The UK led the way in Europe in 2014, accounting for 42% of all Fintech investment in the region, with London easily cementing its reputation as the European FinTech hub. This thriving community and these rapid investments are set to change the way we bank, access our finances and manage payments – and all of these technology advancements make demands on network capacity.

Sustaining the flow of data

The need to deliver these services with unprecedented speed, while remaining energy-efficient and cost-effective, presents sustainability problems for 4g networks even before they have been fully established. The reliability needed to manage networks, without latency, is becoming increasingly paramount.

Driving the need for network development is the growth in bandwidth consumption by each customer. Not only are there more people using smartphones, but each of these people are connecting with more devices. I have five, with each member of my household, from the age of six upwards(!), having at least two devices each. While a data bundle of up to 20GB is more than adequate for the majority of consumers today, the cost of additional data required to run their ‘Internet of Things’ means providers need to find ways to make the scaling of data download packages commercially viable. Who picks up the bill for the development of these services is also up for debate. Will the user be required to foot the bill through higher purchase costs, or will the value of data gathered by app providers be enough to cover the cost of devices – and will customers agree to make that trade?

Building networks to deliver the future

Developing useful applications requires businesses from different sectors to collaborate together in unprecedented ways. From the core technology and data to streamlining services and manufacturing components that manage the flow of information, forging links across industries is essential if we are to achieve sustainable delivery to make services accessible to the mass market. Innovate UK have launched the HyperCatCity initiative to encourage just this. As bankers, this means moving out of our comfort zone and getting more heavily involved in the design of networks to ensure they deliver the perfect user experience.

5g developers promise us a fundamental restructure of how the network operates, integrating mobile coverage with WiFi and home base stations. The framework is set to adopt a scalable approach to the provisioning of connectivity, which will develop in line with usage to deliver data needs for the significant future. This catalyst presents us with boundless opportunity to develop systems and processes to change how, where and when we deliver services to our customers. Connection speed and reliability are as important as the apps and gadgets themselves – without them, true mass adoption of the Internet of Things in our everyday lives would be impossible.

The rise of digital currency

Digital payments are a powerful innovation that has already started to shake up the payments industry, and the signs point towards a world in which software-enabled digital currency, without the centralised control of traditional banks, also begin to gain traction. The shape of this future has yet to be formed, and I believe that if banks move fast they will still have an important part to play.

Making secure transactions quicker and cheaper

Mobile payment systems such as Barclays Pingit, Apple Pay, Samsung Pay, and Google Wallet are changing the way we pay for goods and services and the way we think about payments. Payment by mobile is gaining momentum, and Barclays has even enabled people to make payments on Twitter, using just a Twitter handle. As these examples of internet-enabled payment systems become more mainstream, the prosect of a mainstream digital currency seems set to continue.

Digital currency, a process of exchange powered by the internet and delivering instant global transactions, has been on the agenda for 25 years. The first instance of an e-currency was founded in 1990 by David Chaum (explained to me by Richard Brown, aka @Gendal), which was called DigiCash. Unfortunately DigiCash declared bankruptcy in 1998 and subsequently sold its assets to eCash Technologies, another digital currency company, which in turn was later acquired by InfoSpace. In 1996 we saw yet another attempt, known as E-Gold, which was promptly shut down by the US Government for facilitating illegal money laundering.

The drive for faster, cheaper transactions that bypass traditional banking institutions hasn’t faltered, however. We are witnessing the success of bitcoin as it is accepted by more retailers and used to make payments for everyday items. Policies and procedures offering regulatory guarantees for consumer protection are still lacking, however, as are anti money-laundering measures, and these will be needed for e-currencies to stand a chance of becoming widely adopted.

These shortcomings only relate to digital payments through applications, or “virtual wallets”, though. The underlying protocol that runs and secures the bitcoin network is another matter, and it’s important to note that while there have been widespread reports of digital currency wallets being hijacked in cyber-attacks, the central system has yet to be violated (despite, we can only assume, numerous attempts by the keenest of criminal masterminds).

It’s all in the ledger

The blockchain ledger used to enable the transfer of bitcoin payments is crucial to making digital currencies a realistic proposition for the masses. The central nervous system of bitcoin, the blockchain ledger is the key to secure verification of e-currency transactions.

It works like this. Bitcoin address and ownership information for every transaction that has ever taken place is listed on the blockchain ledger. The blockchain records both the creation of new bitcoins (25 per block at present), and the transfer of bitcoins between users.

