I love a good infographic. As I was enjoying one depicting Google’s 2011 earnings I learned that Google‘s number one customer by ad revenue is the financial services industry ($4b) with a big step down to the next largest source of revenue (Retail at $2.8b)
There has been a real shift in all industries on how consumers research products. There are increased independent review sources. Product information needs to be available and comparable. Google has the search market cornered (with 66% of market share) and they are getting stronger by moving up the value chain and into product comparison.
There is a rapid convergence of media, advertising, content, location, and payment. It is possible now to place the right product in the right hands of the right person at the right price and to make it very easy to complete the transaction. Google flanks this convergence from several key angles: the advertisement, the distribution of comparative information, location awareness and ability to transact.
Financial services are a major source of revenue for Google – but also a source of opportunity. Google advisor provides a comparison service by which like products (CD’s, Credit Cards, Savings, Checking) are compared. Herein lies the threat: This type of product/price comparison threatens the strategy of many financial services firms — particularly those that are pursuing a product differentiation strategy or a strategy that emphasises the customer relationship.
As consumers move more financial services decisions online and if Google succeeds at building an advisor relationship with consumers, the banks will need to have products that conform to the comparative structures that Google provides. If rate, term and minimum opening balance are the key comparative factors for term deposits when compared by Google, these now become the key product attributes. Other products may not see the light of day in a market where digital selection and comparison is the norm. A more exotic product such as an indexed term deposit where different types of risks and rewards are balanced would be difficult to compare with this approach.
There are some really positive aspects of this trend as well — for those firms focused on low-cost provider strategies Google represents an opportunity to be at the table when customers are making buying decisions. Big brands will need to compete with upstarts and traditional financial institutions with new entrants. Consumers can also hone in on those brands that are competitive on price and potentially drill down to understand the product offerings in greater detail.
As financial institutions consider the objectives of transformation it is important to consider the external factors. Having a full perspective of customer and a robust product factory can be a great strategy to combat these kinds of threats — and if they are not key considerations or objectives for your transformation program, why not?
So.. would it bite the hand that feeds it? Much depends on how the consumer/banking relationship evolves as technology and banking continue to converge. If banks can differentiate products and relationships in a way that is meaningful to consumers then the disintermediation of product selection will fail. But if the current trends continue and consumers are looking for the lowest common denominator when it comes to banking products, then Google will be glad to provide this service with a smile.
The observations are spot-on when it comes to highlighting the trends of how entities such as Google have become intermediaries in customer-bank relationships and influencing the outcomes. Analyzing the outcome and how customers are at the end of day benefitting, I see this an opportunity to the banks rather than a thread and worrying about “will it bite the hand that feeds..”. There are 3 prominent drivers that could be imperatives for the banks to see these trends as opportunities.
In the new age banking, the traditional distribution channels have crossed beyond the ones that are bank defined. We see how mobile, social commerce and inclusion are becoming the vehicles of building banking relationship. There seems to be a lot more collaboration and convergence between these channels. Banks who have welcomed this convergence and adapted, have led themselves towards realizing benefits. We have heard and seen enough about “one size doesn’t fit all”. Empowering customers with tools that allow customers to compare products and see which one best fits their financial need is good but not just enough. Banks can unleash the potential of analytics and be “customer aware”. This approach makes customers to believe that they are segment of one and benefit from having the right product at right prices via right channel and at right time.
Customers now clearly bringing startling difference about their preference and approach not only in banking but in all walks of their life. We would have learnt enough about the generation driven trends. Almost all the industries are experiencing this who have something or the other to offer to these customers who belong to different genre. Specifically when it comes to making a buying decision, the new age customers expect banks to play an advisory role instead of pushing everything and anything. More than any industry, banking industry is one such that has information akin to an ocean. Imagine if banks could effectively use this information, appropriately apply analytics and reach out to the customers beyond traditional channels in offering right product at a right time.
The 3C formula – Co-optetion, collaboration and convergence would make banks and non-banking entities including telcos to bring out the best to customers. Afterall, the differentiation is now about how the banking relationship is serviced and evolved. Isn’t it?