With all the bad financial news circling the globe, you may not have been thinking about innovations in financial technology. While that’s understandable, this is not the time to ignore the fundamental changes occurring in the consumer marketplace (see below).
Yes, we are biased towards new technology, but with registrations to our upcoming Finovate Conference running 75% ahead of last year, there seems to be plenty of people who agree. By the way, this is the last day to save $100 on your ticket (register here) and ensure your ring-side seat on Oct. 14 to see these 24 inventive financial companies showcase their latest improvements.
But let’s address the elephant in the room. Is this the time to be concerned about new bank tech products, or is it time to just hold on and ride out the storm? While good arguments can be made on either side of that issue, here are two interesting examples that made bold bets on online technology in the middle of Internet gloom and doom:
ING Direct, launched during the depths of the dot-com bust (Sep 2000), is on track to become a top-10 U.S. bank by the end of the decade (note 1)
PayPal, also launched right before the low point (Nov. 1999), now has more customers that any other financial-services provider in the world other than the payments gateways themselves (Visa, MasterCard)
Who will be the ING Directs and PayPals coming out of the current crisis? Your guess is as good as mine, but my vote goes to the companies that do the best marrying online services with mobile delivery.
Why financial technology remains important
There’s no doubt that budgets will contract in 2009 and beyond. But new technology usually holds the promise of cutting costs or at least making it easier to serve more customers without adding resources. Here are the trends you cannot afford to ignore in your 2009/2010 plans:
1. Always-connected mobile consumer: Consumer services continue to move online as ubiquitous broadband and cellphone connectivity keeps most banking households connected 24/7 at home, work, and now with mobile, everywhere. Apple’s iPhone, and the next generation of competitive devices, are changing the game in mobile. There are already more than twice as many mobile phones in the world as there are credit cards (note 2). And location-based technology allows users to interact with merchants and payment providers in new and potentially more secure ways.
Implication: Mobile services today are about where the Internet was in 1996. And globally, mobile banking and payments will be even more important than online banking and payments.
2. Over-extended consumers seek guidance: Just as millions of amateur stock traders learned a harsh lesson about risk vs. return in 1999/2000, tens of millions of consumers will are learning the downside of extensive debt and leverage in 2008+.
Implication: This is a great time to get consumers hooked on tools that help them manage their spending, savings, and debt. And virtually all the activity will take place online with mobile support.
3. Branch exodus intensifies: The U.S. over-investment in branches will come to a screeching halt in 2009. With several of the big branch builders, especially WaMu, being acquired, there will be less of a competitive imperative, not to mention less capital, to build fancy new branches on every street corner. Some of the savings will be funneled into alternative delivery. Even the fanciest website can be built today with the fraction of the cost of a single urban branch.
Implication: Increasingly, financial institutions large and small will compete online.
4. Online research is the norm: According to a 2007 study published in November by the National Association of Realtors, 84% of households used the Internet in their search for a house. And in a dramatic change compared to ten years ago, online sources were nearly as important as humans in locating the house that was ultimately purchased (29% found it online first vs. 34% who said their agent told them about it). Similar numbers are reported for autos and other big tickets items.
Implication: A good web presence is crucial to landing new customers.
Note:
1. Industry consolidation is helping them move up the ranks, they jumped two spots in the past week alone.
2. Source, Communities Dominate Brands blog, 8 Jan 2007 (with updates)