Is the Retail Banking Industry the Next Kodak?Christina Sommer |
The banking business has always been competitive with one bank emulating the practices of another to “keep up with the Joneses” (think free checking and ATM fees). But banks may no longer have the luxury of simply meeting the competition. New competitors, who see the opportunity to revolutionize financial services, are encroaching on banks’ domains. These organizations understand that they can penetrate the industry by deconstructing consumers’ needs and giving them what they want. Banks need to recognize that their competitors are not the banks on the next corner but rather organizations outside the industry that are vying for a piece of the lucrative banking pie.
I recently read an article in CNN Money about the demise of the American icon, Kodak. The photography giant was downgraded to junk status; some analysts question whether it will survive. “Kodak’s fortunes have been on the wane for obvious reasons,” says CNN. “We live in a digital world. When’s the last time you took a roll of film to a store to get developed? Probably the last time you bought a physical CD instead of downloading your music.” And while this is obvious to us now, I couldn’t help but think about what Kodak executives were thinking five or 10 years ago when the digital revolution was gathering momentum. Is retail banking the next industry to teeter on the brink of extinction?
Thus far, 2011 has brought some significant changes to U.S. retail banks: New legislation is having a major impact and mobile payments are finally a real possibility in the United States. With companies like Google, which recently launched its new mobile payments wallet, and Apple, whose iPhone 5 is rumored to have NFC capabilities, at the forefront, mobile payments have a huge chance of success—and may be the spark that ignites the revolution. Note that the companies spawning these changes are formidable organizations that don’t deny their desire for world domination.
U.S. consumers, disheartened in general, feel they are being taken advantage of at every turn and are searching for change. And change is definitely in the air. What’s scary is that the catalysts of change are outside the banking industry. Consumers have come to trust companies like Apple and Google to help simplify their lives; these consumers are not afraid to try new things if they see the value in it.
So we are at a crossroads. Banks can either understand customer needs and take positive steps to fulfill them or push consumers into the arms of alternative providers who will.
Topics: Payments Strategy