Lifestyle Banking..... here we come in 2015

Is trust for banks being rebuilt?

Tentative improving news for the banks! 33% of customers grew more confident about the industry in the last 12 months according to Ernst & Young. And only 19% lost confidence – a big drop from the 40% decline of 2012.

Other industry watchers saw a similar picture in 2014. The ICAEW chartered accountants association reports that nearly three quarters of UK companies are happy that their banks understand their business. And 85% have no plans to switch.

So after years of public distrust, are the banks now out of the woods? Can they plan for growth, sure of renewed and sustained customer confidence in their age old business models? 

Long way to go..........

Well that’s not a view that gets ringing endorsement everywhere – for good reasons. The recent HSBC scandal has punctured the good news. For a start, the scandal scars run deep. Building real public trust from such a low approval rating is going to take many years, says the Chairman of the UK’s Treasury Committee. And rediscovering confidence is going to need a comprehensive culture change right across the banking industry. 

 Most important, banks have to reassess the traditional businesses that enabled – some would say encouraged – misconduct and miss-selling to take place in the first place. And as part of that reassessment, they have to build relationships with tomorrow’s customers based on how consumers live their lives, not on the banks’ own operational convenience.

 Can one of the big traditional banks reinvent themselves in time or will the crown go to a new challenger?

For the bank that is really committed to renewal, those signs of growing customer confidence today surely provide an opportunity to create a unique business – designed with the customer at the centre, exploiting the immense strengths of the bank’s organisation, and keeping the competition firmly at bay.

 The traditional banking world should ignore new challengers at their peril.  The current High Street traditional model still has life in it today but how long for?

 That new banking proposition is a virtual window on the world - rich in information and services, personalised to each customer’s requirements, and offering the most innovative and comprehensive relationship and experience ever achieved by the banking industry.

 The idea of a virtual window is not new of course. Companies with roots in travel, entertainment, and technology have all built websitesthat take customers beyond their own online offerings, providing myriad cross-selling opportunities with partners.

 But these models are often limited by perceptions of the host brand and the specialist nature of its business. The owners usually don’t have enduring, lifetime relationships on which to build personal journeys through the site. And everyone knows that the host and its partners have products and services to sell, and that taking profits from those sales is the paramount objective.

By contrast, the ambitious bank has extraordinary advantages in this space. Its virtual window will be genuinely agnostic when providing products, services and information. It has more customer data and insights into buying behaviour than organisations in any other field, and that data can be used to drive targeted, context-aware, personalised offers. Most important, the bank holds its customers’ money, backed by a mature and secure payments process and merchant supply chain.

And surely no other enterprise can claim the bank’s range of customers – in social types, ages, and interests. Personalisation is an overworked and often underdelivered form of business speak. But imagine the impact of a bank branded offering that really delivers informed individual online guidance to a young professional woman with clear fashion ideas, to a middle aged motoring enthusiast, or to a silver surfer wanting best deals on travel and tickets?  Its time for new business model based on ‘lifestyle banking’ in 2015. 

So the proposition is compelling, and it’s completely feasible. The startup technology is proven and relatively inexpensive. And there’s no time to lose for incumbent banks. Challenger banks are setting up nimble new systems that make traditional banks look hidebound by the costs and risks of changing their legacy IT. But the online engine needed to drive a virtual service can be implemented with minimal effect on core systems, and the potential payback in multi-sided marketing is immense.

But while the revenue opportunities are attractive, the real value of this unique idea is in repositioning the bank with its customers – forging new relationships through a new kind of interface. The far sighted bank that grasps this idea has the chance to rediscover the trust that was never questioned in the distant past, and equip itself with a powerful first mover weapon in a time of intense competition. 

 Put the customer in charge and let them direct the orchestra for their own personalisation. Encourage the customer to reimagine the world and help innovate to design the new way of banking that suits them and their lifestyle.

 ‘My bank can position itself as my trusted partner  by delivering meaning in the way I personally would measure it.  Make my life easier, more fulfilling, more relevant to me personally.  Let me feel that my life is enriched by an experience that can be delivered because my bank understands me. All the time I feel ‘in charge’ of my destiny I will be happy to allow my bank to support my lifestyle choices.  After all I trust them enough today to let them take care of my money.  Why would I not trust them to make my life better, simpler and more fulfilled.

As we enter an era that supports ‘lifestyle banking’ there is a race to the customer where the bravest champion may seize new markets by wrapping their arms around consumers with a new business model.  Potentially this is a race between a forward thinking traditional bank who can leverage their existing assets and customer trust  (transform the cash cow) and a challenger bank who is not fettered by legacy and an outdated business model.