Banks and Innovation at SxSW
Within SxSW there is a small group of die hard people that are involved in the financial services and banking industry that meet to discuss the role technology will play in the evolution of this market. Since I work with many companies in the financial services and payments industry, I always make it a point to check out the sessions.
The two most intriguing sessions of the second day of SxSW day both dealt with innovation. The first claimed to look at changes in the way lending happens thanks to new ways of looking at data. It really ended up being an excoriation of payday loans and an examination of new types of lending - from community based business loans to modified payday loans that are designed to focus solely on people paying their bills.
Payday loans and serving the underbanked are two issues that the industry has grappled with for a number of years. While I learned about some new technologies, a key takeaway is one that translates into the second session as well, clearly communicating your deals and offerings is a great way to build loyalty. And if you have a new service people need, they are likely to try it out.
The second panel of the day had a very unassuming name, "Banks, innovate or die!" it ended up being one of the most contentious and interesting panels I have been to in a while. A former Citibank
employee, Lendingclub executive, SmartyPig and others were discussing the future of innovation in the banking industry.
The comments were cutting and included such gems as:
- Citi is your bank, not your mother! It's not our job to remind you to pay your bills
- Customer service is easy when you have just a few thousand customers
The key takeaways from this session were things that I have heard quite a few times in the past but are worth repeating:
- People expect greater transparency from their financial institutions. To me though this is not necessarily how they are using your money, but helping customers better understand how their finances are being used as well as what fees they are being charged and what services are available. (full disclosure, Schwartz represents companies that provide services and products for banks and credit unions.)
- Customer service is another challenge. Some called it a way to innovate, I see it more as a way to differentiate. It is important to note that the baseline customer service expectations continues to grow, so FIs that aren't using it as a way to get closer to the customer are missing opportunities and giving start ups and credit unions a chance to take their customers.
- The most interesting point was made at the end of the session. The next battle for banks will not be against startups but likely against Google and Apple and others.
While the companies differed when discussing competitive threats, there was almost universal in identifying where they expect to see innovation over the next few years - mobile banking and payments. This is a shift even bigger than the introduction of the ATM, particularly as the younger generation that has their mobile phone as their main communications device begins to graduate college and enter the workforce. The moderator stated that by 2015 mobile will be the
primary banking channel. The other area for innovation that many identified was in P2P loans.
The only other area of universal agreement was the need to revise FINRA rules to allow for greater social media engagement. Overall though the hours of discussion drove home two points:
- The industry is experiencing a significant increase in the pace of innovation which will likely accelerate with mobile.
- It is an exciting time to be working with companies in the financial services industry.
Posted by Mark McClennan on March 13, 2011 at 11:34 PM
