Friction (how is it being reduced?)

When was the last time you heard someone say, “I need to go to the ATM to get cash” or “Please come into the branch so you can sign some documents”, or perhaps even, “Sorry, we only accept cash”?

Historic view

Service and product providers are rapidly tuning into the fact that in the vast majority of cases, their clients actually don’t want to talk to them, let alone have to actually see them.  Buying of goods and services and the transfer of value to make the purchase need not be conducted in a face-to-face setting.  In fact, those providers who continue to require face-to-face interactions with their clients are more likely to see their numbers dwindle as competitors who have been keeping their ‘ears to the ground’ are adapting their business models and moving towards a frictionless approach.  Frictionless, being an approach which either limits or does not require any face-to-face interaction with the client; they don’t need to pull money out of the ATM, their bank doesn’t require their physical presence to open an account and as a business they offer multiple methods of payment through a variety of mediums.

The traditional role of the door-to-door insurance salesman disappeared when internet adoption became mainstream and aggregator sites became commonplace.  Retail purchasers of insurance could perform their own search, based on their own criteria and eventually decide on the right product and make the purchase via an e-commerce channel such as a credit card payment.  Farewell to the door-to-door salesman; time to re-skill.

Fast forward to the early 2000s and the e-commerce industry has skyrocketed in value.  Online transactions are common place and with the invention of smart phones and mobile applications, it couldn’t be any easier to purchase that Nesspresso machine using the Lazada app on my iphone on your way to work in the morning….could it?  The average consumer probably doesn’t really want to take out their credit card in full view of their fellow passengers on the train….so

Clearly both the consumers and the service providers are of the view that it could be easier.  Consumers are seeking the simplest, fastest solutions which create the least amount of friction in their busy lives.  In response, the financial services industry along with VCs across the globe have been pouring millions into technology developments which can be leveraged in an effort to shift-the-dial on the customer experience index.

Drivers

So aside from it could be easier, what are some of the drivers that are pushing this change along?

  • Outcome based regulatory frameworks; less focus on regulators providing a strict step-by-step guide to maintaining compliance which don’t allow for new processes and innovations, a instead providing high level requirements which can be met by industry players via a variety of approaches

  • Smartphone penetration; access to new markets being made possible by improvements to technology and increased levels of smartphone penetration (Philippines and India are excellent examples)

  • Client demands for ‘faster’ and ‘simpler’; most clients aren’t interested in solutions (no matter how innovative) which take time to learn and time to use, it needs to follow the KISS approach (Keep It Short and Simple)

Current view

Who is doing what?  Below is a short summary of some of the industry updates which appeared pertinent to this piece:

  1. Wells Fargo has just rolled out Cardless ATMs allowing clients to withdraw funds using a series of PIN numbers

  2. WeChat has reached roughly 300 million users in China that are actively using the P2P payment platform

  3. DBS has rolled out DigiBank in India – an online-only bank

  4. Transferwise is linking up with Facebook to allow users to make international transfers from within the social networking app

  5. The Australian arm of ISO is leading efforts to define the internationally recognised standards which will be applied to Blockchain

  6. Facebook has launched peer-to-peer payments through is Messenger application for US users

Future

  1. Credit scoring will be augmented by online data sources such as social media and even how you use and interact with your mobile phone; search for ‘Yongqianbao’
  2. Regulations covering Know Your Customer (KYC) processes will loosen to allow Financial Institutions to take into account dynamic and real-time data sets available from online sources
  3. Achieving #1 and #2 will assist in making it economical for Financial Service providers to develop a footprint in previously untouched markets; developing economies in Asia and Africa

Conclusion

Innovate or fail, seems to be to message these days.  However, I would argue that innovation for the sake of it is pointless.  Referring to the successful innovators listed above, they have all remained locked onto the needs and wants of their clients.  If your client doesn’t want it, or doesn’t need it, then either don’t waste your limited funds to build something which isn’t needed or make sure you have an incredibly convincing argument to show your clients why they need something, they previosuly didn’t think they required.

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