As you certainly must know – unless you are returning from a long, wireless sabbatical spent in a cloister of monks sworn to silence, the iPhone recently celebrated a “big” birthday. The device that changed most everything about banking, shopping, driving and more is 10 years old.
It’s easy to forget how revolutionary the iPhone actually was. As a gadget guy, I always carried whatever Blackberry, PDA or brick-sized portable phone that was in vogue at the time – all of which have ultimately found their way to the island of outdated technology. And while I would always try to get my wife to share in my geekiness, she never warmed to any of them – declaring they were hard to use and often created as many headaches and points of frustration for her as the problems they aimed to solve.
The iPhone was intuitive right out of the box on the day it was introduced. I wondered if this would be “the one” my wife decided was good enough not to just leave in her desk drawer. However, at this point I was beginning to suspect my wife to be some type of closet Luddite, so I had to give some thought to whether this latest “gadget” would be the silver bullet to getting her into the 21st century. She was skeptical when I put the iPhone in her hand but as with so many consumers, she found it so easy to use it was soon an integral part of her life.
For that reason, I was stunned when one day I found her taking photos with her iPhone and nearly fainted when she began posting them via the Facebook app on her home screen. Before you know it, she was shopping from her iPhone and texting me links about the next concert she thought we should attend. Today, one of her favorite features is the ability to view pictures of our two-year old granddaughter Kambrie posted on iCloud by my son and daughter-in-law.
What made the iPhone different for her? She didn’t think of it as technology at all. It was a tool that enhanced her life by providing convenience and new levels of connectivity. To be clear, the other smartphone manufacturers that followed iPhone’s approach did contribute to these devices becoming a part of our lives. Yet, Apple called the dance and created a cult that, even at this point in time, buys the company’s smartphones, tablets, laptops and smart watches with an almost Pavlovian impulse.
There’s an App (or Two or Three) for That
My wife’s story is not unique. Millions followed a similar path of conversion and the iPhone did not just convert individuals. The iPhone radically changed banking in general and mobile banking specifically. Before the iPhone, people could do their banking over the internet but the applications that made this possible were primarily browser-based and notoriously clunky.
Apple recognized that a mobile phone was more than a way to make calls - the more you could do with it, the more ubiquitous it would be. Yet, in Jobs’ view, that was not enough in and of itself. The iPhone would never have become a global sensation if it had not changed the basic paradigm for how functionality is delivered to the device. And that is where the stroke of genius known as the App Store enters the picture.
The genius of the App Store was with its creation, Apple exponentially multiplied its power to put easy and engaging functionality in the hands of end users, while providing a platform where innovation was continuous. Today, anyone offering a browser-only service shuts themselves out of an enormous market composed of those who use only smartphones or tablets. Consumers now consider pushing a couple of buttons, downloading an app, and being able to use the app immediately to be the norm, not the exception. The technology – i.e., the smartphone – functions basically as a facilitator operating in the background, which is where it belongs from an end-user perspective.
The downstream implications of the App Store were significant for financial institutions. Via their apps, banks and credit unions now interact with their customers with a frequency and level of detail (balance inquiries, fraud alerts, card activation/ deactivation) that was mere fantasy not long ago. These capabilities didn’t emerge overnight however – they’ve only reached the mainstream within the last 3-4 years, and that transformation continues.
At the same time, the shift in mobile banking caused by the “app” phenomenon has redefined the branch experience, though not entirely for the better. With more of the everyday tasks handled remotely, there has been a corresponding reduction in foot traffic. FIs must reimagine how they market and cross-sell value-add services in their digital and physical channels.
In addition, banks and credit unions will need to understand how to introduce technology into their physical customer and member-facing operations that is fully self-service. Many of these will be offerings with user interfaces and experiences that mimic those of the digital devices that consumers use multiple times a day. By throwing away our perception of what a branch is and does, it is easy to see what was formally a branch becoming something that combines the convenience of quick service restaurant chains with the hotel concierge desk.
Meanwhile, banks and credit union have more than a few battles to fight in terms of protecting some of their more lucrative lines of business. Here, too, the App Store has played the catalyst leveling the playing field between FIs and newer FinTech disruptors (think Venmo and SoFi) looking to encroach on those select, more profitable financial service products.
Finally, the revolution the iPhone ignited has made it necessary for FIs to reconsider the viability of the legacy, dated solutions they have in place for online and mobile banking, as well as whether the current services they use from third-parties (e.g., bill pay, personal financial management, account opening) can adequately keep pace with the continuous digital innovation consumers have come to consider the norm. New FinTech companies with new, flexible, configurable, and scalable technology have started to gain ground on incumbent solution providers.While these companies may well be the best option for FIs looking to make their digital offering a competitive differentiator, the number of these new players has made the process of evaluating options more complicated and complex. To address this situation, an increasing number of banks and credit unions are partnering with firms that have a reputation for independence and subject matter expertise that can facilitate their path to the best possible decision.