Bank 3.0: It’s Something You Do

By. Mike Lawson, DML Communications and CUBroadcast

If you haven’t read it by now, I highly recommend picking up famed-financial author, entrepreneur (, consultant, and a guy with a really cool accent Brett King’s latest book: Bank 3.0 – a kind of sequel to his best-selling Bank 2.0. Even though it’s targeted primarily toward banks, it’s quite appropriate for the credit union crowd, as well. The book’s premise is essentially the financial services industry losing its physicality (branches) to mobility (smartphones/tablets) as the “new” primary means to manage your account – due to consumer behavior changes from today’s technology advancements. Bank 3.0’s tagline, “Why Banking is No Longer Somewhere You Go, It’s Something You Do”, sets the stage for this financial services evolution.

Anybody who has been invested in the financial industry for the last few years has seen this digital evolution writing on the wall – even Gen Y’ers know this all too well with their mobiles seemingly sutured to the palms of their hands 24/7. King, obviously, takes this observation to a much deeper level, providing well-researched reasons and personal anecdotes why branches, checks, and even cash may go the way of the Betamax, 8-track, Borders and Blockbuster outlets, and the milkman delivering a gallon or two to your home each week – in glass bottles!

Even Microsoft’s Bill Gates, as King shows, stated back in 1994: “Banking is necessary, but banks are not.”

Technology changes our behavior

The basis of this change, King points out, is technology. Technology changes our behavior. With online bill pay, for example, I haven’t written a check to pay my bills in ages – unless it’s paying for something like my daughter’s gymnastics team or a babysitter for the twins. Even then, I could set up a P2P and be done with the rigors of writing a check.

Back to the book, there’s so much to cover. This column could easily stretch to 10,000 words. But this is online, so I have to keep it relatively short. So lets just look at a few items King covers in Bank 3.0.

Less branches with less importance

Let’s visit the branch. King has written off branches as the primary place to do our banking, affirming his stance in his January 2012 book Branch Today, Gone Tomorrow. They are a great example of change that’s occurring right under our noses. King doesn’t doubt the branch will remain around for a while but in much lesser numbers and with even less importance.

With the advent of mobile remote deposit technology, for instance, that killed my branch visits – along with millions of other consumers. Unless conducting a major purchase where a loan is involved, such as buying a car or a home, there’s really no need to get in my car and burn some expensive fuel for a simple transaction that I can do from the comfort of my backyard Barcalounger. I haven’t purchased a car or a home in a while, so based on the technology that’s available now or on the immediate horizon, going to the branch for that business is in its waning days, as well. Nearly every transaction can be conducted online at the whim of the member. Another example of technology changing behavior in a 3.0 world: branch to mobile.

King supports this “mostly branchless” premise pointing out today’s online FIs like his Moven (formerly Movenbank), or Simple, or RaboBank or the many others coming onto the scene that have been able to operate successfully without a branch structure. It proves, for the most part, the branch can be excluded. Even in our very own industry, several credit unions have been able to operate without branches – some nearly successful: Realtors Federal Credit Union (merged with Northwest Federal Credit Union in 2012).

The best example of a branchless credit union would be $3.5 billion PSECU. Granted it does have a headquarters; but because of its forward-thinking technology philosophy, this 75-year-old institution manages to serve 350,000 members throughout state of Pennsylvania with a nonexistent branch network. That’s impressive. PSECU was also one of the first credit unions, perhaps the first, to implement a remote deposit solution (UPost@Home®) back in 2001.

But all is not lost with the branch, as King alludes. The branch is evolving to become more of a retail outlet, not a transaction site. Financial Partners Credit Union Marketing VP Anne Legg supports this observation with the soon-to-be grand opening of its newest branch in Los Angeles. This branch is all retail – and no fortress. Actually, it’s more member-empowered than anything with touchscreens abound, card swipes to recognize the member, voice activation that recognizes the member and his/her recent activity, and no teller desk. Instead, tellers mill about the lobby with app-laden iPads ready to serve and cross-sell. Legg says it’s more like a slick, streamlined Apple store, where members can come and go quickly, using the credit union’s latest technology services.

