Digital Banking Tips

Author: Tolga Tavlas
DBT: 2015

(EN: I'm a bit suspicious that this booklet is vanity published, something that a speaker hands out at a conference to help market his consulting services - it seems interesting, but my sense everything should be taken with a grain of salt.)

The word "digital" is often tossed about to make things seem more cutting-edge and sophisticated than they really are - so the author feels the need to clarify that what he means by "digital banking" is the delivery of banking services through digital channels - the Internet and mobile.

Also, "digital banking" refers to a specific and discreet activity. A customer who transfers money from one account to another is doing "digital banking" - and me may be doing this activity to interact with accounts that he set up with a brick and mortar bank.

The best banks serve customers through multiple channels: the customer can visit a branch office, use a mobile application, interact with an ATM, log on to the bank's website, call a contact center, or interact with the bank in the channel of his own choosing. While it is the hope of banks to push more and more transactions to digital channels, few customers want to have a "digital bank" that can only be accessed through digital channels.

Eventually, customers may prefer the digital channel exclusively - but to get to that point, banks must innovate. They must find ways to make the digital channel just as satisfactory to customers as other channels currently are for most transactions. It will be a slow evolution rather than a sudden transformation.

With this in mind, the author is not writing a book on how to become a digital bank. Instead, there are a collection of tips that financial institutions can try, little by little, to migrate customers to digital channels.

1: Accessibility and Engagement

Accessibility is fairly straightforward: a customer can only use something he can get to. For brick and mortar banking, accessibility means having a branch office that is located convenient to the customer, that is open during the hours that are convenient for him to bank. The qualifier of convenience is part of accessibility: if the customer has to drive four hours and the bank is not open when he gets there, the services in the bank are not accessible to him.

One might assume that a website is accessible to anyone with an Internet connection - but that ignores much. Can the site be loaded and display properly, given his hardware, software, and connection speed? More importantly: can he clearly understand what he needs to do when he gets to the site in order to get the service he desires?

As much as people claim to want digital, most of them are still analog (EN: a recent survey reported less than 2% of millennials, the most tech-friendly generation, do business with online-only banks and their #21 criterion for choosing a bank is a branch office within ten miles of home or work.)

For most customers, the branch is the first point of contact, where they go to set up their checking account. In some countries, there is a legal restriction against opening accounts online and in others the requirement to present identification makes the physical office a necessity.

The ATM is also an important factor. Originally ,the ATM was meant to make basic services accessible when the branch was closed, or in a location where a branch would not be built (an ATM in a shopping mall is cheaper than a branch inside one). Even in the digital world, people need a place to make deposits and withdraw cash. It is questionable whether the ATM or kiosk is useful for other transactions.

The call center is another important touch point, and many companies are making the call center less accessible (and less pleasant) by attempting to automate the handling of calls. The customer who picks up the telephone wants to be helped by a human being, not to awkwardly navigate a menu system that seems to be put in place to prevent them from talking to a person.

The Web and Mobile are also important touch points that are convenient for most customers and cheap for the bank. The main problem with these are that the security barriers put in place to protect customers end up locking them out of their own accounts. By one independent survey, 50% of customers who try to log in fail, and do not re-attempt.

There's also a mention of the amount of effort that is sometimes necessary to do things in the online channels. He suggests that about 12.5% of users who begin a four-page application form will actually complete it (EN: though that begs the question of what is a "page" - trying to count pages and clicks makes number-crunchers happy, but it's seldom meaningful.)

Innovation into accessibility begins with the customer: what is his channel of choice for a given transaction? How displeased would he be if he were unable to perform the transaction through his channel of choice? Has he ever considered or attempted to use a different channel? What would it take for him to be attracted to the channel that the bank would prefer him to use?

2: Removing Barriers

For financial services, we put barriers in place for the sake of security: an individual must provide a photo ID to withdraw money at a branch office, and they must log on with a username and password to view their account information on the bank's website. Even to create an account, we require people to prove their identity to us. It's all in the name of security and privacy, but it is possible that at times we are overly cautious, to the point that authenticating oneself becomes a noisome burden.

It's also noted that there are many customers who do not bank in digital channels for fear of security. Even the most digital-friendly "millennial" generation shun banking on mobile devices for security reasons. (EN: The statistic I saw was that 46% of millennials use digital banking - which means that 54% do not - but among those that do, they generally perform read-only transactions such as checking a balance or seeing if a transaction has cleared.)

People bemoan the number of usernames and passwords they have to remember for different sites and applications. There are so many that most people keep an insecure record (a written note near their computer). The author's advice is to let them use something easily remembered for their username (their name, email address, account number) rather than adding to their burden.

While there is need for security, there should not be a need for complexity. An abstract set of rules (the password must contain one uppercase letter, one lowercase, one number, one special character, no more than three of the same kind in a row, can't start with a letter or end with a number, etc.) makes it difficult to create and impossible to remember.

