In New York and other cities in which a heavy dependence exists on taxis and limos for intra-city travel, inconvenience, frustration, and even danger have been long accepted as part of the travel routine. Uber, the online taxi company, is turning a hassle into an easy and even sometimes delightful customer experience. If bankers think a transportation company is irrelevant to them, they are missing an opportunity to learn and better meet customer needs before Uber-like FinTech firms take away more bank business.
First, what have been the issues related to taxis that annoy customers? Among others:
- Many drivers fail the required English test for receiving a license, suggesting a basic communications issue. As for reliability, even expensive limo drivers are often late or cannot find you. If you are late for them, you pay. If they are late for you, you wait.
- The quality of the interior of cabs ranges from clean to disgusting. Every long-time New Yorker has a story of finding something gross in a cab.
- Some cabs are crumbling. As owners try to squeeze every dollar out of their investment, companies keep cabs on the road too long. I remember being in a Mid-West city in which I could look down at my feet and see the road’s pavement underneath me.
- Taxis now force you to listen to commercials on their intrusive TVs.
- Some drivers are crazy. My most memorable experience involved one NY taxi cutting off another driver that I had hailed for a ride. The driver who lost the fare managed to pull his taxi in front of mine, causing my cab to stop suddenly. Then, that angry driver got out of his taxi with a hammer in hand and smashed out the side view mirror of my taxi to express his “frustration.” A memorable ride.
* What’s the Uber experience? A customer downloads an app to his smartphone. When he needs a ride he goes on the app that, using GPS, immediately locates him. He selects the type of vehicle he wants, pushes send, and learns how long his ride will take to arrive. A map shows the customer where his car is and counts down the minutes it will take to arrive. The app also identifies the driver by name and usually shows his picture. The cars are owned by the drivers who keep them in great shape. Once the ride ends, Uber charges your credit card and immediately sends the customer an email with details and a request for rating the quality of the driver and ride. No waiting on phone hold or waiting in long taxi lines at airports. BTW, pricing changes with demand, a somewhat controversial approach. At high demand times rates may increase by 2X (and perhaps more), putting market practices to work. However, right now using Uber is often cheaper than a taxi, for example, in going from airports to New York City.
What has this got to do with banking in which branch offices are usually clean (if empty of customers), the staff is unfailingly courteous (if sometimes unable to satisfy), and danger is seldom an issue? Uber and others like it have blown apart a commodity-like experience, namely the traditional taxi/limo operating model and brought the owner/driver much closer to the rider, improving both the driver’s and the passenger’s experience. What are the lessons for banks?
* No legacy systems and mindset – Many banks are stuck in the past, proclaiming their history and tradition while a growing number of customers could care less. Some banks build their organizations around long-term employees rather than what is required for success. This may make for a nice place to work but not for a place likely to succeed. Can a well-established bank with a traditional IT group focused on maintaining and enhancing legacy systems also expect that group to lead the digital revolution? Unlikely.
FinTechs operate with a very different mindset from banks, intensely focusing on problem solving and customer satisfaction, usually operating with a minimal internal bureaucracy.
* Analytics – Initiatives like Uber require strong analytics to plan, monitor, and assess performance. Conversely, I am stunned about the things many banks do not know about their customers, segments, and prospects.
* Speed – Uber emails a receipt to passengers often before they get to the door at the end of their ride. The driver’s arrival time is totally transparent as the phone screen shows you where your car is and how long it will take to arrive. Banks are slow and in many cases nontransparent to customers as far as their decision-making process and the time required to complete. There are lots of reasons for this, but the customer does not care.
* Pricing – The bigger and better the car, the more you pay. The more demand for cars at various times of the day, the more you pay. Market dynamics determine pricing. Most banks are bad at risk-based pricing, particularly if they are vanilla C&I lenders. At least in the business space many fail to offer loan products to those customers with higher risk profiles willing to pay higher rates. Hence, the Private Equity and FinTech creation of dozens of companies to serve the needs of borrowers that banks avoid.
Of course, there are many reasons why banks are at a disadvantage to the Ubers of banking: personnel, regulations, culture, compensation, technology, and big dollar investments in physical plant, among them. All legitimate issues, but all requiring senior management to address them.
* An approach? The term “skunk works” is 20+ years old but still relevant. Trying to have bankers invent an Uber-like experience while running their day-to-day business is not going to happen. Banks need a dedicated team of creatives, some bankers and some from outside the industry, to consider how to “break glass” by Uberizing their bank or new product offer. Banks cannot dismissing initiatives like Uber, diaper.com, Amazon, and countless others. They need to look at individual lines of business as an ambitious outsider would look at them and encourage out-of-the box thinking.