Achilles heel of banking today: Inertia = Friction

But branches like FPCU’s and today’s mobile financial technology services still remain the vast minority in our contemporary credit union land. And that’s a huge point King brings up in his book, stating the “Achilles heel of banking today: Inertia = Friction”. What he means by this formula is the bigger you are, the more established you are, the more stuck in your old ways you are; the harder it is to transform. Even though mega-banks, for instance, have the funds and resources to change, they take a long, long time to implement new technologies and new philosophies. They’re like giant oil tankers reversing course. It takes a long time to redirect that floating Goliath.

Credit unions, conversely, are obviously smaller and more nimble and can incorporate these changes much easier. But their caveat is money. Many credit unions don’t have the money to purchase top-of-the-line technology to keep up with the ever-changing financial services landscape. King states that unless your FI has more than a $1 billion in assets, it is challenging to finance the proper technology to succeed. That’s a bit disturbing for credit unions, as most are well below $1 billion. But, contrary to this thought, there are plenty of credit unions well below $1 billion that have excellent financial technology services with very happy members. Still something to think about, however.

Tangent alert…

So this last point brings up a Catch-22 in financial services: If you’re big enough, you can easily adopt the latest technology to please your members. But the bigger you are, the harder it is to implement something new. However, the smaller you are, the more agile you are to make a change quite easily. But if you’re too small, you may not have the funds to make that desired change. Insert yourself here: between a rock and a hard place.

Bringing it back on the rails…

So do you discount your technology services? Do you go with lesser-quality technology that works just Ok, so you can say you have it to please your many member requests? Which brings me to another Bank 3.0 topic King discusses: Banks and credit unions certainly must have an online experience to be relative. But they must have a very smooth and easy online experience that works flawlessly to succeed. If not, members/customers will go where one works for them.

To this point, King states: “The future of your business is getting rid of your friction and aligning your customers’ behavior with the brand response. The better you link to consumer behavior, the more likely I will seamlessly engage with you, as and when I need the utility of a financial institution in my life.”

Something just about every business should adhere to.

Bank 3.0 tidbits, factoids, and observations

To wrap up this column, because we’re getting a bit long on the tooth here, listed below are few other tidbits, factoids, and observations King provides in Bank 3.0:

  • Overall, the utilization of the web channel in retail financial services is appalling. Starbucks, Apple, PayPal, Amazon, and others are two to three generations ahead of most retail banks in their level of competency online.
  • If retail bankers, viewed the world the same way as their customers, what sort of channel prioritization would there be today?
  • Google shows that when it comes to financial products, 88% of customers today in developed economies start their journeys online.
  • The branch, in many ways, has become the least important channel for day-to-day banking for the broader customer base.
  • The rise of the “de-banked” (hat tip: Ron Shevlin) is evidence of the growing trend of consumers who value the utility of banking over banks themselves.
  • Digital natives won’t be able to figure out why they can sign up for Facebook, iTunes, PayPal, and other relationships completely electronically, but your bank still requires a signature. This is why this generation is getting de-banked.
  • In 2000, 59.5% of retail payments in the United States were made via checks. That number plummeted to just 4.3% in 2010.
  • The oldest bank in the world today is Monte dei Paschi di Siena, founded in 1472, was bailed out. (King points out that it is still in real trouble.)

Like counting blades of grass on a putting green, there is so much information in this book; it would be impossible to cover it all: onboarding, social media, data cloud, digital relationships, Siri, mobile wallet, etc. This column is merely the tip of the iceberg. So my suggestion is, if you want a leg up on the future of banking, read Bank 3.0. It will open your eyes to information that will definitely make you ponder the current state of your financial services. It may change your behavior to up the ante in continuing to better serve your members in our ever-changing, digital world.

Mike Lawson

Mike Lawson

Mike Lawson; principal of the marketing firm, DML Communications (, and host of the credit union industry’s only online video talk show, CUbroadcast; has more than 20 ... Web: Details