And in the end, the greatest threat to security is not that the username and password were too simple and easy to guess - it is that it was too hard to remember so the customer had to write it down.

There is constant talk of biometric authentication, and after decades of research the hardware and software to do this is actually available, though there are very few instances in which it is actually being used (and for most technologies, the ways to hack or circumvent it are already known).

There is likely no way for a single bank to pioneer this: the better way of authenticating will be created and promulgated outside of the industry (probably by technology and hardware firms) and adopted by banks, who will likely be a late adopter to allow the technology to be tested and proven out in less sensitive industries.

3: Payment Cards as Access Keys

The United States, more than any other market, is a credit-card culture. Everyone has at least one, and has had one for decades. They are nothing new, and people are comfortable with them.

In general, banks consider possession of the card to be proof of identity. It is virtually unheard of for a merchant to require a customer to present any other form of identification when they offer a card for payment - and the bank requires nothing more than the card number to authorize a transfer of funds. (EN: Today, there is the secure code on the back of the card, some payment systems require the purchaser to enter the billing ZIP code, but this is still pretty light.) Likewise, all that is needed is card and pin to withdraw money at an ATM.

This being the case, the author doesn't see why the card number could not be used as an access key. Enter the last eight digits and a PIN to get access to the website or mobile application.

He does acknowledge that physical cards may fade away - but much more slowly than "card less payment" enthusiasts would have us believe. Few merchants have the POS hardware in place for digital/touchless payment, and tap-and-go payment systems have been tried and failed with a few gasoline station chains. They may eventually get it right - but until this becomes ubiquitous, people will likely have cards that can be leveraged as a form of bank-issued identification for all channels.

4: Reducing Churn and Inactivation

While most organizations show an increasing number of customers, what's hidden behind those numbers is a great deal of churn. That is, the "growth" is not all new customers being added to a stable portfolio of long-term customers - it represents a large number of new customers who have been recruited to replace existing customers who have left.

A bank that is "growing" at a rate of 30% but has a churn rate of 50% is losing its clients every other year. A bank that shows a growth rate of only 5% but keeps churn to less than 10% is far more profitable and sustainable. It costs a lot more money to replace a lost customer than it does to retain an existing one.

In general, the churn rate for banking is 3% to 7% - but is speculated to be much higher for digital banking customers. The lack of a face-to-face relationship and the ease of moving money from one bank to another facilitate (and even encourage) churn for digital-only accounts. (EN: I vaguely recall a study that showed that the more channels a customer uses to interact with a vendor, the greater their chance of staying with that vendor.)

The author mentions that security measures are a cause of channel-switching. If a client is unable to get into his account, even if it is his fault (a forgotten password), he is forced to make a one-time channel switch to do whatever business he was going to do online. If it happens multiple times, the client loses interest in the digital channel. This is compounded by the difficulty of doing something like resetting a password. Security and privacy are important, but some banks go overboard.

A significant quote: "If a client has become a dormant client and has stopped all banking activity, there is not much you can do to activate him. Do not waste your time and energy." You have a fair chance of reactivating a recently churned client, but very little chance of reactivating ones who have been dormant for a long time.

Some specific suggestions:

He notes that zero-churn is a wonderful dream, but not a realistic goal, and cautions that the churn-rate for digital-only customers is always going to be higher than multichannel ones.

5: Digital Metrics

A general principle of business is that you can't manage what you can't measure - followed shortly by the discovery that managing according to the wrong metrics can be even more devastating than running your operation by gut-feel.

The short-term metrics of business measure the cost and revenue incurred in the current month, quarter, and year. These are important, but if they take precedence over long-term metrics of customer satisfaction, a businessman makes decisions that boost immediate profits while running off profitable customers. With this in mind, the author proposes the flowing performance indicators:

