Prosumer

Who is it

The term “prosumer” originated with Alvin Toffler, who first used the term in his 1980 book The Third Wave. Toffler defined the prosumer as someone who blurs the distinction between a “consumer” and a “producer.”

Prosumers are seen as proactive consumers. Common consumers who are predicted to become active and help personally improve or design the goods and services of the marketplace, transforming it and their roles as consumers.

This is in line with the trend of a highly saturated marketplace where mass production of standardized products can no longer satisfy basic consumer demands. To continue growing profit, businesses must initiate a process of mass customization that is the mass production of highly customized products.

Another interesting thing is happening at the same time—in parallel. As technology develops at a thunderous and apparently unstoppable rate, it becomes possible for consumers to interact and do things which is connected and interactive. Prosumers are eager adopters of Web 2.0 products and services— such as social networking (Facebook, MySpace), blogging, video on demand (VoD), podcasting, VoDcasting, virtual realities (Second Life, There.com), mobile communications, and other Internet-based technologies and services that allow people to stay connected whenever and wherever they desire.

This convergence of process innovation, global marketplaces, and advanced technologies fundamentally changes the way consumers buy, retailers sell, and how products are brought to market. This usurp the “conventional” ways of doing things - what are generally thought of as “well understood” activities like banking and retailing are breaking down and losing relevancy.

Toffler's initial combination has also been supplanted by a second pair of blurring roles: that of the professional and consumer. In particular, hobbyists have become ever-more demanding in the pursuits of their hobbies, often rising above the level of an amateur to the point of commanding skills equal to that of professionals.

Customers have become consumers that are technophiles and who are connected and well informed, and compare prices and share intelligence with other consumers. Previously, customers would have taken a bank's advice for granted and subscribed to the products that were suggested to them, but that model does not exist anymore, which has prompted banks to start investing in the transformation of core banking systems.

How will banks connect with prosumers

Customers are grouping themselves - customer activism and protectionism is putting additional pressure on banks to become more transparent to allow comparison of products and prices, and enable a swift move from one bank to another. Prosumers will be commonly multi-banked and will look for the products and services that really fit their needs, and from there they would build products and services themselves, so banks need to be much more agile to adapt to this enhanced relationship that they have with customers. This is what will drive transformation of IT systems to provide agility and flexibility."

Digitalisation is also important because consumers are used to the ease of shopping on the web and the ability to open an account with a bank in a couple of minutes. And societal values have evolved, with the appearance of communities - or tribes, even - with leaders that others follow. It is a very different context in which banks must interact with their customers.

Creating a system

Banks have to create a system to adapt to prosumers’ needs - essential to break down the existing functions that define a bank's ability to deliver products and services. First come the systems for management and reporting, which track and control risks, financials and profitability. Next, there are multiple production systems providing raw products. Thirdly, there are distribution systems to personalise products, distribute them and engage with customers. On top of these lies the reference data used by all three previous components. Each group of systems has different requirements and a different pace of change. Banks have to improve agility to engage with customers in new ways, and improve time to market for new products and services across multiple channels. The aim of optimising each set of systems is to deliver personalised advice to customers.

Breaking down IT systems into these four groups allows banks to take a new role: they will no longer have to manufacture all the products and processes themselves, but will assemble them into offerings that suit and engage their customers. That is what banks should intend to achieve with their distribution solutions: the agility, flexibility, time to market and customer focus that will help the bank embrace this new role as assembler by connecting to their own production systems and integrating with others.

Providing information and facilitation

Banks will be cast in the role of assemblers because it is only in such a model that they will be able to keep pace with rapidly changing customer demands. The challenge for banks is to provide the right information so that prosumers and consumers can decide on the products and services they need - setting customers free in terms of choice, but still keeping a relationship with them. This is a duality that banks will have to deal with in the future

An example of the change in the nature of the industry would be Zopa.com It is a peer-to-peer bank: the world's first online lending and borrowing exchange for individuals. It introduces lending members (people with cash to lend) to borrowing members (people who want a personal loan).

They have cut out the faceless role of the middleman and put lending in the hands of individuals. This shifts business into a new paradigm, where the simple blind act of taking a product to market is being challenged by a whole load more complex questions like where has the product come from, how far has it travelled, where is the investment going, what is it made of, how much is it wasting etc.

Unlike previously where the middleman (bank) is a large, faceless service provider that allows consumers as far into the business as the interface on an ATM or online bank statement and consumers have zero control over this relationship. Prosumers would like to be much more active and choose or co-design where their money is spent or invested such as implementing personal investment ideas that would support the growing renewable and domestic energy markets.

The shift is from what banks are selling — the product (in this case it is money) to a focus that is about how it is sold or traded — the service. The bank industry is also seeing a growing demand for transparency. Prosumers want to know where the money they deposit with a bank is going. They want transparency on where it is invested. Look at that the other way around, it means offering

investment goals, with banks that lend money saying where they are willing to lend it and customers deciding where they will put their deposits on that basis. It is similar to crowdfunding, but facilitated by banks.

Reference

http://www.prosumer-report.com/blog/2014/07/11/want-to-innovate-banking-then-think-about-redesigning-money/

http://www.cisco.com/web/about/ac79/docs/wp/Prosumer_VS2_POV_0404_FINAL.pdf

http://www.banking-gateway.com/projects/future-banking-sopra-banking-software-peter-wens/

http://www.cisco.com/web/about/ac79/docs/wp/Prosumer_VS2_POV_0404_FINAL.pdf

How to be discovered by banks

http://www.treehugger.com/clean-technology/livework-prosumers-they-can-change-the-world.html

http://www.banking-gateway.com/projects/future-banking-sopra-banking-software-peter-wens/