These individual blocks link together in chronological order to create the chain of events (blockchain) and to verify ownership at the point of need. The information is located on multiple computers, or bitcoin “full nodes”, rather than a single central source. All full nodes have a copy of the full blockchain history. Each time a bitcoin user makes a transaction, a copy is forwarded to all bitcoin nodes, which verify it and temporarily store it, pending inclusion in a block by a bitcoin miner. At this point the transactions included in that block are considered verified, processed and finalised. Each block builds upon the last one, so some people recommend waiting until several more blocks have been built before considering it safely processed.

What’s truly unique about the blockchain ledger is that by holding bitcoin address and ownership information over multiple computers, rather than on a central server, and by forcing miners to solve a difficult computational puzzle, bitcoin transactions have a level of security never experienced before. An attacker would need to control over half of the entire processing power of the network to succeed. 

The core of the bitcoin system appears to deliver a robust and safe solution to the consumer, but the same cannot be said of the consumer wallets, more work is required. Too many people still lose their bitcoins because their computer is hacked.  

A step change to build trust

The market for digital currencies will retain much exposure over the coming years, and its success or failure could hinge on how the digital currency system is packaged, and in turn how it is perceived by the customer. The underlying infrastructure of our future banking system may be unrecognisable to the systems of today, making use of learnings from the e-currency world to deliver more dexterity behind the scenes, without sacrificing security.

The vital “packaging” – how the behind-the-scenes technology is translated to the actual products and services exposed to the customer –  will determine how easy to use, how secure, and how reliable the concept is when it becomes reality. This is where retail banks could play a crucial role. Their focus should be on crafting solutions that will take the benefits of crypto-currency and entwine these with the practicalities of easy to use banking processes, to deliver a benefit-led package to consumers. This could create the step change to mass adoption of virtual currency.

Authenticity outperforms promises

Recently I read a report that suggested service is more important than the product it surrounds (CMO Survey, Feb 2015). This surprised me initially – could customers really value how a product is delivered over and above the product itself? A quick second thought, recalling some of my own experiences of late, and I understood.

We live in a world where there is a substitute for everything. Very little is truly unique and with global markets at our fingertips it is becoming easier to evaluate and obtain products and services from a much larger marketplace. Therefore, if we can meet our primary needs from a multitude of products, we are going to put increased importance on our emotional needs – and this is what customer service should focus on. It is the new ‘hierarchy of service needs’, says @mrjake74 on Twitter.

The good, the bad, and the walk of shame

Quite often we find ourselves floating through life buying things we have bought before, interacting with brands without a second thought. That is until something surprises us, something out of the ordinary, which makes us sit up and take notice. I’ve had a few of these moments lately. Charles Tyrwhitt, Amazon UK, Piel Frama and Nespresso have all delivered fantastic moments in my shopping experiences. The bad moments, and I mean absolutely gut-wrenchingly awful, consistently over months and years, are from some of our iconic, or ‘old economy’, brands. I won’t name and shame here, but if you follow me on Twitter, you will know who I’m referring to.

Old economy brands talk at us through slick marketing campaigns, glossy brochures, and carefully managed PR twitter feeds masquerading as customer service accounts – but often they fail to engage us. Motivated by the trading sheet, they harvest our wallets with calculated promises, minimal service standards, and no interest in developing a meaningful two-way relationship. If the retail industry had a walk of shame, we would be plodding home in last night’s clothes after a date with one of these brands.

Delivering great customer experience requires the ethos and culture of ‘doing the right thing’ to be embedded deep within the organisation, with customer service being seen as more than just a department on the second floor to the right of marketing. Customer service means making an organisation easy to interact with through clear policy, empowered front-line staff, great technology, decisive leadership, and most of all, meaningful values. It’s not about being perfect – things go wrong, we all appreciate that – but the marker of truly great service is in how you act when things do go wrong. Customers want to have their issue resolved by the first person they contact, so point them to the right place, and if it’s Twitter, make it a Twitter service that does more than link you to yet another ‘customer services’ team. And if that link fails to render on a mobile device, you really are sending a clear signal that you don’t care.

Brands that get customer service right create an experience that is designed, thought through, consistent across channels. Irrespective of the method of purchase or communication, the experience maintains a certain grace, and intuitive flow. Customers should not feel the need to make public rants on social media before they get the attention they deserve.

I’m upset and I’m going to tell the world

The social media angle is interesting. Twitter and Facebook have given consumers a way to stand up to big brands on a level playing field. Word can spread fast about bad brand experiences, and with the eyes of the world upon them, organisations are compelled to respond. Interestingly, first responders are all too often PR teams, not customer services teams, which is strikingly defensive behaviour, screaming ‘we care about how we appear to the world’ rather than ‘we genuinely want to solve your individual issue and improve things for you personally’. This approach is insulting to the individual, but the public platform means that everyone can see right through this sweet talk – and nobody wants to be just a number in a brand’s little black book.

