The Hyperconnected Consumer Is Killing Traditional Banking
Previous: Bank 3.0 Series Intro
Book: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do
Author: Brett King
ISBN: 978-1-118-58963-2
Chapter 1: The Demands of the Hyperconnected Consumer
Your Bank Has a Problem, and It Is You
Here is a fun thought experiment. There are 1.6 billion people in Asia without a basic bank account. In that same region, there are 2.6 billion mobile phones. More people have phones than have banks. Let that sit for a second.
Brett King opens Bank 3.0 with a wall of stats like this, and they all point in the same direction: technology adoption has lapped banking adoption by a wide margin. The UN declared internet access a basic human right in 2011. Meanwhile, 25 percent of US households still had limited or no access to financial services. The phone won. The bank branch lost.
King’s argument is simple. Consumers are hyperconnected now. Multiple devices, always online, always reachable. His kids will never know a world without smartphones and social networks. They will not see these technologies as “alternative channels.” They will just expect things to work that way. And if your bank does not work that way? You are irrelevant.
Maslow’s Hierarchy Meets Your Checking Account
King does something interesting here. He connects consumer psychology to banking behavior using Maslow’s hierarchy of needs. The idea is that technology gives consumers control, information, better deals, and a sense of self-achievement. When you can research a mortgage online, compare ten providers in an hour, and apply without begging a branch manager for approval, you feel empowered.
He uses a 1970s mortgage example to make the point. Back then, you drove to the bank, dressed nicely, and basically hoped the branch manager liked you enough to approve your loan. The bank was in total control. You had zero leverage on rates or fees. If they rejected you, tough luck.
Compare that with 2012 (when the book was written). Countrywide had nine million mortgages that originated online. Google Finance Australia found that 88 percent of internet users started their mortgage search online. People spent 6 to 11 hours researching before even contacting a provider. The myth that you need a branch to sell a mortgage is exactly that. A myth.
This shift matters because it changes how consumers feel about themselves. King ties it back to Maslow: when I have control, when I am informed, when I save money through better competition, I feel better about myself. My expectations rise. And once those expectations rise, I start punishing providers who cannot meet them.
Technology Adoption Is Getting Faster (And Banks Are Not)
There is a pattern King highlights that I think is the most important idea in this chapter. Technology adoption rates have been halving with each major innovation. The telephone took 50 years to reach critical mass. Television took 25. Mobile phones and PCs took about 12 to 14 years. The internet took seven. Facebook went from zero to half a billion users in about three to four years.
Apple sold more iOS devices in 2011 alone than all the Macs it had sold in the previous 28 years. Read that again.
So here is the problem for banks. If new technologies reach mass adoption in months now, and your bank has a 12 to 24 month development cycle, and you are waiting to see someone else’s ROI before committing, you are three to four years behind. That is enough time for a disruptor to eat your lunch, take your customers, and eliminate your margins.
King quotes Jeff Bezos on this: even well-meaning gatekeepers slow innovation. The self-service model lets improbable ideas get tried. Many of them work. Banks, with their committees and approval chains, are the definition of well-meaning gatekeepers.
The Four Phases of Disruption
King lays out four phases of behavioral disruption in banking. This is the framework for the whole book.
Phase One was the arrival of the internet. Customers got control and choice. Within ten years, transactions shifted from 50 to 60 percent happening at the branch counter to 95 percent going through mobile, internet, call center, and ATM. Social media amplified this by giving consumers a collective voice. Bank of America tried to raise checking account fees and got forced to reverse the decision within weeks by public pressure on social media. The “lucky to be a customer” era was over.
Phase Two is mobile. Smartphones and tablets became portable banking terminals. You could do everything on a phone that you could do at an ATM, except withdraw cash. One-third of US households were already mobile-only. Smartphone users spent 94 minutes a day using apps.
Phase Three is mobile payments. When you no longer need physical cash or a plastic card, the need for ATMs and branches drops fast. Cheque usage was already in freefall. In the US, cheques went from 59.5 percent of retail payments in 2000 to 4.3 percent in 2010. In Australia, even steeper. Cash was declining too, from 40 percent to 30 percent of Australian retail payments in just three years.
Phase Four is the big one. Banking stops being somewhere you go and becomes something you do. The basic bank account gets unhinged from the bank. Your phone becomes your bank account. Prepaid cards, mobile wallets, and stored value cards can do everything a checking account does. You do not need a banking license to offer a value store. This is where the “de-banked” consumer emerges. Not poor people who cannot get accounts, but tech-savvy professionals who choose not to deal with traditional banks.
The De-Banked Are Not Who You Think
This is the part that should scare bankers. The growing group of de-banked consumers is not just the unbanked poor. Approximately half have college educations. Close to 25 percent have prime credit ratings. The prepaid debit card market grew from $2.7 billion in 2005 to $202 billion in 2012. Starbucks alone had $2.2 billion loaded onto Starbucks Cards, with 25 percent of in-store purchases made via the Starbucks Card mobile app.
These are valuable customers walking away from the banking system. Not because they cannot get accounts, but because the utility they get from non-bank alternatives is better.
King makes the point that even if high-net-worth customers do not fully leave, banks lose the day-to-day connection. And that daily touchpoint is what relationships are built on. If someone else owns the daily interaction, banks become background infrastructure. Manufacturers, not retailers.
My Take
Reading this chapter in 2019, a lot of what King predicted has already come true. Mobile banking is dominant. Branches keep closing. Fintech companies have carved out huge chunks of payments, lending, and basic banking. The four phases framework holds up well.
What strikes me most is how clearly King saw that the real threat was not any single technology. It was the speed of adoption outpacing the speed of bank response. Banks are slow by design. They are regulated, risk-averse, and full of legacy systems. That is not going to change. But consumer behavior does not wait for your IT department to catch up.
The core lesson: if you are in banking and you think you can be a “fast follower,” you are already dead. The window between emergence and mainstream adoption is now measured in months, not decades. You either lead or you get replaced.