Why banks must play “follow the (innovation) leader”
Today, innovation is no longer merely “nice to have”; it’s an absolute necessity for survival. So banks must do everything within their power to innovate, or risk being left behind. And what better place to start than learning from other industries that have already been there, done that?
There are many instances of how different businesses have leveraged new ideas and technology to innovate on processes and ultimately transform customer experience. The retail sector has always been unmatched in product diversity and distribution, but Amazon topped that with their online business model. Now they’re showing the world how to enlist customers as advocates and shape public opinion. Banks, traditionally slow to catch on (owing to size, legacy and regulatory constraints) are waking up to the immense possibilities of using social networking as a marketing platform.
The telecom industry has cultivated pricing innovation almost into an art form – mobile tariffs can vary with the type of customer, age of the user, time or destination of the call and God knows what else! While regulations may not permit banks unlimited freedom to alter pricing structures, they can still optimise it within a context and charge customers based on transaction frequency, channel preference, time of use and risk appetite.
Banks also need to change the way they look at customers. Broad-brush segmentation based on average quarterly balance has proved ineffective in improving banks’ customer insight and consequently, their ability to satisfy increasingly individualised needs. Customers will stick around so long as they’re offered relevant products and services. Realizing this wisdom, some automobile companies have begun to offer prospective customers the option to personalize their vehicles. The faster banks move to a similar “segment of one” strategy, the better their chances of surviving in the long run.
