Innovation in Financial Services
Richard Branson adorns the front cover of the December/January 08 issue of Fortune Small Business. Wearing his customary ear-to-ear grin, Branson’s Virgin Money is cited as something to watch in 2008.
Virgin Money of course is the new name for the social lending site Circle Lending which Branson’s Virgin USA bought earlier this year. And with its cut-through and cheeky marketing launch using tags like “Go Fund Yourself”, Virgin Money is certainly standing out from the other contenders in the rapidly emerging peer-to-peer lending arena.
For borrowers, person-to-person lending sites offer lower-cost alternatives to conventional financial institutions, while lenders have the opportunity of higher returns and the altruistic benefits of helping a real person.
According to research firm, Online Banking Report, about US$100 million in new person-to-person loans will be issued this year, jumping to as much as US$1 billion in 2010.
Of course the peer to peer lending revolution is just one form of new competition that is biting at traditional banks and compelling financial services providers to adapt, evolve and re-engineer their product and service offerings.
Richard Branson adorns the front cover of the December/January 08 issue of Fortune Small Business. Wearing his customary ear-to-ear grin, Branson’s Virgin Money is cited as something to watch in 2008.
Virgin Money of course is the new name for the social lending site Circle Lending which Branson’s Virgin USA bought earlier this year. And with its cut-through and cheeky marketing launch using tags like “Go Fund Yourself”, Virgin Money is certainly standing out from the other contenders in the rapidly emerging peer-to-peer lending arena.
For borrowers, person-to-person lending sites offer lower-cost alternatives to conventional financial institutions, while lenders have the opportunity of higher returns and the altruistic benefits of helping a real person.
According to research firm, Online Banking Report, about US$100 million in new person-to-person loans will be issued this year, jumping to as much as US$1 billion in 2010.
Of course the peer to peer lending revolution is just one form of new competition that is biting at traditional banks and compelling financial services providers to adapt evolve and re-engineer their product and service offerings. Personal finance sites like Wesabe which leverage the social internet, bringing together banking with the support of an online community, are helping create a new brand of banking one that is both personal and an integral part of a consumer’s identity.
So with social lending and personal finance sites providing new and innovative services, the once-common lament from financial services institutions about innovation being extremely hard to do suddenly doesn’t stack up anymore.
After all, innovation is the key to business growth. Of course, Wells Fargo has become something of a trailblazer in the banking world with its use of blogging, podcasts and RSS feeds as well as exposure on social networks like MySpace and Second Life to engage its customers.
Indeed working with new technologies is giving the financial services industry new opportunities to pursue and ways to differentiate themselves especially when Internet banking usage is at record highs in Australia. Data compiled by MISC Australia on behalf of its client banks shows that 31 per cent of all bank customers banked online in the June quarter this year.
Along with Wells Fargo, other banks and financial institutions are leading the charge as they try and differentiate themselves and appeal to increasingly sophisticated and web savvy customers.
Earlier this year, First Direct in the UK launched its First Direct Interactive which is designed to create a community and enhance the way the bank communicates with its customers.
The site hosts content on the bank’s environmental and community work as well as its highly regarded podcasts. The authentic and increasingly extensive podcast service helps its customers stay informed and so far, they have posted podcasts on topics including staying safe online, financial family planning and keeping up with the base rate amongst others.
Likewise, back at home, ANZ has seen the value in this medium and has been building a growing library of podcasts on subjects ranging from home loan jargon, paying off your home loan sooner and unlocking your equity.
Dutch based SNS Bank recently raised the bar on its online mortgage services by facilitating face-to-face contact between an advisor and the customer. The service allows customers to view the mortgage advisor in person during an online advice session, establishing two-way communication by means of a normal phone, chat, IP telephony and a webcam. The application walks advisors through every step in the process, increasing the effectiveness of advice and the process only takes half an hour from the start of the advice session to the moment a customer can print a mortgage proposal.
Bank of America, the US’s largest bank, hopes to build a thriving small business community with the recent launch of The Small Business Online Community. Bank of America has provided a platform for users to network with each other. The idea here is that small business owners are given a place to share information, learn from others and find answers to questions.
It all looks pretty familiar to social network fans, but you have to keep reminding yourself that you’re on a banking site. As Mark Hogan, Bank of America’s president of small business banking told the Associated Press: “We want to be that trusted resource for small business owners, to help them grow their business and be with them when they grow, and we want to help them anyway we can to make that process easier for them.” After all, the goal of this site is to help Bank of America become a powerful resource for small businesses by providing a network of business people that are sharing their stories with each other.
Of course many banks and financial firms are shaping new mobile banking offerings as mobile banking is set to become a significant financial services channel and one that is distinct from online banking. US based research and consulting firm Celent, suggests that by 2010, 35 percent of online banking households will be using mobile banking, up from less than 1 percent today.
Indeed Bank of America started to roll out its mobile banking service earlier this year which allows its subscribers use their cell phones to check account balances, pay bills and transfer money. The bank recently claimed to have attracted 500,000 subscribers to this service within five months.
At a time when innovation is so important, it’s great to see the National Australia Bank is exploring and developing online strategies with the launch of its Star Direct & Alliances. The new division is developing and operating businesses serving customers through non-branch channels. I recently recorded a conversation with Nick Dalla Riva who heads up this division about the increasing number of opportunities for innovation that the National Australia Bank is exploring. The podcast of the conversation is available from the HotHouse blog.