As banks begin to harness the potential of social, local and mobile technologies, social media and smartphones are becoming hugely important modes of communication. Shaygan Kheradpir, COO of Barclays’s global retail banking division, explains how the bank is using this wave of new technologies to engage with customers in timely ways.
In February 2012, Barclays launched a smartphone application called Pingit, which enabled users to send and receive cash while on the go. Beginning with the bank’s 12 million UK current account customers, the service was rolled out in May to UK corporates and marks a European first. It is quickly gaining ground with a hyper-connected consumer base.
The app allows customers to make payments in a matter of seconds, simply by calling the recipient’s mobile number and keying in the desired amount. Suitable for splitting a bill at dinner or repaying money borrowed from a friend, Pingit sits on the cusp of a more wide-ranging change.
This shift toward mobile banking has been much discussed in recent years, but not until very recently have its ramifications made themselves felt. More a subset of online banking than a new channel as strictly defined, mobile banking is moving beyond the province of tech-heads and on into the mainstream.
In keeping with the present industry buzzword, solomo (social, local and mobile), banks are beginning to harness the potential of social media and mobile devices. By 2016, it is estimated that £3 billion of purchases will be made in the UK using mobile phones.
“Four years ago, there were no smartphones,” says Shaygan Kheradpir, COO of Barclays’s global retail banking division. “But in three years’ time, there’ll be two billion of them in the world. So, you’ve got two billion people riding around with things in their pockets that are going to be more capable than our current PCs. What you can do with that for customers in the retail banking sector, your imagination can decide.”
I am sitting with Kheradpir in Barclays’ offices in Canary Wharf. He has just shown me round the floor, which is being revamped to resemble the breezy, high-tech workspaces of Silicon Valley. “For whatever reason, when you come to this side of the floor, people tend to come up with their more creative work,” he says.
Kheradpir has been at Barclays since January 2011, prior to which he served in CIO and CTO roles at the telecommunications company Verizon. Perennially at the vanguard of his field, he was among of the first to note that a new trend in IT – consumer demand, as opposed to business need – was becoming the principal driver of technology innovation. At Barclays, he is committed to the same philosophy, in which customer desires become the spur for change.
Kheradpir’s contention is that 2012 represents a breakthrough year for retail banking. If the last few years have focused on developing the infrastructure, then 2012 is about harnessing that infrastructure in new and ingenious ways. Some upcoming developments are linear, tying, for example, into the ongoing trend towards digitalisation. Others, however, might best be described as pioneering.
Look, no hands
Alongside Pingit, Barclays recently introduced Paytag, a tiny stick-on credit card that, linked to a customer’s normal credit card account, adheres to a mobile handset or any other item. It can be used to make purchases in any ‘contactless’ shop, or even on public transport. With all such innovations, the trajectory is toward simplicity and ease of use.
“I think we’re going to have some innovative thinking on how we can take the friction in money away from people,” says Kheradpir. “The ecosystem is getting there. You’ve got the hardware, the software the cloud systems, the smartphones and the tablets, and you don’t have to be very smart to figure out how you can serve customers with these, rather than from in a branch.”
Mobile banking has thus become one of the fastest-growing areas of tech investment, with banks noting great potential to further innovation and cut costs. As mobile and online banking technologies converge, the focus is on creating efficiencies across channels. In the future, if a customer starts a transaction in one channel, he or she will be able to resume it seamlessly in another.
“You’ve got customers who want instant delivery and the quickest access,” says Kheradpir. “It doesn’t matter where I am in the world or what I’m doing. I could be stuck in a traffic jam and bring my mobile out of my pocket and transact with my bank.”
While the advantages of solomo are obvious, as this notional ‘renaissance’ gets underway banks will need to remain attuned to its potential pitfalls. The most obvious concern is surely security. A survey by Ernst & Young, released in November 2011, showed that many companies were failing to address the security threats inherent in mobile tablet usage. Because this is a relatively new technology, protection strategies are not always very advanced. Out of the 1,700 organisations questioned, encryption techniques were used by just 47%.
