Australia's banking industry is ripe for disruptive innovation, and has been for many years. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry provided stark examples into why this is the case. Despite continuous attempts at improving financial services, big innovations still aren't on the horizon. As the battlegrounds for mobile and contactless payments are drawn, it is clear the main basis of competition will not be technical - telecommunications or financial - but rather one of customer experience.
So here are a few areas in which Australia's financial services have fertile opportunity for innovation, and some questions to help them get there.
What does a completely cashless economy look like? There are some really big opportunities here for innovation, from convenient micro-payments, to transportation ticketing, payments to street stall vendors, and pocket-money for the kids.
Some innovations are already seeing their way into the wilds, but mostly these are a technological twist on existing concepts. Contactless payments using near-field communication technology (NFC) makes for a nicer experience - tap and go - but are, at the end of the day, a variation of debit and credit card transactions just in different forms.
That is, what if I didn't need a physical card issued by a financial institution, secured with a PIN or password? What if the number, type, and access to my funds were inextricably tied to me physically?
I don't mean simple biometric security, which is simply a different type of 'password' or access control. What if I never had to remember which card to pull out of my wallet? What if I never had to remember which PIN goes with which account?
Today's banking infrastructure still has built in delays that mean I can transfer money from me to you and, whilst it is no longer mine, it also isn't quite yet yours.
Small businesses face this issue every day. A stream of customers come through the doors of the local cafe on a Saturday morning - parents with their sweaty, post-sport children - have brunch and coffee, and pay with the debit or credit card. A few days later - Tuesday or Wednesday in many cases - the cafe is able to make use of that money. The wait comes from a series of built-in delays: no transactions on a weekend; overnight inter-bank transfers; 'settlement' periods.
Radically reducing this time delay would be a major benefit to the millions of small business owners (and the larger retailers) around Australia.
What does a banking system look like in which I never pay a fee. Ever. Sure, I will be charged a rate of interest on loans - including credit cards - but not fees or charges. No account keeping fees; no transaction fees; no exit fees; no charges for over-the-counter transactions.
In return for access to my money (deposit products) I receive a return commensurate with my risk (low, since I'm lending my money to a bank) and balanced against the convenience of modern electronic banking. Similarly, in return for access to their money (lending products) I pay interest commensurate with their risk with me.
Notice that last part: I pay an interest rate that is a reflection of my risk as a borrower. A good credit history, stable job, disposable income currently acts only as a gate to lending products with a bank - I don't receive a reduction in the interest rate I pay.
Investment services in particular feel very one-sided at times. When things go well with the investment I pay fees and charges; when things don't go well - I pay fees and charges. This creates a point of tension, and an opportunity for a disruptive business model in investment services particularly.
What if I only ever pay when things go up?
Many people feel locked into a bad banking relationship; unhappy with the fees, customer service, inconvenience; but also loathe to switch because of the perceived effort involved. This has a two-fold effect:
But what if I could move everything to a new bank with a single tick of a box? That feels like an enormous service experience opportunity. And look at the impact: if you were a bank and you knew your customers could walk away at a moment's (literally) notice, what would you change to ensure they never took you up on that option?
How would your relationship to your customers change if they could leave at any time? What would you do differently with your product and service design to guarantee that people were coming to you rather than leaving?
Turn that around: what might you do differently to ensure a customer never felt locked in, ever. If you took away that anxiety from them, how would they respond?
6. What if... my bank was like a personal (financial) trainer?
We all have different goals in life, and finances play a strong part in attaining a lot of them. Travelling on an overseas holiday, owning a car or first home, starting a family, learning to sail your own boat - all rely on money to make a reality. But for many of us, the financial discipline and knowledge needed to easily reach those goals doesn't come naturally, or wasn't part of our upbringing.
In other parts of life we bring in outside help when we need it - doctors and physiotherapists when we're injured; personal trainers to help us shape up (for a big event, or just to turn things around); people who actively engage with us to reach a particular life goal. And yet we shy away from financial planners, and we don't expect banks to play an active part in helping us shape and meet our financial goals.
So what if I could walk into a bank and say: I want to own my own home. I'm starting from zero. And not only set out a plan of action, but have them follow up and encourage you along the way.
I heard a story about Nike+ the other day: at the end of a particularly good run Lance Armstrong's voice came onto the iPod and said: "That was your best run, ever. Well done!". We don't receive the same proactive encouragement from our financial institutions. But we could...
7. What if... my bank was as small as me?
What would a truly personal bank look like? A bank with a customer-base of one: you. Where you were the entire reason for its existence...
People often feel anonymous to their bank; a series of accounts - products - and transactions. Walking into a bank branch in a city reinforces this notion - you take a ticket from a machine and you wait until your number is called. Why not have me swipe a card so they can call me by name? "Mr Baty, we're ready for you at counter 5." And guess what, when you reached counter 5 the teller might even say "Good morning, Mr Baty. What can I do for you today?" What a difference that might make!! And it's by addressing a single point of tension in our relationship with our banks.
[Steve is running a workshop on Innovation at UX Australia at the end of August. We're also running a Sources of Innovation workshop in Sydney and plan to run sessions at other locations in September.]