"Flurry of innovation" in financial service industry #OBL12
Orange Business Live 2012 also featured a number of sessions where customers and Orange experts discussed issues affecting their industry. I attended the financial services session and one of the most interesting presentations was made by Jean-Pierre Lemaire, Head of Orange Consulting, who looked at the remarkable range of innovation in the industry.
“There is a flurry of innovation in financial services,” says Lemaire. This innovation is helping support new consumer behavior. Turkey, for example, is poised to be an almost cash-free society, with 74 million consumers under the age of 29. Financial services companies there are being innovative with ATMs and NFC mobile payments. In addition credit cards are already serving as ID documents.
Look at the growth of non-traditional currencies as a sign how behavior is changing. For example frequent flyer miles are reportedly the world’s second largest currency. In addition there is apparently $1 trillion of the virtual Everquest currency in circulation.
Innovation in financial services is taking many forms. It includes B2C banking services that do not actually involve banks; new means of payment, such as contactless; accessing credit through smartphones and peer-to-peer insurance.
The massive installed ATM estate is even providing new routes in innovation. In Japan for example, ATMs offer a video conferencing facility so that you can communication directly with a bank teller.
Even checks, which are seen as a legacy method of payment are still widely used, with billions still in circulation. Standard Chartered offers a service called Breeze in Singapore where you can send a check direct from your smartphone.
Peer-to-peer is also becoming more popular and large banks are getting in on the act. Bank of America, Chase and Wells Fargo Bank have set up clearXchange, which allows consumers to send and receive payments for free via email or your smartphone.
Social networks are playing a part in innovation. Take Kabbage for example, they score business applicants for loans based on their social media score. Loans can be granted in real time, and after a request is made, funds of up to $20,000 could be awarded in seconds.
It isn’t just in banking where innovation is happening. Insurance is full of example of providers getting smarter about calculating risk. In the UK, for example, Fair Pay Insurance has developed a service targeted at high-risk drivers, such as young drivers or those that live in risky areas. The Fair Pay service on the face of it looks like a pay-as-you-drive system, but it is cleverer than that, something like "pay according to your risk."
Customers are provided with a GPS system (a commercially available TomTom device), which is combined with a black box to record their driving behavior. They are then charged based on their driving, such as speed, time and location of driving. In the future the service will be developed so that users can actually monitor their own driving as they drive and modify it to gain cheaper insurance premiums.
So in conclusion, Lemaire offers four pieces of advice for financial companies looking to innovate:
- technology is not the issue – what is crucial is to look at the customer experience
- simplicity is what matters does the service save the customer time?
- online banking should not necessarily be a pre-requisite for mobile banking, because mobile users far exceed online users in many countries
- don’t ignore your legacy assets, they can be a good source of innovation