  1. Customer Interactions - The number of clients who log in each day and the number of transactions performed. Be wary of the number of dormant accounts that you discover. (EN: This seems arbitrary. It's more important to know when a client changes their pattern of behavior.)
  2. Customer Churn - The number of new accounts and the number of closed their accounts, yielding the rates of retention and churn. (EN: I would add the age of closed accounts - it means something different when someone closes an account that they opened last month as opposed to one who closes an account they have had for twenty years.)
  3. Market Penetration - What percentage of the total market you serve, segmented by product and channel
  4. Product Sales - Total number of products sold, by channel, accounting for hand-offs from one channel to another
  5. Revenue Type - The amount of revenue generated by fees and commissions
  6. Customer Satisfaction - Routine surveys to monitor customer satisfaction.
  7. Profit per Client - The amount of profit attributable to each client, broken down by product and channel
  8. Cost Per Transaction - The variable cost associated with any given interaction in various channels, along with number of transactions
  9. Conversion Rates - For any campaign, the number of people contacted who took the offer (EN: Looking to retention beyond the "take" is also important to know if the campaign got high-quality customers instead of short-term bouncers)
  10. Abandonment Rate - For any transaction in digital channels, the number of individuals who start an application and abandon before completing it. Ideally, this is granular enough to know precisely where they dropped out.
  11. Service Interruptions - For digital channels, the amount of time that the service was unavailable for technical reasons
  12. Cross/Up Selling - A report indicating the success of offers meant to get existing customers to buy more products or upgrade their existing ones. These figures should be considered in any sales report to separate sales to existing customers from those to unknown prospects. (EN: I would also add a cannibalization factor - causing existing customers to switch products that are lateral or downgrade.)
  13. Problems/Complaints - A number of reported incidents along with a nature of the complaint, segregated by product and channel
  14. Social Media Comments - The volume of traffic, positive or negative sentiment, and topics for which the brand is mentioned in the social media
  15. Fraud - Number of incidents and amount of losses, type of fraud, etc.
  16. Market Share - How products are performing comparative to competitors' products
  17. Market Size - Growth or shrinkage in the market in general: the number of people with digital access, the number of people who use digital banking, etc.
  18. Cross-Channel Metrics - The number of customers in each channel, and the number of customers who use multiple channels to interact with the bank

In a perfect world, all of these reports would be done on a regular basis rather than once in a while so that trends could be spotted. And in a more perfect world, there would be real-time data.

6: Video Banking

For many years, there has been great enthusiasm about video banking, in which the customer interacts with a banking representative through a television screen instead of meeting face to face.

For many years, the lack of bandwidth and expense were used as an excuse for not getting into video banking - but those barriers have largely been removed. Since most smartphones have videoconferencing capabilities, it is no possible for banks to leverage this channel.

(EN: The author continues to talk about this with wide-eyed wonder, but fails to answer a basic question: what value does video banking deliver that telephone banking does not? Adding a visual improves communication - seeing a face enables you to better gauge emotion, and showing your own enables you to better show, or fake, emotion - but this seems marginal. In spite of hardware, software, and social media support, video calling has not been adopted. There was a short spike in use from 2010-2012, but the novelty has largely worn off and most people simply do not want videoconferencing. The only sources that remain positive are the sellers of hardware and software solutions.)

7: Digital Marketing

The promise of digital marketing is in its intimacy with the user: it is possible to gather a significant amount of information, target advertisements very specifically, and closely observe the reaction of the prospect. For the bank, as for any seller, these capabilities hold a great deal of promise for finding the right customer at the right moment to present a compelling message.

Digital marketing is based on the belief in predictability: that what a person has done in the past is a reliable indication of what he will do in the future. But beyond advertising messages, observing human behavior is key to identifying needs that can be served with existing products - or by new ones that serve unmet needs.

He switches for a moment to talk about the growing popularity of the mobile channel, and the need to support customers in that channel. (EN: which is more hype than hypothesis given the research into mobile banking - it's an important channel, but will not eclipse other channels, and it is not the channel of preference for even the millennial generation, who gravitate to the branch.)

A burst of random tips follows.

8: Website Management

A bank's website is a critical service portal. Even customers who do not do online banking will use the internet to research a bank that they will visit in person. Thus, a good website is requisite - and a bad one (or none at all) can have a serious negative impact on the bank's financial performance.

Banks have been overly focused on their digital banking operations (enabling customers to access banking services via computer and mobile device) and have largely neglected their public websites (where people do research when considering doing business with the bank at all). Even for the digital operations, the experience is not as good as it ought to be, as evident in the number of abandoned transactions.

Bank websites tend to be organic and lack central management - and it shows.

Three basic questions to ask are: who visits our website? What are they trying to do? Are they able to do it? It is the customers, not the bank, that makes these decisions. A bank may wish to make certain transactions available to certain customers (e.g., to sell new accounts via the web), but this may not be their audience or their purpose - so the site fails to serve those who come to it while attempting to attract those who don't want to use it.

He suggests segmenting the audience into customers and noncustomers, but this can be segmented further. The noncustomer may be a potential customer, or a potential employee, or a competitor, or a cautious student. The customer may be a digital customer looking to transact or a non-digital customer who is looking for information to support engagement in another channel.

The notion of "surfing" the web is largely a misnomer. People don't leisurely visit random websites to alleviate boredom. They are generally on a mission. At worst they started at a search engine, trying to finds something, and were directed to a site where they expect to find it. At best, they know your bank and have your site bookmarked and came directly to you for a specific purpose. The audience is propose-driven, and a "good" website helps them to accomplish that purpose quickly and easily.

There are various analytical tools that may suggest the purpose of visits. You can analyze search engine queries to see what words they entered into a search engine that led them to your door. You can look at the most frequently clicked links and pages to get an idea of what website visitors are trying to find and do.

