Customer Engagement Model under Attack

In my previous article, I discussed the need for enterprise architecture building blocks as the basis for creating and delivering outstanding customer service. We will now turn to the disruptive forces that plague the financial services industry.

In its paper 'Disrupting beliefs: a new approach to business-model innovation' McKinsey's starting point is that "every industry is built around long-standing, often implicit, beliefs about how to make money”.

In retail banking for example, these beliefs include industry concepts like ‘share of wallet’, ‘cross-sell opportunities’, ‘acquisition costs’, and ‘lifecycle value’, among many others.

“[These beliefs] are often considered inviolable, “ continues the McKinsey paper, “until someone comes along to violate them. Almost always, it’s an attacker from outside the industry.”

Nowhere is this more apt than in financial services. Attackers from other industries are certainly threatening to invade the hallowed turf once reserved exclusively for banks, insurers, investment and trading providers, and others.

In retail banking, for example, these disruptive forces include the likes of:

• Mobile wallets (such as M-Pesa)
• New payments solutions (like Apple Pay or Square)
• Cryptocurrencies (such a bitcoin)
• Social lending (eg The Lending Club or Prosper)
• Personal financial management tools (like Moven)
• Crowdfunding (eg KickStarter)
• Non-banks offering financial services (like Virgin or Discovery)

Other areas of financial services are certainly not immune to change as well. In the insurance realm, for example, disruptions like:

• Usage-based vehicle insurance using GPS and accelerometers in smartphones or sensors
• Online insurance aggregators and marketplaces
• Other industries encroaching (eg insurance bundled offers from cellular providers or retailers)
• Peer-to-peer insurance networks
• Autonomous, self-driving vehicles in the not-too-distant future.

For incumbents, this presents a worrying reality: newer and more agile attackers won’t have the internal cost structural issues, the legacy infrastructure and higher head-counts – meaning these cost-efficiencies can be passed down to the consumer.

The entrance of new disruptors proves that most of these "beliefs", embedded into the anatomy of a bank, often prevent the bank from meeting the modern customers’ expectations.

Next I will discuss how to address the needs of these modern customers.