Banks and telcos both have the same fundamental problems. In a race to modernize, which one would win?
They both have a swiftly shifting customer base, a world that is being turned upside down as everything becomes digital, costs to cut and shareholders to keep happy, now and in the future.
They both (in slightly different ways) manage our money – both do billing and payments.
Banks also have branches all over the place that customers don’t want, but unions, employees and governments are trying to stop them closing.
Telcos and banks have legacy systems that would make anyone born after 1990 run and hide cowering.
They both have common enemies. In North America and Europe they are called things like Amazon. In Asia Pacific they are called things like Alibaba. (Other common enemies are available.)
Telcos have a unique value proposition: connecting people to people, and people to stuff (let’s leave connecting stuff to stuff aside for now).
Banks have a unique value proposition: managing the money that allows people to get to the stuff so that they can buy the stuff.
With the legacy that these two sectors are burdened with, it is not surprising that they are looking at ‘digital/virtual’ as a way out (although how they get out and where they need to get to once they do, they have yet to figure out).
Recently the bolder telcos have decided that starting again from a greenfield site is the way to go – set up a new brand, with new technology, new billing, payments, and online customer service. Job done.
The same is true of banks. Citi has just announced that it is launching a digital-only bank, targeted (interestingly) at its credit card holders rather than its account holders with high deposits.
While the greenfield approach is intriguing, and beginning to show signs of working, you have to wonder what happens a bit further down the road.
In two years’ time you have a shiny new digital setup. You have attracted a significant number of the target audience you wanted. All seems good.
Yet you still have all those other customers, all with different products. Inertia is a powerful force, so getting everyone to move across is a pipe dream.
Whether you’re a bank or telco, the question is the same: what do you do with those customers? Have you actually just created another (albeit quite cool) silo?
Given that the prize will probably be won by the guy who is bolder and trusted more, then the money at the moment would have to be on the banks.