For the bank, not all pages are equal. A page that convinces a visitor to engage with your bank (purchase a product) is far more valuable than a different page that may get more "hits." While your goal is to serve your audience, it is only profitable if the service they get involves purchasing a product or doing something that leads to a purchase.

The author speaks of the "Critical 1%" of your website - these are your money-making pages, and they are where the majority of your investment should be made.

There is an oblique mention of a bank's mission. That is, a bank may have a mission to sell certain kinds of products - to the exclusion of other kinds. If your bank does not offer mortgages, prospects who come to the site looking for that product are the wrong audience. And if there are a lot of them, it's a sign the bank might consider selling that product if it can do so profitably.

There's some mention of subverting customers - those who come to your site seeking one product, but you wish to diver their attention to a different one. (EN: This seems a bit hubristic to think you can convert more than you frustrate.)

And finally, what happens on the web does not stay on the web. Just because a customer perused product information on your website and did not buy immediately does not mean that you have failed. The customer may research online and then visit the branch office to buy. For some people, this is their choice and you will not convince them to become online customers.

9: Mobile Payments

Currently there is a lot of competition in the mobile payment space. Thus far, no system has become standard and widely accepted, though there are a few candidates - most notably Apple, who has its hardware in the hands of the majority of smartphone users worldwide, and Google, who wishes to own everything internet. In the US, enthusiasts have heralded mobile payments for many years, but it has been show to take hold and remains in its infancy.

Aside of phones, firms are experimenting with other payment devices - wearables such as FitBit, key fobs, and the like. (EN: The author skirts the issue of the tap-and-pay experiment with gas stations, which tied their gas card to a key fob, and which failed to produce financial results or improve customer loyalty. It was an additional cost to install and maintain seldom-used equipment that cannibalized sales and increased fraud.)

It's also suggested that the US will follow models that have been successful overseas, but this seems doubtful. In spite of the hype, the Japanese have not taken to mobile payments - rail commuters use a mobile rail pass to pay for tickets and other items from railway station vendors, but not outside of that limited environment. There's also some excitement about developments in Africa, where many people are unbanked, do not have enough money to maintain a bank account, and use mobile as a person-to-person payment system. Neither of these situations is analogous to the US market.

There are a few key concepts to be aware of right now:

Ultimately, a mobile payment requires money to be moved from one bank account to another, so banks will be engaged in the system, with digital firms attempting to relegate them to the sidelines and claim the lion's share of the profit.

The author notes that most of the major banks are playing the waiting game - letting the aggressive technology firms assume the risk of establishing a new standard for payment. In the end, the bank makes its money (most of it) regardless of whether the customer uses a physical card or a virtual payment method.

A bank may consider whether it wishes to be more aggressive - to invest in developing the technology in hopes of getting on the ground floor and taking first-mover advantage when (or if) their chosen partners become the standard. There's excellent potential, but high risk.

10: Partnering with Digital Innovators

When it comes to mobile banking, partnering is virtually a requirement. The technology firms with innovative ideas for hardware and software solutions don't have the banking infrastructure to support their notions, and the banking firms do not have sufficient technology expertise to extend their services to the electronic world.

One drawback, as mentioned in the previous chapter, is competition and lack of standards. To partner with one firm marries your bank to their solution, which may win or lose. The "big" brands (Microsoft, Apple, Google) seem like safe bets - but each of these firms unseated the industry leaders in their time, and may be unseated by an up-and-coming firm.

Another drawback is security: when a new technology is hacked, who is left holding the bill for all the money that has been stolen from users' accounts? The start-ups are small firms without financial resources, and expect their banking partner to assume the risk.

The processing cost also falls to the bank, which can be sieged by a large number of small transactions, increasing their operating expenses while doing nothing for their revenue. The users of digital payments are simply shifting their purchasing habits from methods that profit the bank (card payments) to methods where the bank must share profits with the technology provider.

Also, technology partners may be looking for banks to bear the marketing expense of promoting the new technology to their customers, and to stake the reputation of the bank's brand on a fledgling technology, bearing the bring of bad PR in the case of any misfortunes.

And last, there are often struggles over who "owns" the transaction data, the use of which can sometimes be more profitable than the payment processing fees. Handing your customers' transaction data over to an outside source who may use or sell it as they see fit, while creating a gap in your own customer data.

Partnering with digital providers may be a necessary evil, and it is important to consider the granular details to ensure that this partnership doesn't turn out to be parasitic, feeding the technology partner on the life blood of the bank.

11: Digital Analytics

The primary motivation to "go digital" was to reduce transaction costs. It costs far less for a customer to get information or authorize a transaction on the website than it does on the phone or in a branch office, so banks counted transactions in each channel to gauge the success of their online presence.

