I always hear the following 3 questions from companies & fellow marketing professionals, I regularly speak to:

• How do we innovate around the customer?
• How often can we do it?
• How fast can we do it? 

It is interesting to see how Wells Fargo does it. In a highly regulated industry like Banking, they get inspired from companies outside their industry to remain customer-obessed!

Here are my key take-outs that can be applied to your business tomorrow:

Rule#1: Learn from leaders outside your industry

To me,  Wells Fargo learning & applying ethnography techniques and principles from P&G was quite refreshing. To stay customer focussed and to build a purposeful customer experience & engagement strategy, it pays to learn from industry leaders outside your own business -Who do you get inspired from?

Rule# 2: Establish newer ways to listen to your customers

Wells Fargo has set-up customer councils for their various banking products and services. Imagine observing and hearing from customers on their banking experiences - their moments of exhiliration and frustration - it is a great way to rejig some of the customer facing processes & technologies -Do you have one in place?

Rule# 3: Be agile to iterate, test & experiment - Customers want quick turnaround 

Sometimes, I do see situations where companies know the bottle necks that stand in the way of better customer experience &  easier adoption but they are just not agile enough to get things off-the-ground. Hence, customers move away as they don't see their voice. feedback and inputs being used by companies. Well Fargo develops, tests and deploys new services in 90 days! So, when customers see visibile improvements or even attempts in trying to address their problems - it can be either process improvement and product development, it has a huge impact - How agile are your product development timelines?

It's a great way to begin and move forward in your customer-centric journey - Small but incremental steps but they do leave a lasting impact in driving innovation around your customers.

NY Times carried an article last week about the new kinds of banking services that are emerging in the post recession era! Some of the new names that they mention are SmartyPig, Kasasa, PerkStreet etc.

The concept is pretty simple these are simple online checking or savings accounts with an objective to save you from the grips of mega banks. They give you higher interest rates, help you achieve your goals with some smart savings plans, no surchage fee ATMs access etc.

I am not really sure how these new concepts work as we have seen online only banks, peer-to-peer banking come and go. But, surely what I seem to take out is that :

1. Customer are increasingly thinking more about savings today than spending
2. They don't want to pay for services that are hidden or having surprises. The need for transparency is becoming more and more important.
3. There is a need for these banking institutions to align their products to a customer's investment goals. Save-to-spend later is an interesting twist am seeing in these services or products.
4. There is a need to simplify banking and some of the services to make it more accessible to many.
5. It is also interesting to see community banks coming together to offer these services. The smaller banks looks like were far more closer to their customers than the bigger ones. But, clearly just transactional relationships will not be order of the day for the banking instituions.

ING Direct is one of the few successful financial services companies in the US with an unique business model. In this environment of financial meltdown in the US, ING Direct has practiced & built a bank with a difference. There is a lot to learn from them. Lots of things that I have read and heard in the past but here is a first account of an interview with Arkadi Kuhlmann, CEO, ING Direct:

In a candid interview with Bill Taylor, Co-founder and Founding Editor of Fast Company, Arkadi shared his business ideas and here’s a rough summary of the conversation( Thanks to Swift Community for this content):

Bill Taylor: how did you build this bank?

Arkadi Kuhlmann: There are 9,600 banks in the USA so who needs another one? That was the challenge we had and we thought that if you do everything like everyone else, how can you expect the results to be different? This meant that it was time to look at the business model to see if we could do things in a different way. A way that may be counter intuitive.

So we focused upon building liabilities rather than assets. 

We know that banks create assets and fund them as cheaply as possible and enjoy the margin. So we said let’s do this the other way, and grow liabilities first. So we focused on gaining deposits, and finding assets as the second step. Many say that is nuts, as you are funding liabilities and so how are you going to find the assets but, if you are going to be different and try something to see if it works, you have to change the definitions.

Bill Taylor: how did you find the innovation to be different?

Arkadi Kuhlmann: The best way to find innovation is to look at other industries.

For example, if you’re looking for innovation, why look at other banks? You just get the same old thinking. So we looked at hotels, airlines and more, and the model I liked the most was fruit and grocery stores. These stores are running a 1% margin business, with limited shelf space and trying to attract customers, and are challenged by that because they all look the same. We thought: “what if we were in that environment as bankers?"

You can then put down some key drivers, and ours were that we needed to deal with high volumes at low margin in a commodity business on a large scale.

Bill Taylor: and so you then need to advertise that message too?

