Other parts of this series:
Open Banking is coming, and it will have a profound impact on how banks operate and how banking is done.
One useful way of thinking about it is Digitization versus Digitalization.
It’s one thing to “digitize” your bricks-and-mortar operations. That just means taking what your bank currently does, and putting it online. Any re-thinking that is done around the customer experience is done at the transaction level. In other words, we know what banks do, the customers know what banks do, the customers want a digital banking experience, so let’s give it to them.
Digitalization, on the other hand, is starting with a clean slate. It’s a bit like imagining a world where lots of people are online, and then imagining that banks still needed to be invented. In that world, what would customers need?
Digitization is adapting your business to offer services online. Digitalization is changing your business model to operate in the digital world. This is more than just creating an app.
A banking app is still a digital interface echoing internet banking, which echoes in-person banking.
We know this because banks talk about “channels”. The branch network is one channel, telephone banking (remember that) was another channel, app and online banking yet another channel. But Digitalization moves beyond that thinking completely. It asks the question: what if the bank was digital first, and a bank second? What would you do differently?
One example of this was the Curve card. You had one piece of plastic and, using your app, you could link all your other cards to it. From a customer point of view, it’s heaven. Why carry a debit card and a two credit cards and a garage card when you can have one Curve card doing all the work?
This is true digitalization.
The whole idea of having cards from rival banks linked to one piece of plastic is completely alien to how most banks think. The question that Curve is asking is: how do we reinvent the business model? Even the idea of having multiple banking apps is becoming a problem. People want fewer apps, not more.
We’ve seen this in the news world. When most people want the news, they turn to Facebook or Google. They don’t install the EWN app and the TimesLive app and the 702 app and the New York Times app. All those apps exist. But it’s quicker, easier and better to go to the search engine which already has all that content—and more.
The other example I like to use is Uber. There was another ride-hailing app before Uber, but the payment system was horrible. What helped Uber prevail was its insight that people wanted a seamless payment experience. So Uber built its app around the payment experience. This means to me that we need to rebuild and re-establish our relationships in a digital world. Which brings us back to where we started. Open Banking is the technology that will boost their relevance.
But it will depend on whether banks use the technology to digitize their existing offerings, or digitalize banking completely.
If you’d like to read more about Open Banking and the choices it opens up for banks, take a look at this recent report.