(EN: The math on this has always been dicey - dividing overhead cost by number of transactions to arrive at a per-transaction amount. The cost of the branch office is the same whether five or five hundred customers walk in the door on any given day, and the cost of a website is the same whether five of five thousand people visit. While it's true the web costs less - the server and connection for a site that serves the world is less than the rent and utilities of a single branch office - the per-transaction calculations are misleading, particularly when they are used to calculate the "value" of channel shifting. Do a hundred thousand more transactions online, and the expenses of the branches do not decrease.)

A second wave of metrics arose from measuring the performance of the website as a store - instead of merely cost saved, it could be measured by revenue generated (presuming that a customer who opened an account online would not have walked into a branch).

There is some explanation of basic website traffic statistics - the number of page views, unique visitors, referrals, and so on. This is not unique to banking and better information can be found in other sources.

Monetary measures of revenue are more significant: there are transactions that directly result in profit to the bank. When the customer does any transaction online that incurs a fee or commission, the bank profits directly. One could go so far as to say that any revenue generated by a customer who opened an account online ought to be credited to the digital operations.

There are also various metrics of the value-add of digital operations for multichannel customers: a customer who does business through multiple channels (web and branch) gives more share of wallet to the bank and remains a customer for longer. Even transactions that generate no revenue (checking an account balance on a mobile device) contribute to overall satisfaction, profiting the bank across all channels.

There's an oblique mention of the value of data collected online - being able to correlate activities to the profitability of an account - though this is a chicken-and-egg argument as to whether performing certain activities makes a customer happy, or an already-happy customer is more likely to perform those activities.

12: Mobile Marketing

Talvas feels that mobile marketing will become a critical success factor in future. (EN: I'm not sanguine about that. Users have not welcomed mobile advertising and react negatively to being interrupted in the course of their lives. They want to be in control of their device, not distracted by it.)

Mobile does not merely mean cellphone, but any device that is kept on someone's person as they venture out into the world - digital watches, tablets, glasses, handheld game consoles, and even cameras - provided that they have the ability to connect to a network to receive data and can be used to communicate in a context-sensitive manner.

Some tips follow:

13: Digital Banking Security

One of the greatest challenges to getting customers to bank online is their distrust for the channel. Their concerns about their own security and privacy often trump the confidence in the bank's brand. While there is in fact very good security for web and mobile applications, it is about the perception of the customer, who doesn't understand the technical details of military-strength encryption, and only feels his own fear of the unknown. You may simply have to wait for customers to overcome the fear of digital on their own.

(EN: The federal reserve's study of mobile banking finds that security is the main thing that keeps people from doing banking online. 75% of people who have smartphones and don't bank online indicate there is nothing a bank can do to make they use the channel, and security is the most often cited reason for concern.)

Even customers who are comfortable with the security of the digital channel are skittish and overreact to news of a security breach. One "minor" incident can cause a mass exodus very quickly, so security must be attended to and any bank that does business online must have a solid plan for how it will react if a problem arises.

(EN: I did some research on this and wasn't able to find anything quantifiable from a reliable source. There is general agreement that customers are less sensitive - most expect the bank will react and protect them from any loss, and this bears out in reality most of the time. Studies on attrition do not list security as a major reason for switching banks, so the observation that customers will stay with a bank that successfully resolves a breach seems plausible.)

14: Fraud Detection Systems

Banks are largely concerned for their own welfare, and the possibility of fraud in digital channels is a serious concern. The criminal who doesn't have to set foot in a bank, and may not even be in the same country, is emboldened by his distance and anonymity, and even otherwise honest people feel less reluctance to try to "trick" the bank into giving them something they don't deserve.

The greatest problem with fraud detection systems is that they are too aggressive and conservative. They often flag a legitimate customer or transaction as fraudulent. Their sympathy and understanding for the bank dries up when a transfer fails or a payment is declined, placing them in an awkward and difficult situation.

(EN: In my own experience of analyzing complaints from banking customers, some of the most frequent and passionate ones are where the customer has been prevented from doing something they intended, usually because the transaction was flagged as suspicious.)

The author lists a number of transactions that should be subject to scrutiny to prevent fraud - basically anything that causes money to leave the bank (EN: which seems common sense). Internal fraud is less common and easier to rectify because the money remains in the bank's custody, it's just a matter of which account it should be credited to.

15: Hacking Smart Phones

In the pre-digital world, criminals had to go to a bank to rob it. But now, a bank (or at least an individual's bank account) can be robbed from virtually anywhere - the cell phone of every customer is a portal through which a criminal can gain access to the banking system.

And the mobile phone was not created to be a secure device. Its inventors never envisioned that it would be able to transmit data between computer systems, nor considered that their device would be an access point to the user's financial accounts. So they did not design the device to be secure.

So making cell phones secure is, itself, a hack - in the original sense of the word, "hacking" was attempting to make a device do something it was not originally intended to do. The computer was meant to be a sophisticated adding machine, and the wireless phone was merely a long-range walkie-talkie. They were not originally designed to do the many things we use them for today.