Arkadi Kuhlmann: Every bank has ads with kids running through wheat fields and saying “we love our customers”, but everyone realises that that is BS. Stop advertising “we’re there for you”, and focus on delivering on the things that customers really care about. That’s why we focus upon the causes we promote, and the advertising and promotions are all about what mainstream America cares about and what customers care about, not what bankers care about.

BT: and what do customers care about?

AK: if you could build a bank just functionally or technically, people would have done that, but you need to understand how customers are technically interwoven with money. Our rates are not the highest, and we are not the best at services, so why do people stay and why do they come? It’s about the beliefs and values of our bank and how we convey that to them.

Mainstream America is looking for people to validate their beliefs and for authenticity. That is why I make a phone call every week with a customer: to understand them better. And those calls are a bit about the transaction, but mostly about money and their views about money. You must understand how customers see money, as this is powerful.

BT: so do you categorise customers based upon limits and values, as you don’t appear to?

AK: I have no minimums on our accounts, we only have maximums, and I don’t like and don’t want rich Americans. I don’t want all their bitching and moaning. They come in and say, “I’m willing to give you a million dollars, what are you going to do for me?” and I say, “Nothing”.

There’s no hierarchy here. It’s a democracy and we’re all level. I sit in the call centre. We have no titles on business cards. You have to get rid of all that hierarchy stuff to do this business model. That’s why we all sit together.

That’s why I tell the rich guys to go down the street and leave. I don’t’ want them.

BT: Do your staff get worried if you’re on the phones?

AK: We have 8 million customers, and about 5,000 customer account closures a month. But those closures are because this bank is not right for them. I actually want to get rid of those account and we do select some where we know we are just not right for them. To close someone’s account this way, you have to do it with compassion. So we call them and tell them they’re in the wrong place. Not all customers are right for ING Direct and you just happen to be one of them.

For example, 7% of Americans change their accounts every year. 3.5% of them do this because they are looking for a better deal. The other 3.5% are manic depressives. They’re unhappy people and they switch to us to say, “Make me happy”. We can’t do that.

BT: How do you get everything to work together in alignment?

AK: Do you know how easy it is to run a bank when you only have one interest rate? Ask any employee and they know the rate and 40% of customers come by word of mouth. How is that possible? Because folks say they know that they will get the same rate you got. You won’t get a better deal or a worse deal. You get the same deal. That’s why neighbours recommend us because they know they’ll all get the same deal.

And all this cross sell stuff is over hyped. It’s cheaper to get a new customer than to sell the existing customer a second product. In fact, much of the stuff banks talk about is wrong.

Folks say you cannot run a bank without fees, but customers don’t believe it. So you shouldn’t charge fees if people don’t like them. Just roll them into something else and say you’ve done away with them. That’s why one of our slogans is, “Bank fees are like sand in your bathing suit”.   Customers like that.  They understand it.

BT: I understand you’ve written $26 billion of mortgages, with only 15 foreclosures. How did you avoid the problems?

AK: Most of us know that in 2002, we needed to get assets and get mortgages. But the mortgages business in the USA I knew was just not right.

We think we’re the largest community bank in the country and, with that mentality, we also think we have to keep our mortgages on the banks’ books. Selling our mortgages on Wall Street was just nuts. I mean I don’t know anyone out there with a 30-year CD account, so why sell 30-year mortgages? That’s why we offered a five-year fixed rate mortgage. We service them for six basis points, and we do a billion dollars a month of them even now.

In fact, Bill, we now have $35 billion mortgages on the books. The average 30-year mortgage lasts for seven years and you cannot guarantee thirty years in life. We don’t know if we’ll still be healthy and married in five years, let alone thirty.

If we had kept mortgages on the bank balance sheets, we would not have the problems we have today. We need to keep mortgages on the bank balance sheet. That was our view. If we cannot cover the mortgage with deposits, we don’t take them.

I want Americans to be in their homes and to be able to keep them. A home is a place you hug your wife and raise your kids. It’s not a financial asset.

Ring fence it and stop the Wall Street guys mucking around with the American homestead.

When you talk to Main Street, we say if you want a mortgage, you have to be able to afford it. That’s why I want a down payment. If customers come in saying they want 100% loan to value, I say who’s doing the maths here?

We can change behaviours and this country but it won’t be by Wall Street, it’ll be by Main Street.

BT: On the one hand you’re a start up but you have a big parent company – how does that work?

AK: Most of the time it doesn’t work, for the reasons of the parent being a big old company. Think of Star Wars and the Empire Strikes Back. We are Luke Skywalker in the orange jumpsuit. That’s us.

