A Finextra member 09 April, 2014, 10:25 0 likes

What is a "better bank". I know that many people are keen on the idea (Brett King is the evangelist), but just being "digital" is not an advantage - traditional banks are catching up in that respect.

There are still many valid use cases where a face-to-face human interaction would be preferred (especially if banks could learn to truly listen to their customers again, the way it all started...)

Anyway, sentiments aside, anyone under illusion as to what modern financial services are about (digital or bricks), should read this interview with PayPal's CTO. For those in a hurry: it's all about regulations and compliance these days... That mostly stops any "good intention" in its tracks.

A Finextra member 09 April, 2014, 11:31 1 like

Being a digital bank is very different from being a traditional bank. You do all the things Amazon would do if it were a bank. These are:

1. Keep track of all orders and their state, thanking the customer for making an order. So when I use the digital bank to pay a bill it records that request, thanks me for making it by email, tells me when the funds are received, emails me if there is a problem.

2. When the customer looks for a new service show both the digital bank's offer and all the other offers in the banking marketplace. Ensure the customer gets the best deal.

3. Makes recommendations based on previous interactions. These are for all financial services not just the ones offered by the bank.

4. Provides personal financial management including consolidation of all banking relationships not just the ones with the digital bank.

5. Excellent customer service including live chat and the kindle-style help button to get an immediate video chat.

6. Automatically refund the customer if there is a price drop, always offer the customer the best rate, give the customer the lowest possible transaction costs and match customers whenever possible (like Amazon prime book sharing) for instance on foreign exchange, so that if one customer wants $100 and another has $100 to sell, the deal is done at mid rate.

7. Allow customers to comment on all services, solicit feed back on all orders.

To do this at low cost and excellent reliability is not possible using the batch based, accounting systems of the legacy banks.

 

John

A Finextra member 09 April, 2014, 11:49 0 likes

John, what you described is a "good" bank, not a digital one.

What are the advantages of being "digital only" (apart from cost savings)?.. First Direct was launched as a virtual bank when "digital" was used in conjunction with "rectal". Did that change anything?..

A Finextra member 09 April, 2014, 14:50 0 likes

I dont see any real difference between a "digital bank" and a traditional bank.

There is nothing a digital bank can do that a traditional one cannot. Everything that is listed here is possible with a traditional bank, the fact they are poor at it doesnt mean a digital bank is in any way different. Rather, that a particular bank (that so happens to be digital) prides itself on providing a better customer service...

Am I missing something?

Paul Love - Konsentus - Nottingham 09 April, 2014, 15:41 0 likes

I assume that a digital bank does not want to handle cold hard cash – just like the “virtual” First Direct over 20 years ago.

However given the current state of maturity of purely digital channels, I assume that the digital bank will still need to issue traditional payment cards to allow its customers to transact with real merchants.

There is still plenty of room for a banks of whatever type to do things better!

A Finextra member 09 April, 2014, 15:42 0 likes

Andrew and Alexander, you are (I think) both right. What we want banks to be are customer oriented 'good' banks. As retail banks are becoming a subset of online retail, this means being at least as good as Amazon on the one hand, and running at much lower cost of IT on the other. This combination is what I take people to mean by 'digital'. Of course, marketing departments of banks and vendors are free to redefine the word any way they find convenient, but I think it just means a bank fit to compete with the GAFA (Google, Amazon, Facebook and Apple) all of which have the infrastructure and focus to do this right. Of the GAFA only Apple has a high street presence, but that just goes to show that being digital does not preclude being on the high street too. Amazon now has shared fullfilment centers, so it too has a physical presence. Banks need to be digital in the sense that they are online retailers with the right physical presence, whatever that turns out to be.

A Finextra member 10 April, 2014, 04:28 1 like

I think being a digital bank is much more than being a "good bank". It's about reinventing banking processes with a digital lens. In fact the end state is probably quite removed from what we call banking today. And yes, agree above, it does involve humans interacting with customers as well!

Pol Navarro - Banco Sabadell - Barcelona 15 April, 2014, 19:49 0 likes

Being a "digital first" bank is not a synonym of being a good bank. Traditional banks can take advantage of digital transformation to connect people with customers, and reinvent the relationship model. We tend to compare everything with Amazon and aliked, but many traditional retailers are capturing the digital opportunity, connecting physical and digital (i.e: Inditex-Zara). Read this article: http://www.wired.co.uk/news/archive/2013-02/25/the-death-of-commerce

A Finextra member 28 April, 2015, 17:18 0 likes Late comment, I apologise. It's good to see the thinking here, but I believe thee is a fundamental difference between a bank, good or ad, and a digital bank. We have conflated two different services overra period of time and are now suffering the consequences. Banks do what they are supposed to do as a line of business. They are, quite rightly,regulated to protect the customer and the economy in general. That's as it should be. But such regulation breeds a atmosphere of risk aversion, this is turn leads to a slow and measured rate of change. The conflation consequence is that when we need change in the IT part of the banking operation, it is slowed down to meet the risk aversion principles governing the enterprise as a whole. This is not how it could' be. Many young and flexible propositions are beginning to emerge: Metro, Atom, Starling and a few others. They will concentrate on the accounting side of banking, allowing themes reactor marketplace demands and leave the "backend" banking to those who know it best. Horses for courses. Not only does this separation reduce or eliminate the failures of the current setup,it provides a platform for many other innovative services. By providing a buffer between the customer the actual bank,in the guise of current, savings and loans accounts. This could the provide a universal security layer, a gateway to other services (brand independent), maybe also a tokenisation opportunity and a PCI--DSS compliance blanket. All this and more in contained intense ChasmManagement Limited's banking model,to be published next month (may). In the meantime, comments and enquiries should be directed to Chris.meggs@btinternet.com.