So when people started using their phones for financial transactions, there came the demand to make an insecure channel secure - and a layer of security was haphazardly cobbled onto the device. Even to the present day, it's functionality first, security afterward.

He comments on some of the ways that a phone can be used by miscreants: to steal data, to record what its user is doing, to impersonate the owner to gain access to services, and to take control of the device to use it as an agent or proxy for criminal activity.

16: Response to Smartphone Hacks

While there are some very smart and sophisticated computer hackers in the world, most hacks are perpetrated (or attempted) by those who are far less savvy. In most instances, a client's cell phone is compromised because they left it in a taxicab or at a restaurant, and some opportunist picked it up and will clumsily attempt to see if they can guess the password (presuming the owner even bothered to password-protect his phone).

He mentions an experiment in which researchers attempted to leave a phone at a cafe to see what would happen. The problem was, people would often notice that they left the phone behind and call out to them - it took "many trials" to be able to "lose" a phone in a public place. And what they noticed when phones did fall into the wrong hands is that more attempts were made to snoop through their social media accounts than their financial ones.

(EN: There is no reference to this study and I was unable to find it online - there were mentions of a few informal studies in which half of lost cell phones were returned, 75% of stolen phones were wiped. But there were also a few accounts of an experimenter who struggled to leave a phone behind in San Francisco and another who mentions it took "four days of desperately trying" to leave his phone in a public place in Amsterdam before someone stole it.)

Back to point, most "stolen" phones are simply lost and fall into the hands of an unsophisticated "thief" who will, at most, snoop through your photos and wipe the phone so he can use it with his own account. And even those with a bit of intelligence will use common techniques and a few canned hacks one can find with a Google search - most of which are already known and countered by hardware and app makers.

(EN: So the point here, and rightly so, is to be cautious but not paranoid about security of clients' mobile devices. The notion of a "criminal genius" who sets out to steal an exploit smartphones is largely science fiction.)

17: Voice Biometrics

Of the various forms of biometric authentication (fingerprinting, retina scan, and the like), the author sees the greatest potential in voice biometrics - using the tone and quality of voice to identify a person.

He mentions active authentication (a person speaks a preset pass-phrase) and passive authentication (reads the voice regardless of what the person is saying). Active is faster and more accurate, but is easily defeated (a high quality recording of someone's voice) - passive is harder to defeat, even with sophisticated equipment.

The value of biometrics is the ability of a person to authenticate without having to memorize a password or maintain a physical artifact: their voice is their password. HE suggests the accurate rate under good conditions is about 96%. But of course, anything that affects the quality of a person's voice (allergies, a cold, dental work, background noise, a poor connection, etc.) can cause a person to be unable to validate.

In the end, he's a fan of the idea - but he doesn't present much evidence from actual implementations or suggest ways in which it can be used other than user authentication.

18: Location-Based Services

The primary use of LBS is to help a person find physical facilities proximate to their present location: using GPS positioning to tell them where there is a nearby restaurant, hotel, supermarket, ATM, or bank branch location.

There has long been the desire to use LBS for advertising - to send a promotional message to a person when they are in a specific location, such as letting them know a special available in a coffee shop as they are walking toward it. (EN: Users universally hate this, and do not wish to be disturbed in their daily lives, so push-advertising has not been successful ... but giving the ability to the user to get this information on demand has had some success.)

He goes into some detail about the various technologies that are used to do this (GPS, Wifi triangulation, etc.) and the difference between indoor and outdoor location services. He also mentions that in addition to sending a message to the device, LBS can trigger external events such as the content of digital signage.

There's a bit about integrating LBS and POS that would enable banks to work out deals with merchants. The merchant system would recognize the individual as a bank customer (eligible for the deal) and the bank system can validate that their customer was in a specific physical store. The ability to determine whether a person (or at least their device) is in a specific place can help reduce fraud.

There's also a brief mention of spying on customers to gather intelligence on the places they spend money, or even to detect when they visit another bank's branch or ATM location.

Another brief mention of augmented reality - superimposing information and animations on the cell phone while the camera is used to view the real-world environment. Even the author's description is a little pubescent, mentioning "elephants dancing, rabbits singing, and our Branches/ATMs shining"

19: Social Media

Social media has many businesses excited and confused. Marketing departments run campaign to increase likes and comments, but no-one has been able to clearly monetize how these activities by prospects and customers correlate to dollars and cents. Retailers who advertise on social media can measure clicks and purchases from those channels, but unless an activity leads to a purchase, there's no clear connection between being liked and being purchased.

The author flatly states that "banks cannot compete with disruptors by providing banking services at social media levels." The best they can do is use social media to harvest intelligence - capturing data about prospects and customers and using it to inform promotional campaigns.

