Banking in the ‘Glocal’ world

This awkwardly titled post is thusly titled because it is the name of an event that Betony Taylor, my esteemed colleague from the UK media relations team, and I were invited to speak at recently. The event took place in Zurich at the Swiss Stock Exchange and was hosted by Capco and the Swiss Finance Institute.

The venue for the day

The term Glocal (a portmanteux of Global and Local) is not just some awful marketing creation but is actually the basis of some detailed geographic research. The event was looking at the challenges being faced by banks due to the increasingly global nature of their customers through travel, the virtual erasure of borders through the use of the web and the realtime access demands due to the rise of mobile technologies.

The day started with a keynote from Peter Stringham of Young & Rubicam, and as it turned out he was also ex HSBC. His firm had undertaken a large piece of research into trust in industries. As you might expect the traditional retail and service industries had seen a huge decrease in consumer trust and the web based companies were seeing a great increase in trust. Peter’s research pointed to the fact that people just did not believe the messages coming out of those so called old world industries. I would like to see the research to dig into it a bit deeper but I have a feeling that people trust the big web companies more because what they do just works. They keep it simple.

The Occupy movement has been a big wake up for the financial industry. It is not just the normal protestors. Peter showed an image of a child protester to make the point that this will affect generations and how they think about banking. Recovering that trust could take generations. This lack of trust makes people want to disntermediate the system.

Occupy Bacon

An Occupy site just yards from the event

One example given was payments startup Dwolla. They want to do payments without touching the traditional bank network as much as possible. If banks continue to fight and defend against the Internet as people will try and disintermediate the bank network.

Peter also discussed the lack of cross border identity, even between so called global institutions. He mentioned Amex being particularly painful to deal with when he moved from Canada to the US. They explained that he was a customer of Amex Canada. He felt it was strange how they don’t brand like that. He moved to the US and had sold a house for ‘several million dollars’ yet had no credit rating in the US (at this point I of course had very little sympathy for him but I agree there is a problem). These problems are caused by regulations and a lack of really understanding the customer need. The companies that can best unsnarl the regulation will be the ones that win. Consumers don’t care about regulation, they care about being able to do what they need to get done. A great start to a day I was worried would be way over my head. It allayed my fears, albeit briefly.

The first panel focused on reputation management and followed on nicely from Peter’s talk. The general attitude seemed to be that the banks had taken their eye off the ball and the blind pursuit of money had cost them dear. They knew they had to engage at a more human level to regain what they had lost.

The second and third panels were way over my head the second panel was also way over my personal wealth. They looked at the future of cross border private banking and the regulatory environment and its effect on the Eurozone crisis. I will be honest, I did not understand a lot of what was said for about 90 minutes. I have looked back at the presentations and discussions and I am still none the wiser.

What those panels did however do is remind me of the scale, importance and complexity of the financial system. I tend to forget how big banking really is and there is nothing like a session on macro prudential regulation in relation to cross border private banking to make you think your obsession with this piddling little social media stuff might just be the banking equivalent of a child’s toy.

Are the banks stuck between a rock and a...

The panel Betony and I were involved in covered social media and new technologies (quelle surprise) It was preceded by a talk from Dan Marovitz of Buzzimi and once of Deutsche Bank. Entitled, Banking in the Digital Slipstream, it looked at how our actions on the web are ever increasing and as such so is the footprint of what we leave behind. This data is the new gold. Banks sit on an interesting set of this data that none of these web companies have access too yet. Are banks making the best use of it?

The panel discussion that followed covered these topics with a particular focus on transparency. How could the banks deal with the demands of social media and its incessant march against secrets. The consensus seemed that they had to adjust. My own point of view being that no longer can they hide behind complex business models and terms and conditions. I mentioned BankSimple CEO, Josh Reich, and his thought that banks make money by keeping their customers confused. I don’t believe they do that wilfully but I think that banks forget how complex banking is as they live in this bubble where they understand the terminology and the ins and outs. Amusingly no one in the room (except the panel members) had even heard of BankSimple so maybe I live in my own bubble as well.

On the wider topic of social media. I wanted to make clear that it is just a brand name. Just like web 2.0 before it and social business that follows it. It is just the evolving web, the twenty something year old all conquering web. We need to embrace it because it is starting to reach its true potential.  Earlier in the day social media had a few mentions and there was some confusion with it being about popularity and celebrity. Peter Andre was mentioned as doing well in social media but banks will not. Rubbish. The question was asked earlier in the day of how many companies are on twitter. This is the wrong question, how many of your named people are allowed on twitter to represent your brand. It is not about pumping out news on your brand in a broadcast manner it is about being a human being and adding some value.

I would love to see HSBC economists on twitter but there is so much regulation around them that they can’t say anything. They probably can’t even tweet about having a ham sandwich for lunch because that might impact the wheat and pork belly futures markets.

The panel moderator, Nick Levy of Capco, threw in his next question about dumb pipes, as in are the banks destined to become just a layer of infrastructure. I have written about this topic recently and the experience on the panel made me finish that long held post. In short I think yes they will but this is not a bad thing.

The view from the panel...enthralled suit based audience

Throughout the day I kept thinking about the levels of complexity on banking and how the evolving web’s great power had been to simplify processes and business models which has led to the rise of these new trusted companies, while banking and its many regulatory bodies and the governments of the world continue to add layer upon layer of rules and restrictions. I kept thinking about Clay Shirky’s piece on the collapse of complex business models. It is a fairly obvious yet pessimistic correlation to make. Yet the big trusted web companies are now starting to face the same problems, as Google’s recent privacy policy issues show. As the web giants encroach further on the ‘real’ world then rules and regulation are sure to follow. Will the new trusted companies be the ones that can innovate around regulation? Or the ones that unsnarl it and challenge the so called dark matter? Will the digital footprint be increasingly understood by consumers and will they realise the power it wields and demand that they have sight and control over it?

I don’t think the digital pieces of infrastructure required to really replace any meaningful parts of the banking system exist today. Digital identity and the elements of trust, systems that can eradicate the ability to hide money in dodgy offshore havens or through complex derivatives built on top of mythical AAA rated bonds. Transparency, trust and simplicity are the things required for banking in a Glocal world but they are very, very difficult to create. Ultimately a lot of these discussions around new technologies and trends and how you need to behave come down to good old fashioned trust. The day had come full circle.

All the presentations from the day (apart from Peter’s keynote frustratingly) are available here. There are some videos presentations and panels, although thankfully not the one I was on. Thanks to Capco and the SFI for inviting Bee and I to speak. It was a complex thought provoking day that reminded me exactly how big banking is and how it maybe needs to learn how to be small again.

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