The culture and the way people engage are radically different to the rest of the group, but there’s something unique about ING. They’re very long-term focused and open to new ideas. They are in an environment that tolerates differences of opinion and friction. And there’s an overall broader thinking.

BT: What about hiring staff. Do you have any criteria?

AK: We don’t hire bankers, because bankers come in with their DNA and they have their legacy which won’t fit. Instead we hire dancers, musicians and artists.  People who can deliver a great and different experience. 

What's the lesson for banks and financial services companies in this hour of financial crisis?

Thad Peterson has lovely post on topic.He writes:

The lesson…when you start and finish by thinking of the best interest of the customer, and you manage your business prudently, you rarely go wrong. So, what now?

A few banks, the banks that you don’t see in the headlines, have been focusing on that all along. This idea was brought home to me by a person from one of the banks that’s actually doing just fine right now. One of the key reasons that they’re doing just fine is that they didn’t make high risk mortgages. Why? Not because they thought the risk was too great, not because it wasn’t in their strategy, but BECAUSE IT WASN’T IN THE BEST INTEREST OF THEIR CUSTOMERS TO MAKE THOSE LOANS. Think of it, bankers realizing that putting a customer in an over-leveraged loan was a bad idea for that customer. No doubt a lot of those customers ended up with loans from other institutions, but this bank didn’t make that loan.

The customer will re-emerge as the center of the banking universe. Banks will realize that core deposits and basic lending products are the most important assets on their balance sheets, that their customers are the ones who own those products, and there will be a shift to acquiring and retaining customers as a core strategy.

Then, it’s about execution. Some banks will decree a "focus on the customer" and continue to deliver lousy service at a high price. A few will take a hard look at their organization and realize that they need to completely re-align, re-train their customer service teams and aggressively coach their front-line managers. And one or two will continue to do exactly what they were doing before because they never stopped thinking about what was best for the customer.

A.P. Giannini, the founder of Bank of America said, “If an institution becomes great, it is usually by the consent of the people it serves.” At this time, in this place, truer words were never spoken.

Suzanne has written a post about a new social networking site in banking called Mybanktracker.com. This site is a marketplace which allows customers to do comparative shopping for banking services that is the best for the them while it also helps them leverage the knowledge and experience of the millions of existing banking customers

I am not very sure if this is an entirely new idea and to me it does not seem compelling enough. There are several similar services available on the web but the real questions to me are a little more fundamental and is as follows:

• Customers are keen to search online for financial services products and compare them for best offers or interest rates. Are they comfortable as yet to leave a "trail" of their financial services relationships in such sites? I seriously question the readiness for the same amongst customers.
• Most social networking sites often work under masked identities except a few of them like "linked-in" where there is a  serious opportunity for "professional networking" value attached. But, when there are financial implications, are customers ready to give -away their identities, am not quite sure about it.
• Also, financial needs are a lot more "personal" than "social". By its very nature of needs, can such a need become "social" and "shareable". I have my own doubts. I believe customers would always want to know, explore, examine choices etc. and therefore have a freedom to choose their financial services partner but "personal identities" regarding where does one have their bank accounts and the problems that they face with some transactions will still have to remain in the private domain. The ones that can reach "social" domains are customer service issues which are neither here nor there as there will always be some problem one time or the other during a long relationship.
• Financial services decisions are a lot more relationship based. Hence, I believe a "hybrid" model is the one that will be successful. Knowing and comparing can be online but any issues related to the account has to be  one-to-one. Generic customer service and  product delivery issues  can be brought into a " collaborative  platform" to help new prospects feel a lot more reassured but specific account-led complaints have be tackled offline.
• Also there's differential risk-based pricing on interest and premia paid, this can hinder social networking in banking as many of customers would like to believe they have got the best rates! At least, that's how banks make customers believe they have got the best deal. Undoing this is like opening a pandora's box. Would banks ever be ready to do it even within their own web site. I am quite sure as it will be very difficult and seems a long way off.

What do you think? I am quite keen to hear feedback and comments on this topic.

There's an interesting report by Experian on how organizations are ignoring basis steps in taking care of their data. The report entitled, ‘Contact Data: Neglected asset seeks responsible owner’, surveyed 2,078 organisations worldwide, and revealed that the overall approach to data quality and integrity around the world is at best half-hearted and, at worst, cavalier.

Take a look at the topline of the report:

• Nearly a quarter of organisations (23 per cent) use data for strategic planning and decision making every day, responsibility for the upkeep of this data is passed from pillar to post.

• 59 per cent of respondents said that responsibility sits with middle management, from a CRM Manager through to an IT or Sales Manager.