He also concedes the hostility people have toward commercial interests in social channels. (EN: another author made the analogy of a salesman trying to "work" a party, bothering people who are trying to relax and enjoy the company of friends with commercial pressure.)

Much of social media is defensive: it's about recognizing when negative remarks are made about a brand in a public forum and showing up to respond before it spins up.

There's some mention of brand-building, often by publishing non-commercial information that catches attention or joining public conversation in a lighthearted manner. For consumer brands, being cute and funny often draws positive attention - though it's not something that financial institutions can generally leverage. While it's OK for leisure brands to be cheeky, it's not something one expects (or tolerates) of a bank.

20: Branches

Digital channels are the main channel for many banking customers - but even for the digital enthusiast, "the branch is still where banking starts and ends."

He mentions personal experience with clients, whose first fear was that digital would replace the branch. This has not happened, but the kind of business the branch performs has shifted more toward sales and advice. Transactions such as balance inquiries are very frequent but have a low impact. Sales and advice interactions with customers are less common, but more critical to the long-term success of the bank: they create accounts.

There's a brief mention of the inadvisability of attempting to force customers to the digital channel. While it is certainly more cost-effective for the bank to do everything online, customer loyalty and satisfaction depend on face time in the branch office. If the bank attempts to force customers to online channels, it will find that the customers instead change banks. Adoption is at the customer's discretion, not the bank's insistence.

(EN: Another source mentioned the change from the teller to the ATM faced similar hurdles. It took time for customers to be comfortable banking with a machine, and ultimately made the change because the ATM was better for them: faster and more convenient than walking inside.)

There is some mention of using branch employees to promote the digital channels, such as giving employees incentives and rewards to be "digital ambassadors" to encourage customers to leverage the digital channel instead of walking into the branch.

Wrapping it up, he ultimately opines that digital channels will cause branches to evolve, but will not make them extinct.

21: Call Center

The call center was a pre-internet method of decreasing traffic to the branch while making services available outside of working hours. Ideally, one can "simply dial a few numbers, surfing through the IVR, and finalizing your task." In reality, it is often a very frustrating and inconvenient experience as banks attempt to reduce the amount of time its employees must spend serving customers. The result is frustrated and angry customers who cannot get the service they need through the voice channel.

He mentions some of the basic call center metrics - the call queue, waiting and handling times, first call resolution, call abandonment, and revenue generation through the phones. All of these are focused entirely on the efficiency and profitability of the channel for the bank - not satisfaction for the customer.

For support operations, most inbound calls come from customers who have tried and failed with other channels to get the service they need. The website was offline, or they were unable to log in, or they were tired of hunting and decided to call for help. These customers are angry the moment they have to dial the phone.

For sales operations, the phone is used by customers who find it inconvenient to come into the branch office, but who lack the comfort and confidence to open an account online. Because these customers are not as motivated as branch visitors and not as sophisticated as digital acquirers, it is very easy to lose the sale.

From here, the author speaks a bit of security on the phones: using passwords, PINs, knowledge-based authentication, caller ID, and voice biometrics to make sure the person on the phone is actually the customer. The call center is a major exposure to fraud, even more so than the digital channels.

22: ATMs

There's a brief mention of the rise of the ATM, which began as a service window located onsite at the branch that could be used to deposit or withdraw outside of working hours. Then it was found that customers preferred doing business at the ATM rather than walking in even when the branch was open. And finally it was found that an ATM could be located offsite, away from a branch to enable customers to access their accounts in other locations. Currently, he suggest there are more than three million ATMs worldwide.

Most ATMs still use the card-and-pin methods of access, but he mentions there are experiments with "cardless" ATM transactions that enable the customer to authenticate via a keyboard (use their website password), their phone, or even biometrics.

The primary use of the ATM is to take deposits and make small cash withdrawals. It's mentioned that the ATM is expanding to provide other services, and can do anything that would be done with the website or mobile application. (EN: I'm not sure that's a good thing - just personal experience as a customer waiting in line to make a quick withdrawal behind someone who's at the terminal for several minutes.)

He mentions some ideas for additional capabilities: a full keyboard, barcode scanner, biometric readers, video presentations, on-demand printing, and video conferencing. There's a suggestion or two for each of them, but the uses should be self-evident.

He also mentions the use of inside-the-branch ATMs, which are basically kiosks. Because of the physical security, an in-the-branch ATM can do things that the bank might be reluctant to do outside - larger withdrawals and more complex transactions such as opening accounts.

23: Dumb Phones

When we speak of mobile banking, we often think about the "smart" phone - the one with a sizable screen and keyboard, whose input and display capabilities are similar to that of a small laptop computer. This overlooks a significant portion of the mobile community whose phones are not smart.

(EN: Checking recent statistics with the PEW research center, the use of smartphone has risen rapidly over the past seven years. Only 35% of mobile users had smartphones in 2011 - but today it's 77%. So it's only a quarter of the market, but that is a significant number of customers and it may be a decade or more before the "dumb" phone is phased out entirely.)

