I was reading the slides of Mary Meeker, the famous (now former) Morgan Stanley analyst, on 10 Questions Internet Execs Should Ask & Answer and among all the available information noted these slides on the unusually high level of innovation within incumbents. It is an interesting statement and it could in some ways be the basis of a different way to view banks and financial institutions.
It seems that big data and social will be two of the major factors that will shape the user experience in the future, including in regards to banking and financial services. For both these aspects, size matters and banks have what it takes to make significant moves in those directions (even if it may be more difficult in the social space)
– The basis of Big Data is … a lot of data. And most likely, when talking about human experience, it means a lot of humans. Banks, with their numerous accounts, transactions, information have the basis for providing a meaningful experience.
Citi, through its partnership with Bundle, is making good use of its aggregated anonymized information to provide important financial references to the Bundle PFM users (compare yourself with other users, identify most relevants shops and restaurants).
On the other hand, we can see that Mint has started the same logic with Mint data, however it comes at the cost of important investments to increase its user base and therefore obtain more meaningful data. (The relative monopoly of Yodlee makes it an exception where a new entrant has managed a relevant size, however an important investment was none the less needed to reach it.) Banks literally sit on a pile of opportunities from the information they can collect from their users and should work on providing improved experience to their customers by analyzing it.
– Social and Finance is a trick question and it is not sure that people want to share their financial details with others. However, social and the social graph is becoming much more. An interesting point taken from Mark Zuckerberg’s interview at web 2.0 (video here) is that they could have done social plugins for website earlier on, but they needed to reach a certain level of pervasiveness to make it a relevant user experience (what is the point of having social websites with no social interactions due to a limited user base?). Banks, because of the way they already have created relationships with people, communities, small businesses have the basis for building relevant social relationships for their customers.
On that perspective, the “prototype” of Banksquare: the new sharing service from your bank as envisioned by Chris Skinner gives a possible path for building this experience with the existing network available. Connecting local businesses, people, offers, reviews in a meaningful and valuable way (for example an exclusive offers for a bank client from the businesses served by the bank?) is something financial institutions should start working on.
Note: on that point however, having a large user base is a necessary but not sufficient basis for creating a social network. Google’s failure with Buzz is a good example.
To conclude: Yes incumbents have some of the characteristics to become relevant in a more data driven and connected world, it is time time for them to kick into overdrive to do so.
Included under the slides of Mary Meeker