The Flaw in Omni-Channel Banking, Why Bi-Direction Channel Banking is Next

Just when you thought you had the evolution of banking channels figured out I am here to explain the flaw in the latest evolution of banking channels; omni-channel banking.

The progression of banking channels has evolved from credit union and bank focused to being about the member or customer experience. From a single banking channel (inside out), which involved an in-person visit to the credit union or bank to omni-channel (outside in) which is designed to allow the member or customer to access banking services and products using multiple channels, in a seamless and consistent manner.

Here is the problem. Successful implementation of omni-channel offers a member or customer access to banking products and services across and between multiple interactive channels in a customer focused seamless manner; but what happens when they encounter a problem? As much as self-service, automated processes, intelligent workflow and automated decisioning are designed to simplify and expedite a transaction, invariably problems occur that require communication or assistance from bank or credit union personnel.

You know the drill. You have a service problem and you know what happens next. You call your credit union or bank and get that annoying automated call tree. Once you finally get someone live you explain the problem and they say, “Just one minute, I will transfer you to Jane in the XYZ department”. Your call is transferred and you get a message saying, “All personnel are on the phone please hold”. After waiting on hold for 5 minutes listening to promotions you have no interest in hearing, someone answers the call and you again carefully explain the problem. After hearing your problem explanation the person says, “Sorry, but that is another department”, and promptly transfers your call. This time your call is immediately answered. For the third time you try to patiently explain the problem. The employee says, “So what are you trying to do on our website”? You respond, “I am trying to apply for a loan and a credit card”. “OK, I can help you, but I have to access two systems. Our loan system and our credit card system”. The conversation goes on-and-on and it is like the “customer is from Mars and the employee is from Venus”. There is a total disconnect.

Why? Because you and the employee are accessing different systems, seeing different information and even worse, the customer is accessing the customer facing interface while the employee is accessing the administration module.  It happens every day in retailing, banking, cable, phone, and most service industries, but it is changing, led by companies like Amazon and FedEx.

For a true low friction member or customer experience the customer/member support team must be able to access and view in real-time the path the customer has taken and have access to support data, regardless of the problem trying to be solved.  To accomplish that goal silos must be broken down, training provided, the user experience (UX) of banking systems must be consolidated, and what application architects and business analysts call the “non-happy path” must be incorporated into the system. When something goes wrong the best opportunity to solve the problem is if both parties are accessing the same system with the same data and error messages, not front-end and back-end systems.

Omni-channel banking is an important initiative, but it must move to what I call “bi-direction channel banking”. Omni-channel focuses on the member or customer experience, which is 50% of the solution. Bi-direction channel banking brings customers and the employees together on single user experience (UX) platform and completes the circle.

We know banking is complex and is driven by multiple banking applications. There is the core data processing system, payment systems, general ledgers, cash management, credit origination systems, credit servicing systems, online and mobile banking systems, account opening and the list goes on. How can a bank or credit deliver a single system view to both its customers and employees with all these different banking systems and applications?

Through a user experience platform (UX presentation layer) that uses an enterprise services bus middleware as an integration layer, connecting to the bank’s or credit union’s multiple banking systems.

Simple…… no but achievable, and replacing all those legacy banking systems is not an option for most banks or credit unions.  Instead of replacing core data processing systems and other critical banking systems, embrace them for what they do, process and manage transactions.

Using a UX presentation layer provides credit unions and banks a customizable solution displaying what and to whom information is displayed.  Within the presentation layer customized automated processes, intelligent workflow, business rules and automated decisioning can be incorporated, which allows each credit union or bank, regardless of their existing legacy systems to be able to develop their own solutions that fit their banking model.

In one of my blogs, “Do We Need Better System Integration or Fewer Systems to Integrate?” I argue Gonzo Banker’s position that rewriting all the bank’s systems into a single system is the right way to go. For all but the largest national and super regional banks, rewriting multiple systems into a single application is not viable.  

Multiple banking systems are a fact of life for credit unions and banks. The complexity, processes, external transaction networks and regulation involved in banking makes having a single banking system impractical. Instead of focusing on a single system, embrace what each of these individual banking systems do, …. process and manage transactions. The vast majority of banking systems were developed for internal back-end use by bank or credit union staff. As the transition from brick and mortar banking to digital banking has evolved, those legacy banking system have not evolved with the change. As a result, credit unions and banks are trying to deploy customer/member facing banking systems that were designed to be back-end employee facing systems.

By focusing on the presentation layer and integration middleware layer, banks and credit unions have an opportunity to maximize their investment in existing banking systems, while being able to deploy bi-direction channel banking using customizable user experience (UX) presentation/middleware platform.  In order to deliver a seamless customer experience credit unions and banks need to deploy technology, re-organization, processes and training that are externally focused while closing the loop so employees and customers are working from the same playbook. The future of banking is bi-direction channel banking, the next step beyond omni-channel banking.   

