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Future Bank

by July 22, 2020No Comments

A man rings a bank to ask about opening hours. 'When Can't You Make It?' Here comes the answer. It's an old joke. It reflects an era when banks were just buildings - buildings that closed at 4pm and didn't open at all on weekends.

A new wave of Fintech is rethinking the banking system. They're using real-time alerts, voice calls, data analytics, and more to steal customers from old-school incumbents. Tim Green, mobile writer, editor and influencer reports on a major account transfer.

Today we live in more progressive times. The branches still exist. But for most customers the bank now lives within an app. We are able to see balances, make transfers, order cards and more at the touch of a finger. It's easy.

But it could be even simpler. Indeed, in a world of negligible interest rates, it could be argued that user experience (UX) is the primary competitive advantage - far more significant than fees and returns.

And there is no doubt that the new generation of mobile-first banking is winning the UX battle. Companies such as Fidor and N26 in Germany and Monzo, Starling, Atom and Revolut in the UK have no branches and are not hampered by decades-old technical infrastructure. They use this lack of legacy to focus on restarting the customer experience instead.

A good example among many is the Monzo approach to payment records. When account holders browse their purchase history, they can click to reveal additional details such as the store logo, product information, and store location. In addition, push notifications are sent on transactions in real time. The latter is not only good for record keeping but also helps reduce fraud.

These features illustrate how competing banks see the mobile as a means to redefine what a bank is: a smarter, more personal financial institution, rather than simply a channel that can facilitate existing functions at a lower price.

Basically, a mobile-centric user experience also produces real-time data, which these banks can analyze to provide useful services. Valentin Stalf, CEO of N26, gave an example in an interview with Reuters. “If I happen to book a trip and rent a car with my N26 card, my app will immediately use that information to offer me travel and auto insurance,” he said.

However, N26 will not provide the insurance. Instead, it will be a specialized partner. This is because most new digital banks use a 'bank-as-a-market' model, where the bank directs customers to a range of providers via its app. Again, this is only possible in a mobile-centric world. This kind of innovative thinking is helping the Berlin-based company enroll 2,000 customers a day.

Curiously, it's not just start-ups that are driving the mobile-first banking trend. In a surprising development, mobile operators are also entering the market. In 2017, Orange obtained a banking license, joining others such as O2 Germany and Telenor Serbia in offering comprehensive banking services. What makes MNOs think they can be successful as banks?

Simple. They believe the banking sector is going mobile and can offer better mobile UX than incumbents. O2 Banking customers can, for example, register via an in-app video chat session with an agent. Within five minutes they can have an active account with one MasterCard free. While the ubiquitous smartphone ownership is causing the banking outage, that's not the only factor.

There is also a regulation. In 2018, the European Union introduced the Payment Services Directive 2 (PSD2). This forces banks to open customer data to third parties if customers agree. The change in the law allows innovative companies to create apps that can help people make better financial decisions.

In the UK alone, 14 start-ups signed up on day one of PSD2 - and virtually all of them were mobile-first. One example is Moneyhub, a personal financial management app that puts a user's bank account, card, investment, save, and loan in one place. Users can set spending goals and then get a timely push to help them stay on track.

Another consequence of open banking is that it offers start-ups the ability to overlay their services on other channels. After all, why create an app when all your customers are on Facebook? This is "banking everywhere" and it is already happening.

For example, Plum created a chat bot within Facebook Messenger. It offers a service similar to Moneyhub, but it does so by “chatting” with the user in a chat session in real time.

In a number of ways, services like Moneyhub and Plum show that messaging is critical to the customer experience offered by new Fintechs. They estimate the asynchronous quality of messaging. They know it allows people to digest information immediately, but they respond when it's convenient.

Of course, new Fintechs are able to provide their advice, real-time alerts and chatbot sessions thanks to the "communication platform as a service". CPaaS turns communications into software. It offers businesses the ability to integrate voice, video and text functionality into their customers

Of course, new Fintechs are able to provide their advice, real-time alerts and chatbot sessions thanks to the "communication platform as a service". CPaaS turns communications into software. It gives businesses the ability to integrate voice, video, and text functionality into their customer-facing applications should the need arise. CPaaS has been instrumental in banking innovation. In the absence of such a flexible and affordable API-based model, it's debatable that most Fintechs wouldn't exist.

The disruption introduced so far by the challenger banks is just the beginning. Technologies such as artificial intelligence, voice interfaces, augmented reality and blockchain will undoubtedly bring new ideas and new start-ups. But one thing won't change. People will demand the ability to retrieve information and get answers when and where they want it. Communication will be a constant. Even on weekends.

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