A new report from George Group/ Wharton is summarised at FinanceTech, by By Matt Reilly & Stephen Wilson, of George Group Consulting.
How IT Drives Product Proliferation: Keeping Complexity at Bay
Competitive pressures are driving the need for more product development. But the industry is plagued by complexity-related issues. Why IT may be part of the problem and why the solution may be less versus more
The key driver all Banks contend with are noted.
94 percent of financial services firms reported that "launching new products and services" was required to be competitive in their segment.
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For many, this means innovating amidst an already cluttered portfolio. (Note; The example provded is Insurance, but its the same for Banks)
The importance of understanding complexity, resulting from profileration of IT, is well stated here. This is a discussion we have every day at the office. Constant review of compromise between what should be, and what can be.
Product offerings are often defined by what the IT system will allow. The costs of complexity are, therefore, often borne downstream – in execution, in administration and customer service. In fact, complexity can be the single biggest factor impeding execution and customer service.
This begs the next question of impact on customers of this complexity. We get "over-choice".
It is the phenomenon of overchoice – a customer-unfriendly quality that the financial services industry is especially prone to. For example, a recent study found that as the number of mutual funds on offer to employees as part of their 401(k) plans increases, people's level of investment decreased.
Two reasons cited for this phenomenon are:
- the potential for regret increases in the mind of the consumer.
- they may be overly taxed by the decision process and drop out
Finally some sugestions for dealing with this issue:
- They are disciplined about portfolio choices
- They have developed processes designed to handle variety
- They package complexity to be customer friendly
Relevance to Bankwatch:
Complexity breeds consumer apathy, and creates retention risk. It also increases support costs, so its bad for banks, and customers. The three sugestions are good, but I would say begin with #3 always. If its simple for the customer, its simple for the employee, and for the selling process. A proxy to enable that, is to design everything with online banking in mind first, and branches second. This will elevate complexity immediately
Bankwatch 