‘Virtual banking’ for the Y-generation

Tomorrow’s business decision-makers want banking technology to deliver far sharper and slicker relationships. IAN CHITTICK Lloyds Transactional Banking’s Head of E-commerce, imagines how we’ll be winning hearts in the next ten years.

All of us now leading the development of the banking sector’s online business channels in the next ten years know one thing for sure: we simply can’t any longer comfortably imagine that one homogenised offering is going to work for everybody. The next generation of business decision-makers wants a much more subtle deployment of “virtual world” technologies to sharpen their banking experience.

For ambitious, growing mid-market companies, we’re already seeing this unmistakeable demand for a more relationship-based approach to banking online. The virtual world is going to look and feel much more like the branch would be in the physical world. And it’s certainly technically possible right now.

You’ll find the same things: browsing for information; someone to advise you; inquiries to answer; transactions to make – there’s no reason why all the things you might want to do in a branch you shouldn’t do electronically.

Those are certainly the tools wanted by the generation of business people – the “Y-generation” now in their 30s – who’ll be the senior decision-makers and treasurers in the next few years. As consumers, they’re already thoroughly used to doing a lot more in the virtual world than the people we’ve been designing bank products and channels for over the last ten years.

They’re comfortable and able online. They expect us to be, too. They’re getting their entertainment through YouTube and iPlayer. They communicate through Skype and instant messaging. They get information through RSS feeds or Wikipedia. They’re keeping right up to date by using Twitter. They’re maintaining personal relationships with Facebook and business relationships with LinkedIn.

And, for bankers, the truth is that we no longer have to rely on blunt transactional tools when there’s the technological scope to move towards online experiences that can inform, engage and enhance relationships.

Banks have gone through a number of e-banking iterations. Those with early generation platforms will struggle to develop the underlying architecture further. But banks now into third and fourth generation platforms already have frameworks which enable them to give creative thought to the real business issues rather than the purely technological ones.

We’re now looking through the customer lens at how the different parts of our banking operations interact with each other. In many banks, for instance, the foreign exchange and payments businesses are completely separate activities with different reporting lines right up to board level. That may suit the bank. But it isn’t what the Y-generation expects and it isn’t how they work.

The real question now is how to break through those banking silos so that our e-channels are structured according to what, say, the customer’s treasurer actually wants to have as the norm – a single point of access to payments activity and account balances, as well as forex rates to convert money between different accounts or make payments overseas. Ideally, that’s where we need to be – “silo-less” in e-banking’s virtual world. This is the next evolution.

Take mobile banking. It has lots of retail and small business applications. For mid-market corporate customers, of course, largely staffed with teams of office-based PC-users, there’s less scope to do things “on the run”. All the same, I can think of four ways in which smart phone technology might be more widely applied.

Biometric security is part of the same future scenario. The public key infrastructure (PKI) or two-factor authentication (2FA) we currently use to verify the identity of a person is still unquestionably robust and fit for purpose. But it’s vital to leave no stone unturned in investigating more advanced solutions as criminal threats gain in sophistication.

That’s why three-factor authentication (3FA) is one of the next measures we’re studying. It adds to what you know (your password) and what you have (your token or smart card) an additional component – what you are, for instance a fingerprint or a retinal scan.

The point is that customers themselves won’t demand these measures – they’ll simply and rightly expect the banks to tell them what’s currently needed to maintain a fully secure environment in which to do their business. And that goes for the evaluation and application of all “virtual world” technologies.

A smart bank, for example, might deepen its trusted status by setting up an e-banking business networking community through which customers in the same line of business or sector might learn best practice from each other. This is where banks can learn the lessons from the early social networking experiments and deliver experiences which can add real value to businesses and their financial value chain.

This is all very much the blue-sky thinking that’s now expected of us all by our Y-generation users for whom virtual banking is the very opposite of “remote”.

The conventional business relationship with a bank might typically have been built round meetings and phone calls, say, with a dedicated banking manager. The older generation has been used to personal encounters in an office, perhaps at a lunch table, maybe even on a golf course.

The younger generation has different expectations about what a “close working relationship” means. It will also be personal, but it can also be much more virtual. For many, it actually needs to be much more virtual, with personal contact significantly enhanced by social media-type networks.

To deliver this, there’s a lot of technology that has been tried and tested outside  banking. The opportunity for us all in banking now is to start thinking about the frameworks we might use to bring the most viable of these technologies together.

That’s already starting to happen. Majors like Microsoft, Adobe and others are developing frameworks to pull together innovative platforms and applications ‘behind the scenes’. For bankers, the challenge is to give customers what they say they want – not what we bankers think they ought to have.

It won’t happen quickly. The reality is that, for a bank to change or upgrade its channels is costly – as well as being potentially disruptive for customers. So it has to be done with a great deal of thought and planning – and not too frequently.

None of this has altered banking attitudes yet. But it’s going to. The change is coming. And for us, that’s exciting. We’re no longer just thinking about meeting customers’ needs in the Here & Now. We’ve moved far beyond that to the There & Then – using technology not for technology’s sake, but as the seamless way that we can add value to their relationships with us as bankers.

Online access
There’s theoretical potential for replicating internet banking capabilities onto a phone, but clearly there are challenges here. One is around security. The other concerns the usability of viewing detailed transactional data on a portable device. 

Customer alerts
This is where mobiles will really come into their own – using the mobile’s SMS capability to transmit simple transactional alerts, like “this money has been received”. Consumers are used to operating in a multi-channel world and mobiles are best suited to filling the gaps in the end-to-end customer experience.

Mobile Apps
Some banks are developing business banking Apps for smart phones. We’re certainly actively studying how we might apply this approach to support mid-market business customers and upwards. The key is to know which trends are for the longer term, and which are simply passing fads. 

Enhanced security
One of the reasons why e-banking is so successful – and why others find it so hard to break into that market – is that customers implicitly trust banks to look after their security. But, although there’s admittedly still a lot of work to be done in this critical arena, it’s clear that there is potential to use the unique identity of the mobile phone’s SIM card as an authentication device, rather than a dedicated token – which provides a real opportunity for user-friendly and easy-to-deploy security solutions even for PC-based on-line banking. 

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