Social media is also used by customers to make purchasing decisions, and old economy brands are finding that their cleverly crafted marketing messages no longer hit the spot. The first thing most of us do when evaluating a big purchase is hit the internet and find out what other customers think of that product or brand. Yes, the brand’s website is critical for product information and images, but customers will use online reviews and social media comments to get the real picture.

Be consistent. Be real.

Brands need to offer their customers an authentic experience, one that meets their expectations with interactions that are seamless, and which fit in to everyday lives without fuss or fanfare. Brands that walk the walk in terms of their promises will shine more brightly than those with multi award-winning advertising campaigns offering sparkle without the substance. Customers want and expect transparency and a human touch; no longer can they be fooled with cleverly controlled messages. This isn’t rocket science, but it is a case of getting it right, for real. Great service cannot be faked or polished to look right. In the age of modern communication, the truth will out.

So what is it that makes a brand stand out? According to a Which? report in September 2014 that surveyed 3,600 UK consumers, Lush and John Lewis both know the answer, placing in the top three brands for customer service. Two very different brands, but with vital characteristics in common: an authentic voice, modern customer service standards that are embedded within their culture, and a vital ingredient – realness.

The magic of employee engagement: surroundings, spirit, singularity, and substance.

A sense of pride

Last week, The Sunday Times announced the winners in this year’s annual survey looking at the best companies to work for. The list got me pondering what the magic formula is for organisations to achieve and maintain employee engagement.

Looking at the list, I felt enormous pride to see that Nationwide had climbed 5 positions and is ranked as the 6th Best Big Company to work for in 2015. The results of the survey, which take into account organisational leadership, employee wellbeing and personal growth, show that my colleagues believe Nationwide makes a positive difference. More than 80% feel a sense of pride about working there.

In a competitive market where customer value is key, how do organisations balance the need for cost savings with the less measurable expense of providing an engaging working environment that motivates and inspires employees? With companies being asked and funded to recognise talent, look at their working environment, and engage employees, how can they make sure they see a return on their investment?

Entering the (work)space age

The provision of space has particularly caught my attention. It’s been on my mind for a while, and I’ve been consciously considering it while reading about other organisations and during recent visits to partner companies, where I’ve had the opportunity to witness their workspaces in action. Red Bull’s London HQ provides an example of deliberate and overt investment in how employees feel about the space where they work, which of course fits seamlessly with the company’s overall brand. Employees use ping pong meeting rooms and a giant slide for moving between floors (almost, but not quite, giving them wings).

Offices are no longer built. They’re designed with a purpose in mind that combines both the movements and, crucially, the feelings of those using them. As creative space replaces the traditional and industries move to embrace customer-centred design, the physical working environment becomes a manifestation of the connection between employee and employer. It can make all the difference when bringing the right individuals in to the environment, getting the best work from them while they are there, and making them want to stay longer. Employers are, in short, entering the workspace age.

Sparks without friction

Gaining the energy, commitment and dedication of staff is about more than just the the colour of paint on walls though – it’s as much about the things we don’t notice as those that we do. Being an employee should be easy, from arriving and parking in the morning, to having a clean, functional and suitably-equipped space to work in. Let employees focus on what they do best by removing hygiene factors.

The environment should be a reflection of how the organisation wants to operate. I’ve visited the HQs of some iconic brands including Apple, Google and Facebook, and while they all operate very differently, they share the ability to use the physical space to communicate and reinforce culture. Tangerine bank in Canada recently tweeted photos and a video clip of their new office, which reflects their cultural values perfectly and is well worth a look. This ability to synergise the environment, the input and the output, is what makes employees effective. 

“I work here”

Creating the right environment breeds success, but it’s about more than just furnishing the office with gadgets and gimmicks. A humanistic approach is needed. By developing employees as individuals, encouraging and celebrating their personalities, and helping them achieve their own agendas and personal successes, companies will see returns on their investment that go way beyond traditional measurements, PowerPoints and spreadsheets. There’s a buzz, an energy, it’s infectious and inclusive and it’s apparent to every visitor, every customer and every employee, at every touchpoint. That’s the magic that happens when employees are proud to say resoundingly: “I work here”.

If money doesn’t grow on trees, why do banks have branches?

Getting to the root of the branch

What is a bank, and what does it mean to our community? Is the branch an integral part of your perception of banking, or is it superfluous to your needs?

Press headlines are reporting that banks are backing down on the “last bank in town” pledge, with reports of 900 branches at risk of closure across the UK. However, with so many services available online, on mobile, and through telephone banking - making access to our money easier - why do we feel the pressure to maintain the high street branch? The British Bankers’ Association (BBA) reports mobile and internet banking is now being used for transactions worth nearly £1 billion a day, and the 2014 Accenture Customer Survey on the UK Financial Services market found that 1 in 4 people would consider using a purely digital bank. In light of these statistics it is easy to understand why the future of the high street branch is under scrutiny.

