New Zealand’s big banks have a money problem, and if they don’t do something about it, it’s going to kill them.

It’s not the money their customers pay in fees and interest (although I’ll touch on that further down).

It’s not the money they ship off to their overseas owners, despite what Winston Peters and his talkback tribe would have you believe. It’s important for banks to be profitable. I buy that, and I’m not fussed who owns those profits. (If you are, buy shares.)

It’s not even the money they lose in $60 million chunks when New Zealand retailers go under, taking their obligations with them (cough, Pumpkin Patch).

It’s the money that’s piped in under the front door of each bank’s headquarters 24/7, day after day, year after year. A high-pressure torrent of billions of dollars, theirs by right for being the portals through which, for the last 150 years, all commerce must pass. That’s what’s going to kill our banks unless they do something about it.

It’s seductive and it’s dangerous. When your business model is to sit at the mouth of a river of gold and watch the lake fill itself, taking risks is hardly ever a good idea. Because there’s so much money coming in, it makes sense to pay people well. And who’d want to take a risk that could lose you a very well paid job?

Banks aren’t alone in this. The recording industry, newspaper classified advertising, telcos and many others have all had their own rivers of gold and one by one have lost them to technological or cultural disruption.

So far, the disruption in banking has been in dribs and drabs. A bit of crowdfunding. A trickle of peer to peer lending. Phone manufacturers acting as payment gateways. But when the real disruption hits; banking’s Uber, Air BNB, Spotify, Amazon Prime or whatever; the river’s going to run dry, and run dry in a heartbeat. When that happens, it will be too late for innovation, reinvention or pivoting.

The best time for New Zealand banks to reinvent themselves was yesterday.

If I were them, though, I’d start today, and start with these five things:

Hold your own funeral

Taxis will die. Mid-range hotels will die. What’s left of recorded music will die. Media will die. They might be rebuilt in some other form, but they will die.

Why should banking be immortal?

So imagine a future where banks – big companies with thousands of people, beautiful head offices, hundreds of branches and rivers of profit – simply don’t exist. What does that future look like? How do people exchange value? How are they paid? How do they buy houses? How do they travel overseas or get stuff online?

Imagine yourself at your bank’s funeral. (Hopefully there was a little money left for some decent booze.)

What happened? What did we miss? What was the last straw and could we have seen it coming?

It’s likely that the answers to all those questions are happening now, just not everywhere. As science fiction author William Gibson said, “the future is already here; it’s just not evenly distributed.” So find those processes and technologies people are already using to sidestep banks and imagine a world where that’s ubiquitous. Ask whether your current offering has any advantages over them. Find ways to incorporate them into how you do business. Or plan for the managed death of those parts of your operation that just don’t have a future.

Don’t settle for spinnovation

I like gadgets. Love them! Enough to schlep over to TV3 every fortnight to talk about them on the Paul Henry Show when that was a thing. But it’s easy and wrong to confuse producing a gadget with real systemic innovation. Smartphone card readers, cashless moneyboxes and a reskinned local version of this or that phone payment technology are all cool. But do they challenge the fundamental way your bank does business? If someone overseas had invented the gadget you just launched, would you be calling a sweaty-palmed crisis meeting and wondering how you’d deal with it? If not, maybe what you’re doing – as awesome as it is – is more spinnovation than innovation. Good press (and ad agency award) fodder and a shiny new thing to point at when someone asks what you’re doing about disruption, but that’s about it. Spinnovate, by all means – but don’t let it slake your thirst for real change.

Fight Facebook, not fires

Fire drills are a part of everyday life when you work at a bank. Less frequent but just as important are crisis simulations… what if an earthquake took out the data centre? What if online banking failed for a week?

More likely and more cataclysmic, in my view, would be a global player such as Facebook deciding to enter the game. Selling ads to put in front of those 1.6 billion users works well for them now, but financial services could be an insanely profitable regional or global play (and yes, they’re dabbling in that already).

So a very smart thing for a bank to do this year would be to assign a team not to consider responses to an imagined Facebook bank, but to invent one. Pretend you are Facebook, right down to the hoodies, hackathons and free lunches. With all your resources, all your customers, all the trust billions of people place in you, how could you turn that into a financial services company? What would you sell? What boring and unprofitable things would you leave to the old-fashioned banks to provide? 

Then, once you’ve invented it, consider how you’ll deal with it once Facebook makes it come true. Or, better still, do it before they do. (Laugh if you like, but Trade Me kept eBay out by being firstest with the mostest – at least in this corner of the world.)

Simplicate and add lightness

Military aircraft design fans will know this mantra from American engineer Ed Heinemann, which led to the remarkably small, light, simple and successful A-4 Skyhawk. While this is perhaps a contrary direction for a bank to take, it’s a position that’s wide open in the New Zealand market and would connect with a lot of consumers.

It’s all about limiting the menu, doing things simply and doing them well. It works for In ‘n’ Out Burger, and it would work for a bank.

One cheque account

One savings account

One term deposit

One credit card

One mortgage (available in fixed or floating flavours)

That’s five products… maybe seven or eight if you give some term options for the mortgages and deposits. If people want anything more complicated (and expensive) then maybe you’re not the bank for them.

Oh, and branding wise… just call them what they are.

Consider free

No really. What if you challenged a team of your best people to invent a banking business model where your customers paid nothing to bank? No account fees. No transaction fees. No credit card fees. No credit card interest. No mortgage interest.

How attractive would that be to customers?

What kind of business would you have to build?

Who else would you need to partner with? A telco? Government? A social network?

How would a business like this even make money? Could it have employees? Premises?

New Zealanders have always been able to watch television and listen to the radio for free. Spotify, Pandora and Lightbox deliver music and TV shows for free. Libraries, museums and art galleries are largely free. Wikipedia, YouTube, Google, Facebook, Twitter and Snapchat are free. Telco commodities like texts, that used to cost 20 cents a pop, are so cheap they might as well be free.

Why not banking?

Pay peanuts, get funky

Oh, and here’s a sixth idea for free: pay people less. Get some young people in: clever thinkers, artists, tinkerers, people as diverse as the customers you serve – people who absolutely do not want a 20-year career in banking. Pay them enough to be happy but not so much they can’t take your job and shove it. Then give them a place where they can experiment and break stuff, throw some thorny problems at them, lay on some free lunches and sodas and see what they come up with. Launch the good ones. Kill the duds. Repeat.

An edited version of this story was first printed in the Sunday Star Times, courtesy of Fairfax Media.