Thursday, April 27, 2023

Bankers: What Problem Are You Trying to Solve?

Finovate Spring 2023 is coming up in late May and the social medial buildup is palpable. Industry pundits in the know about everything financial technology and financial technology firms will soon be clinking martini glasses saluting each other and telling stories about their profitability and number of bank installs they have under their belt. 

I was actually joking about the last two things.

I will occasionally look at past Finovate "Best of Show" winners. It is a veritable "who" of financial technology firms. Not a typo. I never heard of most of them and know of no bank that implemented most of the winning solutions.

Truth be told, though, Finovate is a good forum to learn about what is out there, and what firms rise to the top as Best of Show because of the niftiness of their solution. There are enough financial technology solutions that fall under the "nifty" category to make a banker's head spin. So who do you follow up with once you decamp from Finovate Spring?

"What Problem Are You Trying to Solve?"

Forget about solutions or the universe of what is out there. Prior to fintech becoming a buzzword, bankers have been solving problems. Problems regarding regulation, risk, operations, and customer needs. Fintech is not something new, as I frequently cite when telling people I produced microfiche in the basement of my first bank. In 1985.

One of the speakers at Finovate Spring is Charles Potts, Chief Innovation Officer at ICBA. I recently teamed up with Charles at a New York bank's strategic planning retreat. During his presentation, he was asked a question about the sheer number of solutions out there. His answer: "what problem are you trying to solve?"

Sometimes when I hear financial technology promoters, it seems like this question escapes them. As if having a cool solution out there is enough for a banker to give it a look. Do fintechers stock the checkout aisle of the supermarket? Skip the Skittles. Bankers have better things to do. 

I am obviously cautioning bankers against this vendor centric approach. Just because it's cool, out there, and a fintecher is telling you that you are a dinosaur if you don't get innovating doesn't make it a good strategy for your bank.

How would a customer centric, or, gasp, a strategy centric approach work?

Strategy. Yes, let's start with strategy. We often hear lofty aspirational goals in vision statements that sit atop a bank's strategy. One such goal goes something like this: "We improve the financial well-being of our customers."

When asking the banker how, the lofty vision starts to crumble and you get some anecdote about when they sent a banker to the local high school to teach kids to balance check books. 

The Problem: How to improve the financial well being of our customers? Now we have a problem in search of a solution. And perhaps this banker might recall Array, a Finovate Fall 2021 Best of Show winner that helps people improve their credit scores, protect their identity, and inform the financial institution about making the right offers to customers to improve their financial well-being.  In this regard, the financial institution can measure how they are doing in improving the financial well-being of their customers by how much they improved their customers' credit scores.

Many bankers have a similar vision for their bank. When I ask if they have a personal financial management solution with their online banking tool, many say yes. Ok, is it standard to set up customers when they open accounts, or are your branch people calling existing customers and making appointments for them to set it up, either virtually or in-branch?

Well, no. And by the way, our branch people don't even know we offer it and if they did they certainly wouldn't know how to set customers up on it. They don't use it themselves.

Wouldn't it be nice if you made it standard practice to do so, and measure the trend in average net worth of all customers that use it? So you can say, ya know, "We improve the financial well-being of our customers."

That is how you take a problem (tracking the financial well-being of our customers) and search for a solution. Instead of finding a cool solution at Finovate and looking for a problem for it to solve.

~ Jeff

By the way the highlight of that bank strategy retreat in which Charles and I spoke was Brooklyn Brewery afterwards!

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