Perhaps the start of our journey in understanding the future of the high street branch is to take a quick look at its past.  “Back in the day” you could walk in to your bank and identify the bank manager by name, and more importantly, he or she would also know you. A bank manager was at the centre of the community. They knew the local area and the local businesses, and used this knowledge to serve customers in the best way possible. By bringing together local businesses and understanding local issues, the bank manager could give tailored, relevant advice, and provide the best financial services for the customer.

The evolution of the high street

Today, customers could be excused for feeling things couldn’t be more different. Flagship stores for high street banks are changing the face of banking. New branches have broken from the convention of reception desk followed by rows of till points with staff behind screens. A modern branch can be an airy space with discreet terminals giving individuals personal access to their own accounts online, with staff on hand (iPads at the ready) to help. Customers simply carry out the transactions they need without assistance. Staff step in only if technical support or specialist “value added” help and advice is needed.

With a BBA poll reporting that 77% of customers use online banking at least once a month, it’s clear to see how it has revolutionised the industry. As customers have more flexibility over how they make their transactions, and banks report a 10% year on year drop of branch use, the purpose of the high street branch has been put under the spotlight. The value of having a presence on the high street to reassure customers and reinforce the brand is disputed by few, but the branch needs to be more than just a billboard if it is to sustain a profitable future.

The key to understanding the branch of the future is to understand what customers need. The 2014 Accenture report highlighted that customers are already using self-service points for transactional activities such as withdrawing cash and checking their balance, but are still turning to advisers for value added services such as finding out about new products, opening new accounts, and receiving complex advice. Other high street stalwarts, such as coffee shops, have had to rethink their raison d'être, and now banks are finding they must do the same.

To remain competitive on the high street and meet the changing needs of modern customers, Costa realised it needed more than just good coffee. It now serves a variety of customer needs, acting as everything from a place for young families to meet up for a drink, to a place for professionals to stop and grab a quick lunch while connecting online. Crucially, Costa also stopped expecting the customer to go to them, and instead they moved to where the customer was already: you can now get a Costa coffee from many hotels, cinemas, bookstores and DIY shops.

In a similar way to coffee shops, high street banks need to give customers a reason to engage with their branch. If they can do their banking online and from their mobile, why would they come in to a store?

Technology-enabled, social business

The answer is in the personal nature of finance. Customers need to feel that their unique circumstances are understood, especially when these circumstances have high emotional value, are complex, and require expert advice to fulfil. This is difficult to achieve today with online forms or through a mobile device.

My personal vision for branches is one of community “hubs” enabling people across both virtual and physical communities to come together for valuable services. These services would stretch beyond those traditionally offered by branches to include new opportunities, such as business networking events and youth job clubs. Expert advice could be available to enable community members to prosper. Young adults could receive financial planning related to accessing the workforce for the first time. Those thinking of setting up their own business could get practical advice and meet others who have already been through the journey. The branch would offer other services of course – just as great coffee is the minimum requirement for a coffee shop, so would banking services be for a branch.

I do not claim the ultimate solution here but rather part of it – thinking differently. The branch should serve a community purpose, and at the same time deliver to the requirement for financial services help and advice. It should feel like a natural extension of a banks digital presence.

For the immediate future, I believe the technology behind the branch will underpin its effectiveness and its value to the community it serves. By utilising the best in infrastructure, banks can provide a service that delivers efficiently at the point of need – making customers’ lives easier. At Nationwide Building Society, branch customers can now talk face-to-face with specialist mortgage advisers located across the country – at the touch of a button, via a screen. This means they don’t have to wait for an appointment with a specific adviser in their local branch, or travel further afield.

By shunning technology on the high street in favour of traditional service, banks risk outdated processes that simply do not match the expectations of the consumer. Customers are no longer happy to accept a multiple day wait time for help and advice.

Know your customers

While branches are being used less often, by fewer people, customers young and old still expect them to be there. The challenge for retail banks is to build customer trust by providing reliable, accessible, easy to use services. This is where customer service is vital. The best specialists in the branch can distinguish the customers who want to pop in, do what they need to do and then leave with minimal fuss, from those who need support and further engagement – and treat them accordingly.

I urge caution too, to the banks that use their customers’ age to defend outdated processes. Customers of any age are willing to accept new technology, as long as it comes in a way that enables them to stay in control. Here it comes back to the value of customer service. Success will be dependent on banks’ ability to guide customers seamlessly across both their physical and virtual services, so that they focus on what they have achieved rather than where they have achieved it. This is the essence of an outstanding customer journey in an increasingly digital world.