In the past few posts the executive team completed an environment scan for exampleBank and noted what they feel are the most important trends and forces to be considered. According to how it all fits together it is now time to assess opportunities and threats for exampleBank.
- The current banking industry is bloated with legacy costs that exampleBank can avoid. By passing lower costs on to customer in the form of higher interest rates and lower fees on savings accounts, exampleBank can use consumer sensitivity to rates and fees to create a powerful competitive advantage.
- Most banks in the industry are saddled with high costs from a legacy branch infrastructure that is declining in importance. exampleBank can gain a cost advantage by not providing branches.
- Most banks in the industry have costly processes for selling and underwriting loans. LendingClub and other similar services provide a lending platform that is growing exponentially. exampleBank can gain a cost advantage by purchasing loans from the lending platform.
- Most banks in the industry are saddled with expensive core banking systems that are required to service a bloated product set. By only offering a single, simple product (a SaveOrSpend account) exampleBank can gain a cost advantage.
- Most banks in the industry maintain a costly ATM network. exampleBank believes that cash usage will decrease as electronic payments increase, reducing the need for ATMs and the cost of leveraging existing ATM networks. In the short-term this will be a massive savings because exampleBank will not invest in any ATMs. In the medium term it will be a wash due to ATM usage fees from other banks. In the long-term exampleBank will retain a cost advantage as other banks maintain underutilized ATM networks.
- Most banks in the industry maintain an online banking service which is increasingly duplicated by similar mobile banking services. exampleBank believes that mobile banking usage will continue to increase and online banking (along with the sales of PCs) will continue to decrease. Over time the cost advantage of not having an online banking platform will overtake the customer experience disadvantages of a mobile-only service. exampleBank believes customers care more about rates and fees and will increasingly be willing to give up the online channel.
- Consumers increasingly value the convenience that comes with a digital relationship. Deft offers save time and naïve offers waste time. Pre-filled forms save time and blank forms waste time. As customers have less time to waste they will choose the bank that saves them time. Digital relationships are based upon the ability to (a) extract information about the customer from day-to-day interactions and transactions, (b) use that information to build an understanding of the customer, and (c) use that understanding to make deft choices about how to treat them in each future interaction. But most banks in the industry are not so deft, with little ability to assemble any coherent understanding of a customer from interactions and transactions. exampleBank can create a competitive advantage by excelling in customer engagement.
- exampleBank customers will be exposed to fees and competitive offers every time they use a competitor’s ATM to get cash.
- A key feature customers use to select a bank is ATM locations. exampleBank will need to convince prospects that attractive rates and fees are more important than ATM location. They will need to provide exceptional mobile payment services to prevent existing customers from defecting to banks with ATMs.
- Banking regulations for Know Your Customer (KYC) were designed (and continue to be refined) on the assumption that banks have branches. exampleBank will need to find innovative ways to service customers in compliance with KYC. New regulations could threaten exampleBank’s novel business model.
Next on the agenda is a quick self-scan to identify exampleBank’s strengths and weaknesses.