At the heart of a people-centred economy is, of course, people. Freeformers look at the future of work through the lens of the future of people within work; what will they be doing, what skills do they need to be doing it, and what mindset do they need to keep acquiring those skills? Recently, our Founder, Gi Fernando MBE, wrote a chapter for People Centred Economy, a book edited by Vint Cerf. In it, there is a call to action for using people as a lens for economic growth.
Specifically, Gi writes about the importance of the banking sector – arguably the pivot point of the model economy. What follows is a summary of some of the key points Gi raises, and how they relate to the work Freeformers do in Financial Services and beyond.
Retail banking acts as bellwether for other industries – it has unrivalled levels of state regulation, a healthy challenger market and a deep social responsibility to use technology to benefit its customers as well as shareholders (at least in theory). This makes it a useful predictive model for other industries.
Crucially, modern retail banking has become far too task-centered. In a task-centered economy we optimise transactions. But AI can do this far easier and faster than humans and so there is no business advantage to be gained from it.
However, with a people-centered economy and people-centred development, we can instead build thriving ecosystems with economic growth, money, products and relationships at its heart.
And it is this theory that underpins the belief that a people-centered model for the industry, to replace today’s failing task-centered one, is the way in which banking becomes relevant again.
Bank CEOs and boards are fighting the threat from leaner, faster and nimbler Fintech startups, building digital products and offers at a speed the incumbents cannot match.
These competitors do not have the same inherent barriers to innovation, whereas banks cannot afford to fail fast and then fail again. With large-scale costs and old-style mindsets and practices, today’s incumbents have become risk-averse.
They are now mired in the micro transactional elements of their businesses. This task-centered approach is returning less and less profit and providing less value to customers. This cannot go on.
For example, much of the current income at a retail bank comes through charging customers for services, such as paying a cheque, the interest on a loan, or the fee for going overdrawn. And these small transactional elements are becoming increasingly commoditized.
Similarly for investment banks, increasing amounts of transactions such as Mergers and Acquisitions can be automated and much better handled by machines.
Replicated into their billions, small micro transactions and charges may show as a strong number on the balance sheet, but in a world where everything is now connected with effectively unlimited processing power and cheap storage, moving 1s and 0s from one place to another is now practically-free to all.
When the margin on a micro transaction is near enough at zero, you have to find a different way to grow. Charging a percentage or fixed fee on moving a piece of information is no longer sustainable.
Banks however have one thing none of the new digital challengers have: the sheer volume of PEOPLE working for them and the sheer volume of customers they are serving.
They already have the tools to return to a people-centered model, it would not be difficult and would offer far more opportunity than merely storing and lending money.
The general measure of value has always been money; the notes and coins exchanged over a counter, the balances in an account or the debt outstanding on a loan or credit card. But people have value too and this can and must be measured through data. Only then can we can develop the human growth that powers financial growth.
Banks today have something of value that is woefully underused and underutilised, the tangible everyday relationships between staff and customers.
When customers aren’t just numbers on a spreadsheet, and money itself is not always the dominant factor, connections are made, advice is offered, knowledge flows, new ideas germinate, trade is facilitated and communities thrive.
Banks can take greater, faster and more confident strides because they have the people and the data already to hand. Few other industries have this chance for change on such a huge scale. They just need to use the opportunity more effectively.
Banks need to talk to their customers more. Right now it is practically impossible for banks to do much about personalising a service purely for an individual customer, but this is the key to the industry’s future in a people-centered economy.
Business plans and spreadsheets tell you very little about the person presenting it, or their innate and potential to develop a proposition over time. But that too can be measured using data and that welded with the knowledge, gained from personal interactions over time, changes the game.
Machines have made it simple and fast for loans and credit cards to be applied for and approved without the need to talk. Algorithms work out someone’s risk in seconds, but there is no inherent advantage to this technology. The inherent advantage comes through a people-centered approach to gain insights into a customer’s psyche and aspirations.
As a bank, when you understand why that customer is taking out that loan or credit card and what they are using it for, you can begin to personalise your approach. This information is a valuable commodity.
Information drives change and banks are places where vast amounts of valuable information about people is stored. Using it can change lives and refuel economies. It creates an ecosystem.
Knowing why a customer is doing something is the currency that can be used to develop a successful ecosystem and it is these ecosystems that can make a bank more successful and sustainable in the long-term.
This ecosystem doesn’t have to be built around a branch, it can be someone’s home or a coffee shop or a supermarket. In all of these places, banks can have real conversations with real people, observe their body language and develop rapports and relationships.
Understanding everything that a customer is up to at any particular moment is critical for the future of banking. Transactions are of low or negligible value but aspirations are of high value because they can be used to make connections, not just financial ones.
What better place than a bank – which already exists around the currency of our lives, namely money – to facilitate somebody’s whole life journey within a thriving ecosystem that connects them to, and crucially provides them with, all sorts of new opportunities and chances.
The birth of a baby presents a whole change in lifestyle for an individual and a family. This example can demonstrate the value in a people-centered approach to banking. If an employee knows a credit card has been applied for to fund a new arrival, that local ecosystem can kick in at various levels.