Do We Need Better System Integration or Fewer Systems to Integrate? (Gonzo Banker)

I read an article ”Do We Need Better System Integration or Fewer Systems to Integrate?” by Terence Roche, co-founder of Cornerstone Advisors and contributor to Gonzo Banker. In the article he says, “If I were to go to most bankers today and ask them what one thing they would do to improve their systems environment, a large number would say better integration of the systems they are using. Ten years ago, if I had asked them that same question, the majority probably would have said - hang on to your hats here - better systems integration. Despite a lot of focus on middleware, application programming interfaces (APIs) and other tools, this issue has never stopped being top of mind with system users.”

He goes on to suggest that the solution is not better system integration, but rewriting systems following the design principle of other industries - customers and employees use a common system and the front-end experience is the start point? He cites Amazon, Uber and FedEx as examples of other industries to follow. 

I accept the author’s premise that banking systems need to be built around the front-end member/customer experience first and then the back-end that credit union and bank employees access and use to support the member/customer. From that point forward I will argue the opposite as it relates to the solution he proposes, rewriting the many banking technology solutions into a single platform. 

He rightly points out that back-end banking systems (their core processing systems) were written 20 to 40 years ago and are based on antiquated technology. They were designed before self-service or member/customer facing solutions were even a twinkle in the eyes of the developers. They were batch systems designed to process transactions. 

Unlike Amazon, Uber or FedEx, the level of innovative solutions (third party and homegrown), complexity, high level of expertise required to create and deliver these solutions and the ongoing regulation that must be overcome is limited, compared to what banks and credit unions face.

To expect a company with a single banking technology platform to develop, deliver and support all the technology solutions to meet the needs of their customers, regulators and employees is not practical. There are several core data processing companies that have gone down that road with very limited success. 

Why not build a single member/customer and employee user interface (UX) platform that accesses all these diverse systems and databases and let the diverse systems and databases do what they do best, process transactions? The result is a single member/customer and employee UX with integration to all of the credit union’s/bank’s front-end, back-end systems and supporting services. How data is input, retrieved and used would be dependent upon how the credit union or bank design their user interface (UX). Designed around business rules, workflows, and decision matrixes, this UX using today’s technology can be built around drag and drop and customization menus. Work that can be done not by credit union/bank IT programmers, but by the new banking team of the future:

1. Data analyst - Google has even created a new name for this position, Data Scientists
2. User experience designer - Must be able to tell your story in a simple and in an intuitive way
3. Algorithmic risk specialist - Identifies risk through multiple data sets without requiring input from the users
4. Predictive analytics - Provides services, solutions and expected responses at just the right time, "the magic second" of opportunity.
5. Behavioral psychologist - Must understand your members or customers, their desires, buying and behavioral patterns. The future of bank marketing is behavioral patterns not demographic profiles
6. Social media expert - The person that develops the message and engages your members and customers

The sheer complexity, services integrations and number of technology front-end and back-end banking systems make a single rewritten system with the required specialization and ongoing regulatory compliance almost impossible. A single system is a utopia that will not happen.

Credit Unions to their credit are actively designing a standard interface protocol “Credit Union Financial Exchange” (CUFX) led by the CUNA Technology Council that will help facilitate integration between technology solutions. A UX platform integrated with the credit union’s or the bank’s front-end, back-end and outside services have a much higher probability of success and is a realistic goal to achieve omnichannel implementation than a rewritten single technology platform.

For your enjoyment, a fun cartoon about and OmniChannel Banking. It hits the mark. 

Putting the Digital Banking Puzzle Together

Digital banking is a relatively new term that encompasses ATMs, mobile banking, online banking and has expanded to include essentially all banking channels except for the branch. Like most iterations, digital banking started as a single solution, ATMs, but really gained traction as a term when online banking and mobile banking were introduced.

The result of this iterative process has been the implementation of a "collection" of technology solutions that are intended to allow credit union members and bank customers to digitally interact conveniently and effectively with their financial institution. Let's call this Digital Banking 1.0

Problems with Digital 1.0 are abound. The first problem is a lack of strategic planning and thinking as the new technology solutions and channels were introduced. The agenda and digital innovation are being driven by the major national banks that either have the resources to develop the technology or have acquired the technology. Everybody else is following, trying to keep up. As a result, there is no digital strategy, it is all reactionary, and digital implementation is a hodgepodge of disconnected solutions.