There is also evidence to suggest that people are less security-aware on mobiles than they would be on PCs, neglecting to see the devices for the small-scale computers that they are. Clearly, a bank cannot directly alter lackadaisical consumer behaviour, but from its own side it can make security an investment priority.
Barclays has given a particular push to the implementation of local mobile cloud-based technologies. If a customer is using their phone in one part of the country, and a fraudster accesses their data elsewhere, such technologies note the discrepancy and can block the account. The goal, as Kheradpir puts it, is to ensure that all information is “Fort Knox secure”.
Alongside protecting customers, the other major point of contention is how best banks should use social media. In this regard, many institutions have been slow on the uptake, hindered by regulatory issues and concerns about data privacy. Shaking off the image of fustiness has thus far proved a challenging task.
One report, ‘Social Media in Banking 2012’ by MyPrivateBanking Research, suggested that the majority of banks lack an integrated and strategic approach to social media. Only 16 banks out of 50 maintained a presence on all the social networks analysed, and for the lion’s share, the information they did include was out of date.
These, however, are teething problems pure and simple: most banks see the opportunity as too good to waste. With over 900 million users on Facebook, and 140 million on Twitter, social media present highly lucrative channels of communication and innumerable possibilities yet to be harnessed.
“We are looking at social media because we want to deepen and broaden our relationship with our customers,” says Kheradpir. “We have a lot of products and processes in the works, and we recently rolled out a social networking tool, Barclays Mysites, which we use to communicate back and forth internally.”
The bank is also beginning to take advantage of Twitter, with C-suite and frontline staff alike using a twitterfeed to alert them to issues. Twitter’s strength here is perhaps its neutrality – in the wake of the financial crisis, many customers will flinch at the faux-cosiness of becoming Facebook ‘friends’ with their bank.
While, in the future, social media may be used to deliver a personalised customer service, for the time being its public dimension is proving prohibitive: where sensitive personal information is at stake, banks cannot legally interact with customers in an open forum. The main benefits so far have proven to be marketing services and canvassing clients’ views.
In September 2011, for example, Bank of America announced plans to charge their customers a monthly $5 fee for the use of debit cards. Little more than a month later, the plan was scrapped: the bank had been subjected to a potent consumer backlash, not least through the conduits of social media.
“We’re going to learn with our customers,” says Kheradpir, “because a lot of the time our customers are like, ‘hey what you did there I really love’, or’ what you did there I didn’t like’.”
In light of this rapidly evolving picture – the full-throttle pace of technological change and the evanescent nature of public approval – Kheradpir does not think it will be possible to plan too far ahead.
“Is the trajectory super-clear, with milestones?” he says. “The answer is, it is for the immediate future, but if you go three-quarters out the answer is no. The world is changing. I guarantee you that 24 months from now there’s going to be a bunch of sons of Twitter and sons of Facebook with new capabilities.”
Barclays, he says, is moving more towards a Silicon Valley style mode of delivery, which is driven by real tangible customer scenarios, and adapts expeditiously. In an era when communications technologies advance almost day by day, banks cannot afford to lag behind.
“If you deliver use cases in quick fashion, then you learn whether they worked or not and you can behave accordingly,” he explains. “This kind of delivery is really commensurate with the world we’re in. Four or five years ago, we were stuck with rigid requirements, and by the time we’d delivered our services, the world had moved on.”
As we leave the meeting room and stroll out into the office space, I remark on the panoramic view of London through the windows. Kheradpir points out the Olympic village, four miles to the north: a bastion of a pivotal year.
“All of us, you and I, who are customers of banking, are going to be in for an exciting future,” he says. “2012 is going to be a very special time for retail banking.”
This feature appears in the Summer 2012 edition of Future Banking