Everybody hates it, everybody needs it

There are many things in life that people must do, but will avoid doing until necessary. Sometimes avoidance is impossible. Don’t pay your taxes, for example, and sooner or later they’ll get you. Delay, however, can be an attractive option for those who stress out about managing their money. The very phrase ‘personal finance management’ (PFM) can sound a little doom-laden to some. In this blog I want to explore how banks can address this issue and what the practical steps are to get there.

If they even suspect they have money management problems, some people would simply rather not face up to them. Sooner or later, poor money management catches up with people. Everyone who avoids even the remotest glimmer of personal financial discipline knows that this will happen. Inevitability is not a strong motivator though. Customers need to be shown the way.

PFM is a stressful task; not managing wealth or deciding what to do with your trust fund, but taking care of the day-to-day…getting by without getting in debt. The increasing cost of living (together with the impact of Brexit) tops the nation’s main financial concerns for 2018 according to research from GoCompare: “… 40% of people think that 2018 will be a financially challenging year, with 12% admitting to being ‘seriously worried about their finances’ in the year ahead”.

One FinTech, Neyber, positions financial stress reduction at the heart of its offering. The company’s DNA of Financial Wellbeing report (2016) surveyed 10,000 workers and found that 70% of the nation’s workforce admit to wasting a fifth of their time at work worrying about finances. The report estimates that that worry costs the UK economy an estimated £120.7 billion a year.

A statement’s just a list

If a bank can alleviate this worry, it follows that it is taking stress out of the equation, or at least diminishing it. Banks have a significant opportunity in the realm of PFM to make life easier for their customers, and look to some FinTech examples on how simplicity is revolutionising the interface and the relationship between banks and customers.

Have you ever looked at your bank statement and found it rich with analysis, intriguingly demonstrated through histograms and pie-charts, and highly illuminating the information it provides? I bet you’ve found none of this if you’re with a traditional bank.

Your statement will be a chronological list of what came in and what went out in the last month. It records the evidence of what you’ve been doing with your money but doesn’t offer any clues on how to manage it. This is one of the chinks in the armour of traditional banks that FinTechs have managed to pierce.

Lock in your customers now

“Banks need to understand their own core capabilities and their strategic aspirations today to take actions for tomorrow”, says Deloitte’s report ‘Banking business models of the future’. With PSD2 taking effect in September 2019, as well as Open Banking (leading to nine banks opening their data to third parties as of January 2018), banks have two choices: allow disintermediation to erode their customer base, or adjust to new customer needs.

As the bank opens its APIs to all manner of potential payment services providers, competition for customers will intensify. Any bank of any size or heritage will need to offer PFM services. These will be the minimum acceptable enriched services that customers will expect and will be able to find easily.

If banks can address the core concerns of their customers, and help diminish these concerns, they earn trust and loyalty. It’s that simple. Or, rather, it isn’t. Getting this strategy right depends on finding the balance between vision and innovation as one essential ingredient, and prudence and procedure – testing – as the other…

 The essential role of design

I’ve headed this blog “The Path to Customer Retention”, not “The Key” to it. It’s a complex journey from the snapshot in time of the current bank statement to taking on the role of trusted financial insights provider and being able to validate any claim to be so. Many hurdles have to be jumped, or got around. Not the least of these is the form factor; the smartphone. Viewing data on such devices is not easy; presenting it for easy view is a design challenge.

The even more essential role of testing

Getting design right in a mobile first environment (or mobile-only in the case of many FinTechs) is an extremely sensitive area. Creativity must run on rails. In the business world creativity must be wrapped in process, otherwise everything ends up looking great but perhaps not being as robust as it needs to be.

I have discussed this with many customers who have started to bring in fresh thinking at the development stage; hiring designers and developers from the gaming industry, for example, to challenge deeply held views and practices within the traditional bank.

 A question of balance

Design thinking is not just about look and feel, important though these considerations are. It’s about agility. Fresh designers into the bank from other industries come with such agility in their DNA. They will often also arrive with a less than rigorous sense of process discipline, however. They are accustomed to rapidly released manifestations of their genius. They have been weaned in a FinTech world. They believe that failing fast is the perfect way to go. They may often have come from environments where 3-day change cycles were not unusual.

The problem here is that banks are wedded to locked-down systems and processes where once-a-year change cycles prevail. Who needs to adjust, the developers and designers who can deliver the interface customers want, or the banks themselves? Rather than the two approaches colliding, banks now need to find ways of making them splice into each other.

APIs and micro-services make it possible to move faster but even APIs require rules and documentation.

The solution, as you would imagine, lies somewhere in between the two; innovation and strong foundations. Banks can start to progressively re-engineer their systems. One way is to set up real-time data stores that offer easier access to data for agile development. Another is to take a leaf from the manufacturers’ playbook – the runners, repeaters and strangers (RRS) model. This enables different priorities and resources depending on the urgency or immediacy of the development in question.

This is not the first blog ever to talk about the clash between legacy system restraints and innovation. You can be sure it won’t be the last. All I’m saying is that there is a bridge between the two that can enable banks to keep pace with the competition. There is a path between the two. There is also an urgency driving the need to deliver better customer experiences.

The customer experience in banking is defined by trust. This is nurtured by making it easier for customers to manage their money; it’s why they came to the bank in the first place. In one of my recent blogs, entitled  ‘The two pillars that make banking more personal’ I talked about the theory of Jobs to be Done and how it can provide a focus on developing relevant services for customers. What I said was: “Fundamentally, customers want to find ways of topping up their savings funds easily and without too much effort; they want to set and progress towards savings goals; they want to make contributions in easy ways that help them accumulate money or even plan their retirement.”

Help people with budgeting, planning and controlling, avoiding debt and feeling more on top of things and you’ll have them, hearts and minds. I would also say to any bank don’t be overawed by the legacy challenge. Not everything you do has to be agile. Pick your battles and then you’ll win your customers.