Digital banking beyond your pretty UX

Digital banking is not about your UX.

There, I said it.

You can have a fully digital bank without an app. You are unlikely to, admittedly, but you can. And you can have a fundamentally analogue bank with an app. Which is mostly what you have. And that encompasses most legacy banks and sadly most challengers as well, who are borrowing legacy rails and infrastructure under the glass.

And it’s not good enough.

I know the UX is where we started, and there is a good reason for that. There are many good reasons for that.

And good UX has remained a focal point, and there is a reason for that too.

But UX is not enough, nowhere near enough, and there are good reasons here also. And that’s the topic today.

Ready?

Two good reasons why we started with UX:

1. That’s how the other kids did it. The whole conversation around digital capabilities was kicked off by folks who understood the front-end and championed it. There is a reason why a lot of the early proponents of digital came from marketing.

The people who started championing the thing came from the space where the consumer saw it.

Also… starting with UX allows for newcomers to the space to touch, feel, see and understand what it is we are doing. If you’ve ever tried to explain to someone what an API is without being able to point at anything they understand, then you know how powerful it is to show people what is now possible.

Plus, the competitors got themselves a slick and pretty app making your bank look drab and old and clunky. So you had to start where they started and compete.

For all those reasons, we started with UX.

And for one more distinct and important reason…

2. I want my bling where I can see it. As the journey started, it became apparent pretty quickly that apps need connectivity and data and security to run properly. They need the underlying systems to work properly and seamlessly otherwise they are just… pretty… static interfaces, and increasingly mature digital users see right through that.

So work began and carried on to create the capabilities needed.

But the work started and was carried out grudgingly because none of this is quick and easy… and we had other things we needed to do as well… so this work was prioritised with a clear criterion of visibility in the mix. If I spend all that time and money and resource doing a thing to deepen my digital capability, will it be visible? To the street? To the investors? To the competitors? To the customers?

If yes, fine. If not, it often got sent to the back of the queue even if it is essential to a smooth and seamless experience. So a lot of time and effort was spent on things that were visible, leaving the less visible, thornier, deeper problems unaddressed.

For now.

This was not a forever thing.

It was just a ‘no for now’. Only ‘now’ has lasted nigh on 15 years.

So you have an app now that is slick, cool and easy and can do (finally) most of the things you need it do. But loans come with pretty much the same cost footprint, micro-payments are still a challenge for you or your bank (because those who do them mostly subsidise them rather than doing them cheaply under the hood) and your mortgage application still seems to need to go offline before coming back online in a process that is described as fully digital.

Why is that? Because the bits that need to be in place for that to change are only visible in the obstacles and costs they would remove and for that they were not prioritised and here we are now.

Analogue banks with digital front-ends.

Two good reasons why UX is still important:

1. Distribution and access: With smartphone penetration going through the roof and actually defying class boundaries in most (not all, but most) geographies and affordable internet connection being increasingly available, there is a democratising component to distributing financial services via your phone. It means you can access banking from your remote village without travelling into a branch in town. It means you can access services after your day’s work without swapping shifts or taking a day off to go find out if you qualify for a loan or why your credit card bill is wrong. You can do your banking without needing to make a phone call during office hours. You can do it before breakfast, after the kids have gone to bed, on your day off, at the gym. On the go.

Banking becomes ubiquitous and present when the client needs it. It fits around their routine and the timelines of their needs and that availability is actually cheaper for the bank than branches and phone centres, so everyone wins.

2. Understanding and inclusion: Good UX is less scary and more informative than reams of bank documents or explanations delivered by a clerk who may sound patronising in their own attempt to hide how little they understand what they have just explained.

Good UX answers questions the user has while also protecting the bank.

It creates pathways that feel less exposed to answer questions in a simple way that allows the consumer to get more or less information where they need it and move at their own pace. Read and re-read. Click ‘find out more’ or ‘next’ depending on their level of comfort and prior knowledge. Plus, it captures data about what the client is trying to do and where they lingered, so we can do it better.

Good UX supports and guides a customer in a way that is not scary, daunting or patronising and gets out of the way once it’s done that. Bad UX can be baffling, confusing, trivialise a decision and leave someone signed up to debt without realising what they were doing. Bad UX is dangerous. But good UX is inclusive without being patronising.

And yet… it’s not enough.

Two bloody good reasons why UX isn’t enough:

1. You can’t go where no man has gone before, through an app. The user experience can only guide you between places that exist. If the data pathways required to do what you are trying to do are not there because the systems required don’t talk to each other, or the service that you need doesn’t exist because the underlying systems don’t support the calculation you need, then UX can’t fix the problem.