• Only 50 per cent of organisations went on to say that data quality is championed by someone at board level.

• Organisations admitted that only half (52 per cent) of their employees have bought into the importance of data quality, revealing a lethargic approach to an issue that affects business success on a day-to-day level.

• Only 46 per cent of the same sample said they have a documented data quality strategy in place.

• 34 per cent said they do not validate any of the information they collect on their customers and prospects, whether that be name and address, contact number, e-mail address or bank account information.

My take: Looks like in many organizations, while customer data is touted as the most important asset, the efforts taken to  upkeep the quality leaves much to be desired. It needs commitment at the C-level, else it is not seen as priority by many operating managers. This must become a part of the KRA or KPI of every operating business head and CXOs must ensure compliance if they want their organizations to succeed in the future by leveraging this information.

The way customers pay and transact is undergoing a huge change. Today, most financial institutions have a trail of the payments, spends or usage in their transactional systems thro' many traditional payment methods. But, as these trends below show, there is a huge new revolution underway. If you are in the business of customer data & insight mining or in marketing to these customers, then get ready for paradigm shift in tracking & influencing their purchases.( Thanks David for this post)

Take a look at the trends:

1. Digital money
According to AC Nielsen, 90% of transactions in the US will be cashless by the year 2020. PayPal already has 63 million accounts, which makes it larger than most national banks,while in Korea during the month of June 2004, 300,000 people purchased cellphones into which you can insert a memory card containing all your financial data. So will physical money soon be a thing of the past? Most observers say yes, but don’t underestimate the power of human nature and tradition.

2. Contactless payment
McDonald’s is testing ‘contactless’ payment technologies in the US (and elsewhere). Just drive-in, grab your goods and drive off. Payment is made automatically by a wireless device on your windscreen linked to your bank account. Mobile phones can and will do much the same thing.

3. Pre-pay and stored value cards
10 million households in the US don’t have bank accounts and many of these use their pay cheques to buy pre-paid credit cards. Around 8.5% of households without bank accounts own pre-paid credit cards but this figure is expected to rise to 25% by the end of 2006. This is one reason why companies like Visa and MasterCard are getting into the act by signing up Rap moguls and singers like Russell Simmons and Usher to put their names on prepaid cards.

4. Private currencies
Pre-pay is a type of private currency in that you can restrict where people spend their money, in some cases to a single brand, outlet or service. This is good news for loyalty and also good (or bad) news for privacy depending on your point of view. For example, parents can give their children pre-paid cards with certain categories or locations locked off. However, the big news in private currencies is what’s happening in the air and in cyberspace. According to the Economist magazine, airmiles are now technically more valuable than the US dollar while over in cyberspace gamers are exchanging cyber dollars for the real thing.

5. Debt
The level of credit card debt in Britain has increased by 73% since 1997. The UK now holds 60% of all credit cards issued in Europe and has 75% of all European credit card debt. Spending on credit cards now represents 11% of GDP and 40% of people say they expect to use their cards more with the advent of new technology. Meanwhile, the amount owed to credit card companies in the UK now stands at GBP £53 billion. Figures for other countries such as the US and Australia are following a broadly similar trend. So what happens if (when) interest rates really go up? Trouble, that’s what.

6. Everyone is a bank
If everyone from supermarkets and search engines to phone companies and airlines offer banking services where does this leave the banks? The answer could be as back office low margin sub-contractors or maybe banks will re-frame themselves as ‘wealthcare’ businesses.

7. Micropayments
Once upon a time people used credit cards for big purchases like holidays. Not any more. Now you can buy a 99cent song on i-Tunes with your credit card or charge your hamburger at McDonald’s to your plastic. In 2004 the average credit card transaction in the US was $67.81. Back in 1999 it was $72.83. Add to this the possibilities created by contactless payment, stored value cards and pre-pay and you have a recipe for radical change in the financial services sector.

8. Proof of identity
With cases of identity theft going through the roof in most countries, there will be a boom for companies and technologies offering electronic and other forms of identity verification. There will also be an increase in products and services aimed at helping people get their identify back after its been stolen.

9. Mobile phones becoming wallets
Have you noticed how fewer people are wearing watches these days? Under the age of 21 a watch is almost a novelty as people use their mobile phones to tell the time instead. And so, the theory goes, phones will replace wallets too as people find it more convenient to carry their cash digitally inside their phones.

