Years ago, you went to the record store to purchase an album of music. It was curated by the artist, and maybe you liked two or three songs (unless it was Michael Jackson). In 2003, Apple Music was launched, and it soon became popular to purchase individual songs for a mere $0.99 each. However, it took work figuring out which songs to purchase and so by 2015; more people streamed music than downloaded songs. Now you go to YouTube, Spotify, Pandora, SoundCloud, Google or Amazon and simply listen to either their curated playlist or choose one from your friends. The same thing is happening in banking.
Going By Way of Retail
Similar to the path of music, retail has followed suit. Large department stores gave way to individual boutique stores before Amazon and Walmart brought commerce together all under one proverbial roof. The rebundling of retail has now evolved with shops like Stitch Fix, Coveteur, BeachMint and Lyst where you can get a customized, curated fashion feed of clothing articles chosen for you by experts, celebrities or artificial intelligence.
Similar to music, the trend in retail as gone from bundled to unbundled, back to bundled and then to curate.
Over the last decade, large banks have given way to a myriad of fintech companies such as Simple, SoFi, Paypal, LendingClub, Square and others. Now, with bank innovation, M&A and fintech partnership, that trend is coming back to being bundled. Chase, Bank of America, Wells Fargo and Citi are having success with technology such as Zelle and their respective online lending platforms. What we are now witnessing is the rebundling of financial services.
If financial services follow the path of music, retail, TV, food prep and other industries, curated financial advice tailored for individual needs will become the norm. This is already starting with wealth management as ETFs, and curated investment companies such as Motif are now one of the most popular investment vehicles. Soon, we can see a day, where banks provide benchmarks and expert suggestions on the level of cash to keep, the amount in to put in a money market account and or what maturities to invest in a certificate of deposit. Soon banks will play a role in curated financial advice as they even consult experts and AI to suggest when to buy or sell a business, when to expand and even when is the best time to retire.
Putting This Into Action
As you plan out the future of your bank, it is worth the thought experiment to think about how your bank will thrive in the future. Will you plan on also offering a bundle of financial services, will you pick a niche to focus on such as autonomous vehicle finance or will develop some other specialty to secure a value proposition.
Scale, efficiency and changing tastes will likely force most banks to change. As larger banks migrate more and more of their customers on online/mobile platforms, customers will find it convenient to shop for a variety of financial products without ever having to complete another application or prove their identity. As more and more data aggregates to these banks across personal preference, demographic, liquidity, credit, and cash management lines, banks will be in an ideal spot to leverage the information to provide even better-curated advice and more accurate suggestions.
Aggregating financial services and allowing experts, financial celebrities and AI-driven algorithms to help provide bank customers expertise on cash management, financial planning, capital management, and business growth is likely to catch on if banking goes by the way of retail, music and other industries. Banks should consider how to build these trends into future product design and delivery.
It is clear you don’t want to be the next Tower Records, Blockbuster video, Sears, JC Penny’s or the millions of other businesses that failed to change due to technology and shifting business models. Technology and curated financial advice present a pathway for hundreds of community banks to reinvent themselves. Whether this future state is for your bank, only time will tell, but it is clear community banking must change.
Submitted by Chris Nichols on January 14, 2019