For the purposes of this article I will focus on Google, but you don’t need to look too much further to see that Amazon, Apple, Stripe and Alibaba to name a few have equally made impressive progress in the financial services sector.
5 years ago Google Pay was launched and since then customers in their millions have been tapping to make payments, multiple times a day. Paying for public transport in the morning, lunch at midday and drinks in the evening. Consumers rightly have an itch that needs scratching. The need is a digital customer experience for all their financial services needs.
Welcome again Google, who are to offer co-branded current/checking accounts in partnership with 8 US banks. Consumer and user experience meets reputable banking. Google looks to benefit with access to financial data that informs customer behaviour, but equally the ability to provide additional loyalty programmes. Google’s offering will sit on top of Google Pay, which in turn will sit on top of the existing infrastructure of 1 of the 8 banks.
Ultimately, the customer will receive a consistent Google experience, with enriched data analytics on their spending patterns and availability of offers etc. Half of me can’t help but think these 8 banks have conceded to the fact that they can’t offer this experience to existing or new customers….I promote innovation, but could this have been achieved internally?
Having said this, there are benefits for the banks to partner with Google. They are now able to reach new markets as a result of hyper personalisation through Google’s data algorithms. However, they must equally be asking themselves, why couldn’t we have done this? I am sure the other 10,000+ financial institutions in the US will be reviewing their current customer experience in the very near future, hopefully the question will be answered.
What can the banking sector take away from this?
There are two paths in the context of this scenario. The first, where banks continue to be the infrastructure sitting behind ‘Big Tech’, where services are offered. Or, adapt your bank through upgrading your tech stack to create your own ‘Big Tech’ experience and continue to own the customer experience yourself and not outsource this to a ‘Google’.
Initially, banks will see a partnership with Google as innovative, yes it is to a degree, where new markets will be reached as a result. However, soon enough, Google via their customers are going to demand faster innovation to meet changing market and customer needs. Therefore, meaning that the banks tech stack, especially their core banking platform needs to be one that is digital first, agile, hosted in the cloud and API driven to quickly access the latest market Fintech to respond. Unfortunately, in most cases, core banking systems are built leveraging legacy architectures and one that is deployed on premise.
Hmm, challenging, this may be the first hurdle in this new partnership and have we just come full circle? Is it possible that banks, through proactive digital innovation can achieve customer delight and therefore provide end-to-end customer value without a Google? It would seem that these banks are going to need to innovate in any case. Here are some of the benefits that could be realised with a new Cloud SaaS core banking platform and subsequently sidestepping the need for a ‘Google’ front end.
- Customer data will be accessible. Today only around 20% of banks use their data for hyper personalised targeting due to legacy on premise systems. If executed well, data used for targeting will lower acquisition costs, build deeper relationships and suggest more relevant solutions for customers. Banks now have the ability to target customers like Google.
- Time to launch new products in the market will reduce with investments in core platforms founded on the principles of open or composable banking, where innovation is sourced through APIs. Thus meaning that customer demands and experience can be met through a one-stop shop approach at your bank. Banks take on the form of being a service hub for customers.
- Providing last mile customer experience is critical and to be fair, Google and others are world class. Cloud banking platforms will provide banking customers flexible access to their accounts, where transactions can be performed, statements reviewed and applications for new products submitted. Anywhere in the world, anytime.
- A Digital first approach is key, however, banks are equally well positioned to humanise their digital experience through physical branch locations. Capitalising on a hybrid digital and physical approach is a true advantage for the traditional banking sector.
In summary, I support innovation and understand why Google and others are partnering with institutions in the financial sector. The thought process suggests that even with the partnering, banks are still going to need to invest in their tech stack to meet future needs. This investment in core banking solutions will lead to the benefits mentioned above and more, which in some cases puts less emphasis on the need for a partnership with a ‘Google’ or others. More importantly banks can then own the end-to-end customer experience, which is critical for their future destiny and longevity.
No doubt consumers will end up the true winners when ‘Big Tech’ and Banks partner. Who picks up 2nd place is still to be determined.