From here, he speaks of SMS, which is the primary use of a dumb phone (other than making voice calls) - and it's worth considering because text chat via SMS is also one of the most used features even of smart phones (EN: younger generations text far more often than they call.)

He mentions that SMS can be used for short messages and direct exchanges: a person can check their balance by text faster than logging into the bank's mobile application or website. SMS is also commonly used for push notifications (a security alert) and other quick messages where a small amount of information will satisfy a need.

Because many "dumb" phones have small screens and text input is difficult, he toys with the notion of quick-service via voice line. Instead of texting to receive the balance, why can't the customer simply call a special number, say the words "checking account balance," and get their balance spoken to them? If called ID is good enough security for SMS, it ought to be good enough for a voice call.

24: Alarm and Reminder Services

Alarm and reminder services send a message to the user based on the trigger. The trigger may be a time-based reminder (send account balance at 8 am every day) or event-based (send a notice whenever a transaction brings the account balance below $100).

It's suggested that these notices can be provided as a separate service for an additional fee (EN: but they are so commonly offered at no charge that customers are unlikely to tolerate that) - but the main value is cost reduction. An SMS is much cheaper than a call, and can prevent costly and unpleasant events such as a bounced check or a refused POS charge.

It's also mentioned that users find intrusive messages a nuisance - so it would be unwise to make them automatic and forcing the user to opt out. Instead, present them as a free feature and have customers opt in when they create their account.

There follows a random list of questions:

He also mentions the value of non-alarming messages. The ability to reach a customer and assure them that all is well in certain situations (their card was eaten by the ATM) can assuage fears and reduce calls.

25: Social CRM

The author mentions Social CRM as being based on external data sources - aggregating the social media posts and comments of a customer to better understand their financial behavior. It's different to social media marketing in that it is about listening rather than speaking.

(EN: The remainder of this section is entirely effuse, with hints and intimations about the value of social listening, but nothing that seems concrete or actionable for the reader. It seems likely the author is only vaguely aware of the practice and has some general enthusiasm, but no clear purpose for engaging in a social listening campaign.)

26: Big Data

The author mentions "big data" because it was a very trendy topic five or so years ago: the belief that there is a wealth of data that exists about customers in databases that largely sits ignored, that can be mined for gold. And what's been found is that "Everyone talks about it and mentions how important is, but except for a few, many do not know what to do with it."

Banks have long been seen as having some of the broadest and most valuable data about customers. Whereas a retail chain has information about what a customer purchased at that store, the bank knows how much a customer spent at every store. It knows every check written, every card purchase, etc., and has a comprehensive perspective of a customer's financial habits. But again, the bank has done nothing with this trove.

Another fad in the industry press is to talk about the shift from transactional banking to relationship banking - from passively accommodating whatever financial activities customers initiate to being more proactive in anticipating what they might need or benefit from. This, too, has largely failed to materialize.

Even the author seems to shrug: "one way or another, banks should learn how to profit from big volumes of customer data." It should inform us of how to reach out to the right client with the right solution at the right time.

He suggests "there are a few banks which have done an excellent job in putting big data into practice" - but he doesn't name them or provide any examples of exactly what they have done.

He lists a number of things that big data "might" be useful for (acquisition, risk management, deepening, predicting needs, reducing churn, increasing satisfaction, improving call center efficiency, better segmenting the market, etc.) - but again, fails to explain quite how.

He ends with the advice that big data is not a project - something that is done once and forgotten - but it should instead be an ongoing program to mine and leverage intelligence from customer data.

27: Gamification

Another trend that has largely jumped the shark is gamification: using techniques borrowed from video gaming to make mundane business seem more meaningful and exciting.

(EN: Again, the author becomes vaguely enthusiastic and provides no useful information. There are books on the subject, and it's something to proceed with extreme caution because poorly done gamification is hokey and undermines consumer confidence. It also may not be a good fit for banking because its main purpose is to create goals and quantify things that are abstract - like achieving "good health." Banking is already quantifiable in dollars and cents, and financial goals are easily understood and have intrinsic value - so it's often unnecessary, and does more harm than good, to add an artificial layer of meaning to something that is already meaningful and concrete.)

28: Artificial Intelligence

Artificial Intelligence is the stuff of science fiction - in which computers are able to apply logic in a way that is very much like a smart and well informed human being.

(EN: Again, the author becomes vague and effuse, enthusiastic about technology that does not yet exist. At present, AI is still quite primitive - and not very intelligent. At bet it is applying statistical analysis to inputs that are not clearly defined, attempting to make decisions based on incomplete data, and deciding which functions to perform based on its analysis. It is evolving, but is currently more comical than impressive - and while it's worthwhile to daydream about how it might be useful in the future when the bugs are worked out, that may be several more decades in the future.)