10. The death of cheques
  Seriously, who under the age of thirty uses cheques these days?

I was just going thro' some reports on the Gartner CRM 2008 summit. There are some highlights which I  saw was not new or earth-shattering but definitely makes a lot of sense to reinforce once more:

• Act on feedback, deploy changes and communicate actions to employees and customers - companies should view every contact with customers as an opportunity to deliver brand values and standardise on the business feedback management tool across the organisation and for all communication channels.
• Design processes from the outside in - most process redesign is done with the objective of improving operational efficiencies rather than to improve the customer experience; which requires the organisation to identify which processes matter most to customers then set about identifying what to improve: an outside-in approach.
• Act as one organisation to ensure consistency - the customer may interact with many parties as part of his or her business with a company. The challenge for the company is to ensure that information gleaned at one interaction is not forgotten in the next channel.
• Be open - organisations that want to improve the customer experience often become more open. Being more open may just mean opening up more channels or opening hours but it can mean much more. For example, some firms establish an environment where customers can support, promote, defend or refer their products and services through an online community.
• Personalise products and experiences - some personalisation options are simple, such as a website that enables customers to monogram products, while others are more complex, such as tailoring and personal pricing.
• Alter attitudes and employee behaviour - employees’ actions are often the most powerful improvements in a customer’s experience. Companies can alter employee behaviour in three primary ways: recruit the right types of employees, ensure standards such as policies, procedures and governance structures, and create training programmes and incentives that can modify employee behaviour patterns.
• Design the complete customer experience - many organisations have no plan or design for the customer experience. Companies with a focus on selling experiences focus on designing experiences. Customers of Disney, for instance, told it that difficulties in leaving the amusement parks often spoilt the experience, so the firm has worked to improve parking and traffic at its facilities.

My View:  The key question really though, is how do we enable all of this in organizations - to me it is about execution-employee focus. I think there is only a small mention on how do we reward, appraise and evaluate employees who should make this happen. This is really where the pieces begin to fall. There are conflicting KRAs in different departments and hence there are no compelling reasons to deliver a consistent customer experience. To put it bluntly, "if it does not hurt, it does not matter!"  This is where it needs to begin and end as the puzzles in the middle are put together!

According to a recent survey report by Allegiance - Pulse of America Survey, there are 4 key areas banks need to engage with customers.

Helpful Service:  Customers like doing business with a bank that saves them time and money. Banks have focused on wait times, and overall, they are meeting customer expectations. But saving time is not limited to waiting in line. For example, online banking services should be easy to use and understand, which creates a strong avenue to build engagement.
Clear Communications: Customers are reluctant to rely on banks for unbiased financial information, yet they thirst for knowledge about the newest and best products and services available to them. Customers are saying you can connect with me emotionally by telling me about a product that is relevant to my situation. 
Personal Connection: Customers say that their one-on-one experiences with bank representatives (tellers, loan officers, or managers) have a meaningful effect on their engagement, both positive and negative. Banks should not underestimate the power of each one-on-one experience in building lasting engagement, and they should establish training and processes to establish best practices. 
Respect:  Banks must do better at making customers feel respected. Engaged customers cite bank reps who deliver service with speed and confidence. Dissatisfied customers cite bank fees as causing stress, which makes them feel less respected. In particular, some customers feel disrespected when banks game the system to increase bank fees wherever they can. The message to banks: Engaged customer are also savvy customers and expect to be treated fairly.

I quite agree with personal connection as an important engagement pillar, as technology is taking away personalized service from banking. Hence, banks need to identify ways of building personal connection with customers as they invest more in self-service technologies.

Frost & Sullivan has released a report on managing the multi-channel challenges that retail banking is faced with today. According to the report, multi-channel banking has increased the potential for diminshed sales opportunities despite the expanded number of distribution channels!

The report says:

"...the number of bank channels and touch points have proliferated and so has the complexity of the service delivery which has added to the overall cost structure. Rather than lowering the overhead, the greater number of touch points actually prompted customers to increase their transactions - resulting in higher overall costs...."

Some of the best practice recommended are:

1. Meet and exceed the needs of the high value customers - Find ways to creatively service the needs of these customers.
2. Provide "consistent" quality of multi-channel  experience - Don't create a fragmented feel of interactions across multiple-channels.Create an organization-wide customer experience strategy.
3. Integrate across channels.
4. Provide action-oriented intelligence - Integrated data can provide proactive customer interaction measures.
5. Employ Event-based selling

I believe the key point here is getting different silos of retail banks to work together with a common customer experience strategy across mutiple product offerings, agreed metrics around different channels( for acquisition, retention, cross-sell and customer service issues) and drawing-up proper handshake processes between channels when customers interact with banks.