Omnichannel: What’s The Buzz?

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The technology business is full of acronyms and buzzwords.  FinTech is no different and lately one buzzword in particularly has been making the rounds:  omnichannel.  As part of my job, I speak with banks and credit unions across the country to understand their current environment with particular focus on their digital access points.  When I ask about their “omnichannel” strategy, generally the line goes silent.  It is clearly a word that is unfamiliar to them or that has little relevance to the issues they face in their positions.  However, nearly everyone of these individuals is challenged to provide a singular, aligned strategy for supporting a consistent customer experience, especially as more and more devices are adopted by customers as a means to access and manage their money.

Turns out that what they all want to provide their customers is exactly what the definition of the word omnichannel describes.  Consult that source of all knowledge, Wikipedia, and here’s what you will find: a “… seamless approach to the consumer experience through all available shopping channels, i.e. mobile internet devices, computers, bricks-and-mortar, television, radio, direct mail, catalog and so on.”  Did you notice the emphasis on “shopping?”  That’s because “omnichannel” was a buzzword in the retail industry before it started making the rounds in FinTech.  Apparently, buzzwords are recyclable.

Today’s financial institutions are struggling with what retailers – especially those with e-commerce channels in their operation – were trying to figure out maybe a decade ago or more.  Though “digital banking” began about the same time that most of us were exposed to making purchases online, digital banking – originally referred to as “online banking” – had a much slower evolutionary path.  Some of this was due in part to the fact that banking is a far more heavily regulated industry than retail and some was due to the risk adverse nature of bankers especially regarding new technology.  I know.  I used to be one.

It also took some time to change consumer behavior concerning online banking.  The latest generation of Americans born may have been born into a world where the Internet already exists, but the rest of us had to get used to it.  In addition, history shows that Americans in particular tend to adopt new technology when it only helps make their lives easier.  What most of us don’t have that we need, more than money, is time.  Initially, the technology required to support banking online was not all that easy to use or all that affordable. So it took over 10 years to get 10 percent adoption of the online banking.  It even took more than seven years for smartphones adoption to reach a 10 percent level.

Lately, technology has changed.  My colleague, Mike Carter, – who helped me write this blog - is an Apple cult member so he would give Steve Jobs all the credit.  Whatever or whoever is responsible, technology has gotten cheaper and much, much more user friendly.  So, the adoption of the tablet by 10 percent of the population took only 2.5 years – the fastest adoption of any technology in the history of humanity.  Friendlier more affordable technology has created a corresponding exponential jump in the number of people doing digital banking.

According to AlixPartners, 53% of banking transactions are now accredited to online banking with in-branch activity accounting for only 14%. And more devices that provide even more convenience have been introduced or are on the way.  Google Glass is here.  Smart watches are already showing up.  Our cars are wired for the Internet.  How long until we are interfacing with our financial institution via our touchscreen in the car to send our children the money they need for textbooks which they forgot to mention until they were standing in the line at the college bookstore?   By the way, they will be paying for those textbooks perhaps with a virtual reusable debit card on their smart phones provided by the FI of the university where they are working on their degree.  

The consumer has experienced a very methodical response from banks and credit unions to growing digital consumption demand.  Up to this point, FI’s have mostly approached smartphone and tablet support with one of two tactics: 1) Don’t offer a mobile experience, use the full web site from the device’s browser; or, 2) Find a third party provider that can offer a separate mobile platform that can be quickly deployed but will not be integrated into the other channels of the FI, including online banking.

Some FIs and their software providers are developing individual applications suited for each type of device. Jim Marous recently discussed the lack of deployment by FIs of tablet-specific digital banking applications.  From the data he shared, it’s clear that people consume financial services differently based on the device.  Equally important, device preference is clearly evident within market segments.  However, building separate applications for every device is not a viable solution.  It will meet the same fate as client/server computing (see “ adljfasldkfj” by our CEO Mark Vipond).

Where does all of this take us?   For many FIs, it means being stuck providing their customers with an experience that looks and feels very different depending on the type of device the person usesToo many FIs are actually making their situation worse deploying individual digital channel solutions and applications on top of an IT infrastructure of disparate, legacy systems.  Omnichannel is not some unreachable promised land.  It is attainable.  However, FIs will need to do what retailers did more than a decade ago and step back from their traditional ways of thinking about their business.  They also will need to consider innovative companies emerging on the landscape rather than defaulting to their established providers.