I was having lunch yesterday with a couple of friends and a discussion about banking began. How exciting I must be as a lunch companion. A question was asked, "Who has an account at a credit union or small bank?" They are both in the millennial generation and confirmed that they both have an account with either a credit union or small bank. I asked, “do you also have an account with a major national bank?" Again they both said they do. I then asked, “who do you prefer to do business with?" They both expressed a preference to for their credit union or community bank; however, both of them almost exclusively use the major national bank. I asked why? They both said, "Because they make it easy to do business with them." 

The credit union and community bank were their preferred financial institution because they provided better loan and deposit rates, better in-branch personal service, and they knew their names, but at the end of the day that is not enough to win their business. Why, because it is not easy enough to do business with the credit union or community bank. Both are relatively new to the Atlanta area. When they moved, their big national bank made the transition easy. To this day, neither one of them have set foot in their new branch locations. The lack of a comprehensive digital strategy sent these two high value customers to a large national bank.

This was a chance discussion, ............how often do you think this happens every day? The data is clear, according to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Why, because the big national banks have a digital strategy and are leading the market with the implementation of their strategy. 

It is past time for credit unions and banks to move into Digital Banking 2.0. You have lost

tremendous ground to the big national banks when it comes to the next generation of most profitable banking members/customers. It is not too late, remember they want to do business with credit unions and smaller banks; you just have to win their business by making it easy and convenient to do business with you.

How do you make it easy and convenient to do business with you?

1. By making digital banking a highest priority
2. By developing a digital banking strategy
3. By allocating the resources necessary to implement your digital strategy
4. By mastering social media communication
5. By treating digital banking as its own P&L channel, and not a channel to drive members/customers to the branch or call center
6. By quite asking the question was is the ROI. That is simply a question to stop moving forward. By the way, Forrester analysts have developed a concrete ROI for mobile banking of 15.7%, if that information helps you feel better

The first step is to assign or hire a digital banking executive to lead your credit union or bank into Digital Banking 2.0 

How Apple Watch Will Change the Face of Banking

Credit unions and bankers, I have good and bad news for you with the introduction of

Apple Watch. The good news, your members/customers will have another way to interact with your credit union or bank. The bad news, your members/customers will have another way to interact with your credit union or bank.

Apple Watch introduces a whole new interaction channel, wearable technology. Just like the ATM, computer, mobile phone, and tablet; wearable technology is the next technology channel that your members/customers expect and will want to be able to use to interact with your financial institution. 

What makes wearable technology and Apple Watch in particular different, is the small display surface available on Apple Watch. Apple recognized this limitation and went back to the future to create a digital crown, similar in concept to the Blackberry roller-ball. Using the crown on the side of the watch allows interaction without covering the display surface. 

Call it a good start. The problem is Apple Watch is still highly reliant on manual scrolling and swiping to interface with the technology. That is a concept that is left over from the PC, mobile phone and tablet. 

Yesterday when Apple introduced Apple Watch it, was the "first generation". Remember the iPhone:

• iPhone (1st generation)
• iPhone 3G
• iPhone 3GS
• iPhone 4
• iPhone 4S
• iPhone 5
• iPhone 5C
• iPhone 5S
• iPhone 6
• iPhone 6 Plus

The first generation Apple Watch is undoubtedly going to be a long list of future versions of Apple Watch and other wearable technology solutions. What does that mean? It means reliance on manual scrolling and swiping to interface with the technology will evolve to voice, virtual assistant and behavioral predictive technology. For credit unions and banks it means another technology solution that must be incorporated into their channel strategy. A technology solution in which the rules will rapidly evolve.

It is exciting times for fintech providers and consumers, but I am not sure credit unions

and banks feel that same level of enthusiasm. The milestone marker just changed and many credit unions and banks are still trying to adjust to mobile technology. Moore's law suggests that the pace of technological change doubles every two years. 

Most credit unions and banks have not been able to fully assimilate the mobile space and the opportunity mobile presents. How are those same credit unions and banks going to handle wearable technology such as Apple Watch?

The fact is the pace of technological change and the costs associated with the technology is beyond the scope and capability of all but the largest national and regional banks. Credit unions and banks, ...... the walls are closing in on you and your corner is looking dark. How can you change the game and give your credit union or bank an opportunity to survive and thrive?      

Through cooperation. Technology solutions and non-member/non-customer facing operations do not have to be owned, controlled and executed by each credit union or bank. Credit unions and most banks simply cannot keep up with the technological change and the costs associated with technology solutions. Instead, a new cooperative entity needs to be created to handle all technology and non-member/non-customer facing operations. Through the use of shared resources true economies of scale can be achieved, but it must include both technology solutions and back-office operations in order to realize the full true cost savings. It may be radical thinking, but based on the prognosis for credit unions and banks, it may take radical action to change the paradigm. Sometimes radical surgery is required to save the patient.

The time to act is now. Remember Moore's law, the pace of technological change doubles every two years. You are already behind and you do not have time to wait before the next technological leap occurs.