That knowledge can be used to connect that customer with appropriate services from local and national government from benefits to healthcare and it is in prime position at a local level to offer them discounts at relevant nearby stores.
Employees could hold knowledge-sharing sessions in branches, community centres or schools between parents-to-be, to give them advice on the costs of raising a baby that they’d perhaps not thought of.
Ensuring they are as financially-prepared as possible is the responsibility of a modern 21st century retail bank and it pays dividends, because of the varied financial opportunities a bank benefit from in the long-term.
For example, it could work with the customer to develop a personalised savings plan for their new child towards education. It could target ways in which the parent could earn money, if they chose not to return to work full-time. It could introduce flexible working opportunities, help to set up them up as a solopreneur, provide them with advice and connect them to others doing similar things nearby.
Offering such personalised services creates long-term committed customers. This is more advantageous than a quick-fix transactional focus such as interest charged on a credit card purchase.
Technology should always be used to augment real relationships. If AI highlights someone has missed a payment, or stops paying in a salary, a people-centered relationship with that customer quickly identifies why.
If they have lost their job, assistance can be given by the bank on where to turn next and the bank could adapt their credit line in the short-term to ensure they can pay their bills. The bank could even connect them to new money-making opportunities in the gig economy or to state benefits they could claim to stay afloat in the short-term.
Rather than notifying someone when they go into their overdraft and are at risk of charges, why not text them before they fall into the red? If the technology knows they have money in a savings account, encourage them to transfer it over. A bank may lose a little in fees but it will gain much more in goodwill.
People-centered banks built around empowering people means people ultimately earn more, save more and live their lives more enjoyably and effectively.
Small business growth can also be underpinned by a people-centered approach. A people-centered bank will have already identified the businesses it is lending to who are looking to grow. They may be hiring new staff locally and have a need for those specific skills of the unemployed customer and so the connection can be made. Then a charge can be made for the successful introduction turning the bank into a broker of people and not just cash.
Trust being restored in banking is so important here, because if a bank was to recommend a new employee to one of its commercial customers, the business would have trust in that introduction and the potential employee would also reciprocate that trust.
Similarly, if a people-centered bank knows a company in one sector is heading towards a cliff edge but also knows a similar company is thriving, rather than losing money when the former defaults, it could connect the two and the pair could collaborate or merge.
The bank could lend more securely against this potential, boost growth and make more money over time. This is less costly than seeing an existing business fold, with the bank getting only a fraction of a return, when assets are liquidated.
A people-centered approach is not always about the money a bank can make or lend. For example, if someone comes in for a loan to start a new business, the bank may recommend to them a variety of grants available locally or nationally instead. For a fee it could help them to successfully obtain that grant or even advise of a tax credit they were not utilising. How many people miss this because they just don’t know? The person in the bank who knows them, they will know.
What is important to note is that a people-centered approach does not necessarily mean user-centric. User-centric might mean a slick web app or mobile app for banking but that’s not the same thing as building a relationship and engendering trust while building an ecosystem founded on local knowledge and connections.
People-centered means re-training existing employees in soft skills such as empathy so they understand a customer’s own personal situation better and then giving them the tools to adopt new digital skills, tools and mindsets.
The people revolution will help us personalise everything and become more efficient. Imagine in the future a bank selling you your dream home because it knows what you can afford to spend and can package up a property with a mortgage, utilities, services, local suppliers and all the legalities taken care of. It becomes a personalised experience, not just a series of disconnected transactions.
Imagine too if that process was started at an even earlier stage and a bank gave you that option sooner, presenting you with a plan showing how you could eventually afford it, all developed from the conversations it had with you over months and years rather than numbers tapped into a digital form on any given day.
And when things go wrong for some people, which they will, it is these strong bonds formed over time that allow a bank to help a person through their difficulties in the short-term but still make money from them in the long-term.
The successful people-centered bank with an ecosystem can stitch these lifelong services together around an individual and be the glue. This makes it difficult for you as a customer to switch, because all of your support services are orchestrated by your bank.
If you build value around a person growing and take a percentage of their growth, that is a much better model than taking their assets. If you do the latter, you lose them as a customer forever. If you help them develop, even when times are tough, you keep them as a customer forever.
The biggest tech players have won because they have built ecosystems. They are not always the provider of services, they are the aggregator. Banks can learn from this.
Banks can support local trade and local people and local innovation and growth. That is the right thing to do. It is people-centered.
Banks staff can be retrained in problem-solving and empathy. Remember, your workers are customers, they know what customers need. This is the essence of one-to-one marketing.
This is retail banking theory for a modern digital age but like all great ideas, it is based on a simple and proven premise: People and relationships matter and are always your greatest strength and asset.
Recently, Freeformers hosted the European book launch for the People Centered Economy in Mayfair, London. If you would like to watch the event replay watch the full event video below.
The future is brighter when there are people in it. A business model that creates new innovations based on data combined with human intuition and relationship building will win out over organisations who race to the bottom with algorithms and cheap pricing.
But this means people at all levels in an organisation need to think and act differently. This is where Freeformers can help to embed a social learning culture within an organisation, creating a resilience to change that enables companies to thrive in the future.
Find out how much you could save your business on Digital Transformation here.
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