7 ideas for innovation in banking services

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.

1. What if… there was no more cash; anywhere; for anything?

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.

So take 1. a step further: What if… my money was a part of me

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?

2. What if… your money is yours, immediately.

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.

3. What if… I never paid another fee, ever again?

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.

4. What if… my bank partnered with me to share both risk and reward?

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?

5. What if… I could switch banks with the tick of a box?

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:

  1. Financial institutions aren’t punished (and don’t learn) from poor performance in these areas; and
  2. Customers put up from financial institutions with treatment they won’t accept from mobile phone companies (for example).

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.]

  • Daniel Szuc

    August 17, 2012 at 11:36 am Reply

    Thanks Doc!

    Like number 6 and assumes a deeper understanding of need towards helping me in the mid to long term. This then assumes that the path to that understanding and tools used to help people plan, need help too.

    Perhaps if it felt less like the relationship managers managing 200 people poorly and more like managing 50 people well, this would help. Of course, use the word “relationship” in relationship manager lightly … very lightly.


  • Peter Robertson

    October 31, 2012 at 7:59 am Reply

    I’m really not that thrilled with the phrase “what can I do for you today?”. I would rather have the question just as “What can I do for you?” I would like to know who added the word “today” into this question, and what was he thinking? It has got to be the most irritating overworked word in customer service!

  • Jhumkee Iyengar

    November 22, 2012 at 1:02 am Reply

    Thanks. This gives me specifics of ‘What If’ design thinking activities for a holistic UX context like a bank….something I have been trying to encourage alongside user research and analysis….

  • Phil Smithson

    April 3, 2015 at 7:52 pm Reply

    Great post, coming at it a bit late (3.5 years!)….have there been any innovations in the Australian banking industry in that time?

    I live and work in the Philippines and for #4 , I can’t even switch *branches* at the tick of a box. Have to close my account with my old branch and create a new account in my preferred branch (even though it’s the same bank) and go through the whole “fill in 4 forms with the same information” rigmarole.

  • Alex Harbin

    April 23, 2015 at 7:07 am Reply

    The other space I’m seeing some focus on at the moment is managing all of your accounts across all banks in your ‘primary bank”s platform. I see many banks edging towards it by offering limited ‘read-only’ consolidation, but it is going to be interesting to see how far it can go, and whether a bank’s platform could become a more influential factor in decision making.

  • Mahesh

    September 1, 2015 at 3:44 pm Reply

    Fantastic read, thanks.

  • Nova Franklin

    September 30, 2015 at 12:31 pm Reply

    If only! This was penned years ago but sadly these opportunities are yet to be realised ubiquitously.

  • Gavin Hince

    December 11, 2015 at 3:11 pm Reply

    Action #5 has been attempted a few times, with third-party providers aiming to reduce the friction to swap financiers. If I recall, AMS among others, started efforts in this space, but foundered with differences in approval processes, delays in documentation and other process inadequacies. So it’s doubtless challenging, but a valuable and vacant market space ripe for a digital-based solution.
    Lance Armstrong encouraging your ‘best ever run’? Unsure he’s an example to aspire too. But then, it’s not about the hike…

  • […] New innovations in solar technology So it’s doubtless challenging, but a valuable and vacant market space ripe for a digital-based solution. Lance Armstrong encouraging your ‘best ever run’? Unsure he’s an example to aspire too. New innovations in information technology 2015 But then, it’s not about the hike… Site: http://www.meldstudios.com.au/2012/08/16/7-ideas-innovation-banking-services/ […]

  • Jay C.

    June 28, 2017 at 6:01 pm Reply

    I love this article; I truly like your optimism in banking innovations, especially how banks conduct their business. Numbers 4, 6, and 7 sort of go together. If banks were to share with its clients’ losses as well as gains, it would be small enough to recognise a customer by name and provide him with a personalised banking experience. There would be no snobbish staff, no long queues. Then, they will make every effort to help their clients succeed financially since their revenue will hugely depend on it. This is how the pay structure for fee-only financial planners go. But that’s all in a perfect setting in a perfect world. Maybe someday, a brave-hearted organisation will bring this dream to fruition. Who knows?

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