What a Cup of Coffee Says about Banks

A guest post from Ziad Alshobaki, Managing Director of Quisk Middle East

As local and international banks rapidly convert to digital infrastructure and digital retail banking products, progress comes in fits and starts. Gaps sometimes appear, evidence of progress being made and the work still to be done.

Given my profession, I generally bank with more digitally advanced and innovative banks if I can. That’s why as I stand in line for my daily coffee at the shop in my building, I often wonder if my bank knows that I am a regular here.

I’ve been using my card to buy here for seven years—by my estimation, going on 1,500 delicious cups—and have come to know many of the other regulars, some of whom I know also have accounts at my bank. In all that time, and all that coffee, I’ve never been contacted by my bank for a digital voucher to replace these pesky punch cards I seem to go though in a week.

Worse, when I am occasionally visiting banks across the city or travelling through the Gulf for Quisk and step into whatever local coffee place looks most palatable, I always feel a twinge of disappointment when the smiling person at the counter offers me a daily discount or a punch card at the opportunities being missed. Does my bank really know me as a customer? Do they know how much I would rather be making this purchase at my usual card machine?

According to the World Retail Banking Report (WRBR), while less than 3% of consumers report that they do all their banking via non-traditional firms, more than a quarter use both traditional banks and these fintech companies in combination. Essentially, most banking customers aren’t as loyal as I am about my coffee, and if a better-faster-cheaper offer presents itself, or one that is more interesting or more convenient, they are likely to give it a taste while keeping their relationship with their current bank. How then can we push the value proposition and ROI for banks to the forefront to innovate in fast, low-cost, and non-traditional ways that can surprise and delight customers in the coffee line?

One of the ways is to avoid the temptation to ‘insource’ new digital products like apps. Banks invest not less than US$ 500,000 in the process of building a consumer-facing app. Included in this investment you’ll find development, testing, security, design, images, and other content, integrations, management time, etc. On top of this up-front investment, forward-thinking banks must budget an additional 20 – 25% to support and maintain the apps, barring any upgrades or changes required, which add unseen costs as well. Ironically, the part banks today are in the best position to do well is the final and often least-planned step: the marketing or promotion of the app to their account holders and customers using owned media and existing web, social, mail, and branch channels.

One way or another, at the end of this long and expensive app development process (assuming the fledgling app can even make it to market at all given political and budget challenges within most banks themselves) comes the great disappointment: Among active financial applications in use today there is a less than 15% average active user rate. To put that another way, if you have 100 people who taste your coffee, you can expect just 15 or less become a regular and ever return with their punch card like I do.

There’s a better way, of course, and that’s for banks—like coffee shops—to stop trying to create new and complicated products internally and get back to focusing on what they do best: making money.

With the addition of blockchain and other security protocols, it is safer than ever before to enable third parties to develop cutting edge new products and services via APIs that are plug-and-play for banks. Third party contracts or agreements can protect banks even further, ensuring that vendors do what they say they are going to and provide maintenance, upgrades, or other improvements at pre-established and pre-budgeted prices. The World Retail Banking Report this year explored how these APIs can change business and technology outcomes while delivering sustainable competitive advantage and is at https://www.worldretailbankingreport.com. The 126 bank and fintech executives in the report outline this new path very clearly and put cost effectiveness front and center.

As I’m standing here in line for my cup, it is difficult to imagine a cost-effective way for my bank to internally design and build a secure and robust artificial intelligence capable of delivering time and location relevant offers to an account holder like me. There’s not money to be made in internal projects for coffee cups. But where my bank can win in the future—and where I am confident they will win—is contracting a vendor to deliver this existing technology via third-party APIs in ways that are complementary to current systems while leaving my bank to brand and communicate this new offering to me, the customer. Banks and Fintech vendors can and should leverage complementary strengths, bringing together loyal customers, stable infrastructure, and regulatory know-how with the technical expertise, artificial intelligence and speed offered in the fintech space.

I think it is clear to all of us that working together, our industry can enhance the customer experience starting at the humble coffee cup in a much better way than banks or fintech companies can ever hope to do on their own.

It is a warm and inviting future to look forward to.


Ziad Alshobaki headshot
Ziad Alshobaki