A few weeks ago I wrote a newsletter about Uber, the FinTech transportation company that touts itself as “everyone’s private driver.” The newsletter highlighted the Uber operating model, one that is highly customer centric, focusing on taking the hassle out of hailing a cab or calling a limo company and often at a lower cost than traditional providers.
My emphasis centered on the need for banks to consider how to reinvent their own businesses, much as Uber and others were in the process of reinventing the taxi and limo businesses. Most of the innovation in banking now springs from FinTech and private equity investors, many run by leaders with little, if any, financial services experience. Instead, they approach their businesses with meeting a customer need as their focus and without the preconceptions and traditions that often act as impediments to experimentation and change.
In recent weeks, I have used UBER extensively and will continue to do so. The ease of calling for a driver, the quality of the service, the cost, and the paperless billing process continue to encourage further use. However, during this time I have also noticed some cracks in the Uber edifice; if not addressed the Uber experience and image will erode, as customer service deteriorates and its uniqueness disappears.
Just as banks need to consider the innovation that Uber brings, banks also need to take care that they avoid the traps that Uber (and other companies like it) could fall into.
Uber’s emerging problem may be that in its push for growth it is in danger of alienating the one group most critical to its long term success: drivers. Just in recent weeks I see a shift in the Uber experience:
* Drivers are complaining. Apparently, while Uber has been dropping its rates to riders, it has also been decreasing its payout and increasing the fees charged to drivers. More than one driver has complained about his profit being squeezed and the need to drive more and more to make less and less. One commented: “Uber is great for riders but terrible for drivers.”
One driver told me he was going back to his old livery company. He would make more money and could also have any complaints listened to. Uber had its rules and processes and drivers either accepted them or not…no discussion.
* Poorer customer service. Some drivers continue to offer extraordinary service, but others appear rushed and curt, no longer providing the extra touch that distinguished the company in its earlier days.
* Less availability. Maybe because it was the holiday weekend, but in recent days cars have been unavailable at any price. Any loyalty to Uber quickly disappears when a need is not being met.
* Technology failure. In at least one case, I could not connect to the app. No app, no business, no revenue. I actually had to go to a corner and hail a cab!
* Legal wars. Uber battles constantly with regulators in the U.S. and around the world. Recently, the head of Taxi Deutschland referred to Uber’s business model as a “locust” and banned its most popular ride. It continues to fight regulators in many countries and U.S. states.
* Privacy and harassment issues. Months ago the Daily Beast published an article abut problems with Uber, its drivers, and its willingness to take responsibility for their actions. If unaddressed, this area could become a disaster for the company. Disgruntled drivers point out that more part-timers are joining Uber and that many lack the skills and professionalism required. If that is the case, Uber’s s estimated $17B in market value could quickly erode.
* New competitors. In the past few weeks Lyft has been entering the New York market. Not only is it a competitor, but it may have also brought out the worst in Uber’s corporate tactics, with Uber being charged with trying to sabotage its much smaller rival. Again, more bad publicity.
So, what’s this got to do with banking? There is no doubt that banks need to challenge themselves like never before and break out of their traditional mindset; they need to work with partners; they need to get out of their old comfort zones if they are to remain relevant to the majority of their customers. However, they must also protect their reputations, not compromise on ethics, and maintain their core values.
Uber is a FinTech company not a taxi company. Many of the banks’ new competitors and potential partners are also FinTech, companies that happen to see an opportunity related to banking rather than companies that have a passion for banking. That’s a different emphasis in how one operates and approaches the customer base. Uber may be trying to grow too quickly, to do too much too soon. Banks often seem to have the opposite problem, operating with almost no sense of urgency with many internal staff putting the breaks on change for a variety of reasons.
Banks can learn a great deal from companies like Uber. Its energy, willingness to push boundaries, and appetite for creating a new business model are all positives. The negatives listed above outline some of the external and internal problems a new business faces: personnel issues, comp issues, regulatory issues, etc. Banks must consider how to Uberize their banks while also avoiding the pitfalls Uber seems to be falling into. How? Starting points include clear internal communications, top management involvement, and clarity about the direction in which the bank wishes to head. Currently, I see too many banks trying to cover too many bases, not being selective in how they use their limited resources, and failing to make some basic strategic choices about where they will and will not invest, a recipe for frustration and failure.