Forewords

EMBEDDED BANKING EXPERIENCES1

Brett King, bestselling author of The Rise of Technosocialism, founder Moven and Breaking Banks Podcast

The pandemic saw a massive decline in branch activity over a very short period. While many hope for branch activity to come back, changes in behaviour in mobile usage and online tend to remain permanent--so that hope is unfounded. For many banks, however, their distribution platform is their branch network: it is their access identity; it is the way they are embedded in the community; it is where their branding sits; it is how they measure customer excellence, experience, and engagement. The bigger issue for branch economics is acquisition of customers at a digital scale that is being demonstrated by the more successful neo-banks, buy-now-pay-later operators, and wallets around the world. As more and more day-to-day banking market share is taken by digital equivalents of a bank account, the role of branches for all but certain exceptional use cases becomes largely unsustainable. Right-sizing branch networks will be forced upon publicly listed banks. Banks reliant on branches will have nowhere to go. It is not that bank branches will disappear, but that banks that rely on branches will. Without a robust digital acquisition model, customer inflow and product applications through a branch will slow to a trickle that is not enough to sustain the future bank. If you have a product or service that still requires a signature in 2025, you are going to be struggling for any cross-sell and up-sell. You simply will not be able to survive as a bank with revenue from the branch alone. No way. Friction will be the biggest killer of bank revenue in the next 10 years. The lowest friction experiences will win the highest network adoption rates. We can already demonstrate that in China, India, Bangladesh, Kenya, and elsewhere.

In 2020, the mobile payments networks of Alipay and Tencent WeChat Pay delivered almost twice the total number of payments to merchants of the entire global plastic card market, that includes credit cards, debit cards, gift cards, . as reminded in Turrin [1]. These changes are all illustrative of banking becoming embedded in our world through non-bank networks, where many of those network operators are starting to offer financial services in context. The big shift is this: in the world of banking from the 1400s to 1995, every bank transaction or product was issued through a bank-owned and bank-operated channel--a branch, call centre, broker, or ATM network. Today, non-bank channels dominate day-to-day banking access and transactional activity. Within a decade, non-bank channels will dominate revenue also.

BYE-BYE PRODUCTS, HELLO EXPERIENCES

As payments have evolved, the tendency is to move away from both the closed, proprietary nature of bank-owned and bank-operated payment networks and from complex, slow systems toward instant or near real-time payments. The reality is that networks like PayPal, WeChat Pay, and Alipay have demonstrated much greater utility within their networks than bank-to-bank transactions or cash for day-to-day payments capability. And it is not just for payments. The boom in Buy Now Pay Later (BNPL) credit access is again evidence of embedded banking experiences. Instead of treating credit as a product, such as a credit card, that you need to apply for separately before you engage in purchasing activity, BNPL allows you to not worry about credit options until you are engaged in the purchase process. By streamlining credit access in this way, the utility of credit becomes much more powerful and meaningful. It makes the use cases for a plastic credit card that you need to apply for in advance, much harder to sell in a real-time world. The reason cheques and cash use are in decline, and the reason more people use Alipay and WeChat Pay in China today, is because we increasingly use technology in day-to-day interactions. We are clearly going to use devices with a bias toward frictionless and open payment architectures that have comparable utility. The future of payments is unavoidably experience-rich, friction- and artifact-poor.

Examining savings, credit, and lending, and other aspects of finance, will demonstrate the same trend. Online and mobile experience design is leading us toward rapid utility and fulfillment. The fastest, most seamless credit experience is not an application for a credit product on your phone or laptop while you are in a store, but simply a provisioning of credit based on a preferred or enabled relationship. The product (credit card, overdraft, personal loan, line of credit, etc.) structure disappears to simply enable you to get access to the utility of extra cash when you need it the most. Context is the new experience battlefield because it brings the utility of banking to you when and where you need it, instead of relying on the customer asking to be approved. This is the key switch that is being made--Bank 4.0 experiences will be an attack on the entire onboarding and application process banks have designed today. Designing experiences in the Bank 4.0 age means that the previous product and channel structures offer almost zero benefit in this new world. In fact, they may bias you toward experiences with unnecessary friction and limit you in terms of scale.

This begs the question: if products have to make way for contextual experiences, what does a bank org chart look like? Where do all the products and channels go?

WHEN BANKERS ARE NOT BANKERS ANY MORE

When I am asked by bankers who they should hire for what is coming next, I always begin with, "Stop hiring bankers!". The qualitative research I have carried out has come up with just a few of the jobs that will be considered critical in revenue and capability growth in financial services over the next five years or so: data scientist, machine learning specialist, experience designer / storyteller, behavioural psychologist, blockchain integrator, compliance and risk programmer, community advocate, and identity broker. I refuse to add robot psychologist, emoji translator, and customer experience Ninja to this list. However, I might be tempted to add an AI ethicist, for example. Some roles I have left out that are critical for future development already exist in numerous banks, but they will become increasingly important in building a bank platform that is competitive. They include business analysts, venture capital teams for investing in FinTech, those that manage and grow technology partnerships, hackathon, or incubator labs--basically the ability to rapidly grow the bank's technology capability without building it internally. The real challenge, of course, is that if you are a tech graduate coming out of a university looking for a job today, would you be looking to work for a startup, a tech major like Facebook, Apple, or Google, or would you be wanting to join a bank? Recruiting these skills will surely be a challenge for financial services organisations culturally.

An organisation chart in today's modern bank is not all that different from an organisation chart you might have seen 30 or 40 years ago, but there have been new competencies and capabilities inserted into the structure. What is most noticeable about an organisation chart of a bank in the future is that the bank functions as a "platform"--it can surface the underlying utility and capability of the bank. In a Bank 4.0 organisation, it is not the omni-channel capability that is the key, it is complete channel agnosticism, engagement, and revenue-pragmatic focus. The modern banking organisation is focused on customer delivery, whether retail, SME, corporate or otherwise. As such, the organisation becomes much more mission-focused when it comes to revenue delivery. When you look at the likes of Ant Financial and others attacking this space, they have business units around core competencies, but not organisation charts focused on products. Their organisation chart is unconventional, focused on KPIs that measure active users, daily engagement, cumulative actions, such as borrowing over the lifetime of the customer, and year-on-year growth. Their collective business unit growth is designed to speed up the reach of their network as it grows [2]. This leads us to think of the new Bank 4.0 organisation structure not as a chart showing strategic business units, but as core competencies across the organisation that can share missions, customer goals, and so forth in a matrix form that a typical bank today would encounter huge challenges to accomplish. In terms of competencies, we see that "banking" per se just becomes one of the competencies of the bank, and in equal terms Delivery, Business Operations and Technology Operations are just as critical.

While we might see today that AI and something like Amazon Alexa or the latest mobile app would sit under the purview of the Information Technology or Digital team, in this new world delivery capability becomes a customer experience and engagement platform that is far-reaching--essentially the new driver of revenue, relationship, and reach. In this new model, technology operations become the underlying platform capabilities that are needed to surface utility and experiences in real time. Instead of traditional operations, we have technology and business operational competencies, as both are just as critical, but require very different skill sets and division of labour.

A few new areas emerge that you would not find on the organisation chart today, namely, Research and Development,...