In his role since August 2013, Stefan Merz is responsible for driving Diebold’s transformation strategy, helping execute on the company’s multi-year alignment plan and identifying other areas of improvement that will drive future growth. Prior to joining Diebold, Merz held a series of senior leadership positions at Hewlett-Packard Co. and Siemens AG.
Diebold: What major projects are you overseeing at Diebold right now?
Stefan Merz: We’re a company that’s transforming in an industry that’s going through a large-scale transformation. “Diebold 2.0” is our strategy for taking a traditional hardware company and transforming it into a services-led, software-enabled company that is supported by innovative hardware. Our transformation framework is based on eight distinct programs, sequenced in three major phases: crawl, walk and run. For a year and a half, we were heavily focused on infrastructure and processes – and we recently announced that we exited the crawl phase and have moved into the walk phase. This means that we’re providing solutions to meet the needs of our customers, improving the consumer banking experience and helping our customers grow their business in a changing and competitive environment.
And, we’re delivering on that promise. For example, on the infrastructure component, we successfully installed a new, improved invoice system and made changes to the service contract. In October, we also created quite a buzz at Money20/20 in Las Vegas – the largest global event focused on payments and financial services innovation. We publically introduced two, new, self-service concepts and showcased Diebold’s software innovation with a unique, secure mobile payments offering. The excitement even caught the attention of the “TODAY Show”, which produced and aired a segment featuring Diebold.
As we focus on expanding our global market presence and growing high-value services and software solutions, we’ll continue to look for strategic opportunities to bring together leading innovators in banking and retail technologies. Learn more here.
DBD: As Diebold’s chief strategist, what are some of the trends you see in the banking industry?
SM: Let’s start with some longer-term trends. Changing customer expectations, as well as technology that disrupts traditional business models, will force banks to reinvent themselves over the next couple of years. While the current banking model is clearly under attack, retail banks won’t go away. I firmly believe that there is a key role for the bank in the future. Yes, customers will increasingly use different and alternative channels and they will bank with multiple financial players in the market – but, customers will look to one institution to be their “trust center”. What do I mean by trust center? While customers adopt new devices, features and payment or banking applications, protecting and securing their own identity will be an increasing concern. Banks will be the authentication partner-of-choice in this new digital world. This opens endless opportunities for banks to go beyond traditional banking, to embrace and support alternative payment systems, offer new services and partner with other FIs to create truly seamless experiences through a single trust center. Think of this as a refreshing way to open new windows.
I also believe that Blockchain technology will reshape the industry. While I’m not convinced that Bitcoin will survive as currency, Blockchain technology will change the way we transfer assets going forward. Finally, I’m interested in how our industry leaders are reshaping and disrupting current business models. It all circles back to “who will you trust in 10-15 years?”
In the near term, everything is about branch transformation and automation. It’s about the retailification of the traditional branch with a smaller footprint, transaction automation and a universal teller model. For example, one of my peeves is having to share the same personal information with five different FIs. I want to do it only once, and in a safe and secure way. This is an area where I see huge potential for banks to use the transformation process to create different types of services. And, from a strategic point-of-view, don’t forget about all that data you’re sitting on. It’s now time to put those gold mines to good use.
DBD: Let’s focus on branch transformation. How do you define it?
SM: It’s clear that banks need branches – but smaller, more efficient and in various flavors. There is no one-size-fits-all, nor is there consistency in the industry when it comes to definitions. At Diebold, we see branch transformation as work designed to transform the way the branch operates through process improvement, staff education and design enhancement. To improve physical locations to drive efficiencies and respond to changing consumer behavior while generating new revenue opportunities. This may include optimizing the number and locations of branches, as well as the format and/or function of each branch location.
DBD: Since fraud and skimming are likely top-of-mind at most banks and credit unions, how should the industry approach this challenge?
SM: I see a two-stage approach. First, the industry has to work together to combat intensified security concerns at the ATM. These issues require consistent focus and global defense solutions throughout the ATM provider chain. A year ago, Diebold and Wincor Nixdorf AG founded an industry association dedicated to improving ATM security. Through our continued efforts with the association, we compile information on recognized and potential attack scenarios on ATMs and share that information with industry groups to rapidly develop and implement counter-measures at a global level.
Secondly, each vendor needs to focus on its own strategies with the right value-add solutions. At Diebold, I’m especially proud of the innovative work done to develop ActivEdge, digital verifications, biometrics and other enhanced security solutions.
DBD: Speaking of innovation, you say that Diebold is a services-led, software-enabled company. How is Diebold focused on innovative software and service solutions?
SM: Everything we’re doing from a strategy perspective is to strengthen our services and software capabilities. This means that in addition to designing innovative, state-of-the-art terminals, we’re also fortifying our software and services. Diebold’s recent acquisition of Phoenix Interactive serves as the foundation of our software organization. As a leader in delivering flexible, multi-vendor solutions that work in any hardware environment, Phoenix Interactive helps us move further up the value chain, with more comprehensive in-house software capabilities. And, we’re seeing the benefits of this strategic move to accelerate our growth in the fast-growing managed services and branch automation markets.
In addition, when I talk with customers about service, this inevitably leads to thought-provoking questions such as, “What’s the right deployment model moving forward?” Do you want to own and manage your terminal assets? Or, should you consider a fixed-cost monthly fee or pay-per-use business model, similar to IT service offerings? Of course, everything needs to be super-secure and compliant. These are the conversations we’d like to nurture with you.
DBD: Today, we see an increase in “cashless” options, while many analysts are reporting on the growing demand for cash. What’s your personal view?
SM: Cash is not going away. Look at the crisis in Greece. It may be overstated, but cash is still king. We have to prepare for multiple cashless options based on consumer convenience and personal preferences, however, I don’t see a cashless society in the near future. Remember predictions calling for the paperless office? We need to work in both worlds – the physical and digital.
DBD: What strategic advice would you share with banks on ways to capture bigger market share or obtain sustainable growth?
SM: Focus on convenience, security and intelligent use of data. These are major drivers. For example, as a consumer, I would like to get tailored offers that fit my needs. Banks have this information and they need to leverage all the data they’re sitting on.
And getting back to my earlier point, you should also look at ways to integrate the “outside world” into your banking environment. The buzz word is “omnichannel”. Think about how many times FIs, creditors, retailers and others ask you for the same personal identification assets. Wouldn’t it be less annoying, more efficient and safer if your primary FI was your personal trust center and became your single source for all things related to your financial assets? Isn’t that the role you’d like your bank to play?
DBD: What has inspired you recently?
SM: I finished reading “Antifragile,” written by a former New York broker and now professor, Nassim Nicholas Taleb. He writes that in a complex and unpredictable world, rare events occur and fragile things break under stress, but some things are able to resist stress and actually grow and strengthen. Even though we can’t always forecast when bad things will happen, we can control and manage our exposure to avoid risk or benefit from non-forecasted events. Some of his writing relates to the financial world where, for example, a small computer glitch could initiate a sell off on Wall Street. It’s an incredibly interesting thesis.
DBD: What big idea is keeping you up at night?
SM: I’m concerned about the tremendous financial inequality in the world and the important role we can play to champion financial inclusion, education and access to money. From a global perspective, I’d like to see the industry take more responsibility to provide financial tools, education and resources. Together we can make a difference.