‘Tone deaf’ and 20 years of stagnation in digital banking – Steve Jurkovich speaks at the Future of Financial Services, Auckland
Kiwibank chief Steve Jurkovich has offered a frank assessment of financial service’s laggard approach to digital innovation, expressing dismay at the lack of progress made in advancing the internet banking experience over the last two decades, with FSI’s online offerings trailing far behind digital service pioneers of bigtech.
Speaking at the FST Future of Financial Services conference in Auckland this month, Jurkovich fears the lack of innovation in digital and mobile banking and chronic underutilisation of data could relegate frontline banking services to irrelevancy, leaving incumbents vulnerable to upstart challengers with more attractive service offerings.
“The uncomfortable truth is that, actually, the internet banking experience and the banking experience is almost exactly the same as it was 20 years ago, give or take,” he said.
“Twenty years ago, we were taking information from a database and putting it on a piece of glass – and that's pretty much what we're still doing today.”
Jurkovich said the use of data within these apps has remained largely “static”, with banks failing to take advantage of advances in machine learning and artificial intelligence that have propelled others to deliver “far richer and far more contextual” service offerings – ones that are specifically tailored and personalised for individual users.
He contrasted banks’ lacklustre offerings to the intuitive, interactive apps of bigtech players, including Google Maps.
“On Maps, they were giving me the traffic and the travel time. It can work out – through machine learning or AI – that if I walk or take a bike, bus, or car, the length of time it's going to take me.
“The truth is, my banking app tells me nothing about that [information], and most financial services tell me nothing about it.”
Like many in the industry, Jurkovich looks to Netflix’s ‘seamless channel-hopping experience’ as a model for financial services, conceding true omnichannel is far from reality across banks’ existing digital service portals.
“Good luck doing that with your banking. Most of the time, if you start an application on one channel and then jump across to your app, and then ring [the call centre], then go and see someone in-branch, there's a pretty low likelihood that you’ll be able to follow that journey all the way through.”
One of the critical advantages bigtech companies hold over financial companies is their ability to reuse and reapportion their customer data, demonstrated in simple – though highly lucrative – functions such as individually targeted ads generated from users' tracked browser cookies.
“There are many other organisations that are far better at [reusing data] than financial services. And if we don't act fast enough and make some big calls then we are really going to struggle in that space.
Ultimately, despite some small hints of positive progress within the industry – with Jurkovich singling out CBA’s machine learning-backed app overhaul, and the bank’s push to utilise government data to advance its advice offering – he felt overwhelmingly there remained a conspicuous “tone deafness” to the lingering concerns and needs of customers.
“The tone-deafness of the industry around ‘Am I getting a fair outcome over the term of my relationship?’ is really confronting.”
“The uncomfortable truth is a lot of people are asking their financial services provider, ‘Are you really listening to me?'. And I think the answer is, it's been pretty mixed.
In a scathing appraisal of industry practices and self-interest, Jurkovich fretted over its longstanding “bias towards shareholder returns and a return on equity across the industry”, considering it one the “dominant feature of financial services”.
“Having been in the industry for a couple of decades, I've worked with some outstanding people with really high-value sets who really believe in the right outcomes for the customers. It’s confronting, after working in the industry for that long, to be wondering whether or not you’ve had the wrong end of the stick.
“It's a pretty interesting challenge and I've seen the audience for some fellow chief executives as well and I think every single day we're having to face their question: ‘Are we really listening?’.”
“The question mark for me, actually, is there a burning platform in your business and is that enough to make the choices that you need to make to evolve? Across the industry, I think there's been mixed responses to that.”
Back to the future
Despite the industry’s ostensible progress in its omnichannel capability, Jurkovich stresses that banking processes today remain overwhelmingly “analogue”.
“There are still a whole lot of bankers who we're seeing today writing down their customer's needs and ideas on a piece of paper, putting it on a folder, putting it back into their car, and driving them back into work and punching it into a system – and probably making mistakes.”
“I don't believe that we can really listen and deliver great customer outcomes in the way that we have done in the past – and that's hardly a news flash to anyone."
In the age of the empowered consumer, customers increasingly expect banks to understand and even predict their needs on an individualised, granular level. Jurkovich said banks must look to take advantage of the voluminous data that’s already been ported to the cloud, “utilising machine learning as a benchmark for understanding what's happening with customers in the industry.”
“We already understand who people are buying from and selling to, how long they take to pay their bills, and even how much money they've got to pay their bills. [Using this data] we could encourage some people pay a bit faster and some people to pay a bit slower.”
“To me, that’s much closer to the future that customers are going to expect. And I don't think a regulator is going to back off trying to push for that outcome – and I don't think they should.”
A bolder approach
For Kiwibank itself, which underwent an admittedly challenged core banking upgrade, technological innovation, Jurkovich frets, was left on “the backburner for a number of years”.
However, this may prove an unlikely advantage than an impediment, he said, forcing the company to pursue wholesale transformation, rather than piecemeal upgrades built on legacy.
“From my perspective, it’s a really great advantage because it galvanises the fact that we have to choose and we have to move forward. There isn't a renovation option in this.”
This is an opportunity for Kiwibank to be “much bolder” in its approach to innovation and to make “big clear choices”.
However, as a state-owned bank with limited resources, there is an admittedly shallow depth of talent in-house to propel these initiatives forward – a situation he feels is common across the industry. He therefore urges banks to leverage and adopt skilled individuals from beyond the industry.
“The fifth biggest bank at the – excuse my language – arse end of the world is not going to be able to attract the talent required to deliver world-leading experiences. And by the way, why would we want to?”
“We’re not big enough to convince ourselves that we can do stuff by ourselves; I don't think any financial services company in New Zealand is big enough to think they can do it by themselves.”
This perceived lack of in-house industry talent presents a “fantastic” opportunity to partner with those who have already invested significant resources in digital innovation, according to Jurkovich.
“I'm pretty sure Amazon and Google have got better data scientists than most other companies in the world; we only really need to rent that capability. We need to be able to utilise it and liberate it. And if we can crowdsource the best ideas around when a customer might be thinking about moving there next year, I don't need to own that capability.”
He urges banks to remain open minded on cross-industry partnerships, shaking off their reputation as “being exceptionally difficult to partner with”.
“The amount of small businesses that will have starved from how long we took to get a deal done would be an embarrassment to our industry,” he said.
Even with a surfeit of talent from digital disruptors, without the right environment to nurture innovation, such investment would be fruitless. Jurkovich thus impelled local regulators to get behind the industry, promoting opportunities to test digital concepts and prototypes.
“New Zealand's got a chance there to really be different and really try and bring things forward.”
“I think the lack of a sandbox and lack of regulation around being able to try things that hold people back. And the regulators have been pretty forthright about how they want us to change and adjust for the future.
“The quid pro quo for me is that, actually, [regulators] could be much better about doing that. You can see in Singapore and the UK and others, they've been much more liberal about opening up the sandboxes and helping API accelerate.”
In an often fractious relationship, where customers have frequently come out second best, financial services must invest the time and effort to rebuilding public trust. Changing hearts and minds will pay considerable dividends for the industry, inspiring valuable collaborative partnerships and engendering greater trust from customers to drive mutually beneficial innovation forward.
“We really have a chance to have a crack at it and make a difference. People in this industry can be super passionate about innovation,” Jurkovich said. “If we can change things for people, deliver better customer outcomes, and start to change people's minds and perspectives about whether bankers are just in it for themselves and other financial services providers, then it’ll be a great opportunity.”