In a recent issue of Windows in Financial Services, we noted that the airline industry has done a great job shifting customers to self-service kiosks, by making the kiosks simple to use and bringing staff out from behind the counter to instruct customers who haven’t used them before.
Two points to the airlines for excellent introduction of a new technology. But a recent piece about the industry in InformationWeek had me wondering what’s wrong with these guys now. “Customer Connections – Major airlines aim to stay competitive by developing services that tap their reservoirs of customer information,” demonstrated rigorous “inside the box” thinking. It reminded me of that shorthand analysis of where American railroads went wrong – thinking they were in the railroad business rather than the transportation business.
CIOs at major airlines talked about delivering information more rapidly to customer cell phones or PDAs and improving the targeting of upgrades. Useful ideas, but stuck in thinking like an airline, rather than like a travel provider. The best an outside consultant offered was advice to focus on comfort.
Yet Ryannair, one of the most aggressively innovative low cost carriers in Europe, eliminated window shades and reclining seats to cut maintenance costs. So much for comfort. But customers stream onto its planes to take advantage of tickets that often are just a few pounds sterling; the tax is often more than the fare. The company’s CEO, Michael O'Leary, has suggested that the airline might eventually pay customers to fly so it can sell them other services, or just provide a captive audience to advertisers. It’s one of the world’s most successful airlines and yet none of the American industry leaders even mentioned it.
Is there some lesson in here for financial firms? Probably. The industry has been wandering around for almost a decade wondering what business it is in. Financial supermarkets seemed a brilliant concept, but the reality has fallen a bit short – and some firms are retrenching, like Citigroup, which has sold off major chunks of its insurance business. Others, like Wells Fargo, continue to offer a comprehensive range of services and pursue growing wallet share.
At banking conferences, speakers tout the glory of one-stop shopping,but I have yet to meet a speaker who uses a single institution for all his financial dealings. One reason is suggested by a New York bank that advertises that it doesn’t own any of the mutual funds it sells. It appears to be a fact of life that financial firms find it hard to do everything well, and selling your own funds has, to judge by lawsuits filed over the practice, often required special incentives for brokers to flog the dogs to unsuspecting clients.
Also taking a bit of the shine off the supermarket concept is ING Direct, which shows that offering minimal services, cutting costs to the bone, and dumping customers who demand too much expensive attention can be quite profitable.
Simple is also behind a couple of intriguing new offerings this year from a sector not so long ago given up for dead – online brokerage. Ameritrade has launched Amerivest, which asks just six questions to determine goals, timelines, and risk tolerance – they brag it takes only 15 minutes for a new customer to get up and running. Then it offers a group of exchange-traded funds to fit the profile, at a very low cost. Any deposits go across the funds automatically, and clients are prompted to rebalance with a mouse click once a year to maintain their asset allocation. E*Trade, meanwhile, links its banking and brokerage accounts, offers sweep accounts, and pays customers for their loyalty in reduced fees or better interest rates. Both companies have undertaken significant upgrades to their Web sites.
Financial firms are doing a better job than the airlines at thinking broadly about their marketplace. But it never hurts to step back and ask what the customers really want, and what you can actually deliver.
www.amerivest.com
www.etrade.com