The most amazing car can’t take you to a city not yet built. It can’t go faster than traffic. It can’t cross an ocean. Unless your infrastructure enables it.

So if you have 34 core systems, 8 customer masters and 11 ‘golden sources of data’ in your organisation, you will never have truly good UX. You may have pretty UX, but it won’t be able to bridge the gaps you’ve left in the background.

If the systems that power Stirling payments were uplifted but the systems that power FX transactions were not (because it was deemed a high-cost, low-visibility investment for a UK bank), then you can’t set up an FX payment on the app no matter how pretty it is. If the bank hasn’t built cheque scanning and it has no branches and you got a cheque from a service provider refunding you (which still happens in the UK), then you are stuck, even if the way the app tells you you can’t do what you need is pretty and easy to find.

If a bank has not digitised its risk discipline (and that means both understanding what is different about managing risk in a digital world and what the processes need to be), then you will find that there are random cut-offs on the size of payments you can make online.

You have the app.

What you don’t have is a digital bank.

If you had coherent, real-time connectivity in your back-end with smooth and seamless information sharing, then you could have a fully digital offering even without an app.

You wouldn’t do that.

But the point I am making is, you could. You could go to the branch or to a dude with an iPad sitting at your local Starbucks and they would have all the access in the world to solve your problem or service your need.

And yes, you would always have an app because if they can do it so easily on a single interface, why not self-serve? But the point remains. It’s what happens behind the app that makes your bank digital. It is what is behind the app that makes the app useful.

What is possible makes your UX slick.

Which leads us to the crunch of the matter. The service we actually offer via the technology. The service. Not the experience.

2. Digital banks can afford to service the poor. Analogue banks can’t. Most banks don’t give loans to the poor. We have become so used to the idea that the people who need money can’t have it because they don’t have it that we don’t challenge its premise anymore.

People who don’t have collateral and assurances and guarantees can’t get loans. Well, d’uh.

We all know that.

Only, why would the people who need money have money? Surely if they had money, they wouldn’t need money?

But traditional banking is costly. And setting up, underwriting and servicing a loan comes with a cost footprint that means that micro-loans or really affordable loans are hard to deliver without losing money. Same reason why servicing the young and old, whose financial needs are pressing but their economic footprint is small and their circumstances are constrained, is seen as a loss-making enterprise for traditional banks. Same reason why micro-payments used to be a no-no.

If the fee for a payment is £36 (which is what a traditional bank charges you to send money abroad, on average, in the UK), how would you pay 45p to read an article online or repay Dave for that tenner he floated you last month when you were skint?

You wouldn’t. Or you would use cash.

Micro-payments online, free peer-to-peer payments, proximity payments and spot FX were revolutionary for two reasons: one, they decided to challenge the established business model wisdom and make less money and make it differently, offering an essential service that opened up a world of opportunity. And two, they did it differently. They set up an infrastructure that lowered their cost base. They built a digital capability, not just an app. But a digital infrastructure that allowed for processing to be connected, real-time and cheaper. So loans could be cheaper. Payments could be cheaper. Changing the repayment schedule of a loan could be instant. That’s what digital capabilities enable. A world of real-time, data-rich possibility that is cheaper to run.

So, the choice here is two-fold:

1. Build the bloody thing. All the way down and all the way across. Not an app precariously balanced on top of COBOL-based infrastructure and mainframes but a truly digital capability under the app. A digital bank. Not a Frankenstein mix of systems with a digital shop front.
2. Share the benefit. Once you’ve built this flexible, cheaper and scalable infrastructure… share the upside with your consumer. Not just pretty graphics but cheaper services. Wider choice. More access. In one word: inclusion. Digitally enabled and willingly offered.

You have the app. Well done you.

Now build the digital infrastructure to super-charge your app and your business and truly serve your communities.

Build it because you can. It is absolutely 100% possible.

Build it because it’s cheaper and more secure and the economy is digital anyway so you have little choice in the matter.

Share the upside because it’s the right thing to do.

You know how to do it, why to do it for you and why it’s the right thing to do more widely.

So. Do it.

You can. And you must.

#LedaWrites

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Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.

She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. She is chief client officer at 10x Future Technologies.

All opinions are her own. You can’t have them – but you are welcome to debate and comment!

Follow Leda on Twitter @LedaGlyptis and LinkedIn.