The days of old economy businesses dominating customer wallets by offering a variety of products to a customer and expecting blind loyalty for a brand are over! In this blog we seek to show how through smart devices customers have a myriad of options to access products and services from their smart mobile devices. This means that companies need to unblock the ’closed loop’ within which they operate and become more ‘interoperable’.
Interoperability – the ability of computer systems or software to exchange and make use of information.”interoperability between devices made by different manufacturers”
We will look at two examples from two sectors (banking and telecommunications) that I am familiar with. Firstly, in banking the strategy is always to lock in customers by making sure that they have a primary banking account with the bank, where their salary gets deposited, to generate transactional banking fees. Then, the best product to lock-in a customer for the long-term is to offer a (20-30 year) mortgage bond for the purchase of the first and in most cases the only family home, generating interest income. Vehicle finance is another sticky product ensuring interest income for 3 to 6 years.
Personal loans, Credit and Debit cards make up a number of other products where banks earn fees all within a ’closed-loop’ operating environment. Interestingly the internal systems architecture in most of these traditional banks is not integrated with the various product lines running in a siloed structure, meaning the backend systems don’t always speak to each other – a nightmare for the user having to navigate across the various bank products. In fact every time the customer wants to apply for a new product or service, its like starting or initiating the relationship with the bank from scratch including completing cumbersome application forms, because the internal systems are not linked or interoperable!
The customer cannot use products from a competing bank, without incurring excessive additional charges. Granted, at a B to B level banks are interoperable with each other through Saswitch and the Central Bank, however at C to C level interaction is not encouraged or is penalized creating a number of closed loops.
Consumers now have access to new more open platforms via smart devices offered by the emerging Fintech sector which will completely disrupt all the above offerings (see more about this in a previous blog about how Fintech is changing banking and finance forever). Fintech’s are built to operate in a more open nature which is cost effective to the customer, even though they initially need to plug into or partner with banks and telco’s to access user bases.
We previously also took a detailed look at the History and Future of money in two other blogs, which all do not paint a very promising picture for the future of banking, unless the sector can somehow adapt and become more customer focused and less product focused or create products that address specific customer pain points, be more interoperable at the consumer level and fully digitally capable the future for traditional banking looks bleak!
Secondly, in the traditional telecommunications environment a telco puts up infrastructure, an expansive mobile telecommunications network spending billions of dollars in Capex annually and links users to this network via a subscriber identification module (better know as a SIM card) in a ‘closed-loop’ environment. The main products in this model include airtime to make voice calls, data for digital communications and SMS or short message messaging service for sending messages (limited to 140 characters). In the traditional telco model if a user is subscribed to one service he does not have access to services on a rival network.
The telecommunications environment has developed quite rapidly over the past 25 years however it needs to evolve even faster to remain relevant as big tech (Amazon, Google, Facebook, Apple) have developed more agile technologies that are more interoperable and they are quickly taking over telco user bases offering many more options for products and services easily accessible where there is a broadband wireless connection.
Mobile applications are designed to work across different devices manufactured by competing manufacturers. Services like WhatsApp have completely taken over mobile communications and information sharing as they enable quick and instantaneous communication and the sharing of large documents, making traditional telco services look like using snail mail to send important messages.
Telco’s unlike Banks, who do not have a clear path forward do have an opportunity to remain relevant in the new world economy provided they can rapidly transform to a digital telco leveraging off their position of providing the infrastructure that links our devices in a more interoperable world. In our blog on 5G we look at how telcos are at the forefront of the next and largest infrastructure replacement cycle as they role out 5G infrastructure globally. Places like China appear to be leading the 5G race as many cities there are already running on 5G.
IoT is the actual implementation of the much talked about convergence of platforms technologies, and devices with mobile devices (i.e. phones, tablets and wearables) at the center of it all. The video below looks at some of the top IoT projects of 2020 to give more of a feel for what is currently happening in this space.
