10th - Oct - 2018

Bank to the Future

A new wave of Fintechs are rethinking banking. They’re using real time alerts, voice calling, data analysis and more to steal customers away from old-school incumbents. Tim Green, mobile writer, editor and influencer reports on a major account transfer.

A man rings a bank to ask about opening hours. ’When can’t you make it?’ comes the reply. It’s an old joke. It reflects an age in which banks were buildings only – buildings that closed at 4pm and didn’t open at all at weekends.

Today, we live in more progressive times. Branches still exist. But for most customers the bank now lives inside an app. We can see balances, make transfers, order cards and more with the swipe of a finger. It’s easy.

But it could be even easier. Indeed, in a world of negligible interest rates, one could argue user experience (UX) is the key competitive advantage – much more significant than fees and yields.

And there’s little doubt that the new breed of mobile-first banks is winning the UX battle. Companies like Fidor and N26 in Germany and Monzo, Starling, Atom and Revolut in the UK do not have branches, and neither are they hampered by decades-old technical infrastructure. They use this lack of legacy to focus instead on rebooting the customer experience.

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

These features illustrate how the challenger banks view mobile as a means to redefine what a bank is – a smarter, more personal financial institution, rather than merely a channel that can facilitate existing functions more cheaply.

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

However, it won’t be N26 that’s delivering the insurance. Instead, it will be a specialist partner. This is because most new digital banks operate a ‘banking as a marketplace’ model, in which the bank refers customers to a range of suppliers via its app. Again, this is only possible in a mobile-centric world. This kind of innovative thinking is helping the Berlin-based company to sign up 2,000 customers a day.

Intriguingly, it’s not just start-ups that are driving the trend of mobile-first banking. In a surprising development, mobile operators are entering the market too. In 2017, Orange gained a banking license, joining others such as O2 Germany and Telenor Serbia in offering full banking services. What makes MNOs think they can succeed as banks?

Simple. They believe banking is going mobile, and that they can deliver a better mobile UX than the incumbents. O2 Banking customers can, for example, sign up via an in-app video chat session with an agent. Inside five minutes they can have an active account with a free MasterCard. While ubiquitous smartphone ownership is driving bank disruption, it’s not the only factor.

There’s regulation too. In 2018, the European Union introduced Payment Services Directive 2 (PSD2). This forces banks to open up customer data to third parties if the customers agree. The law change makes it possible for innovative companies to build apps that can help people make better financial decisions.

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

Another consequence of open banking is that it gives start-ups the option to layer their services on top of other channels. After all, why build an app when all of your customers are on Facebook? This is ‘banking anywhere’ and it’s already happening.

For example, Plum has built a chat bot inside Facebook Messenger. It offers a similar service to Moneyhub, but does so by ‘chatting’ to the user in a real-time chat session.

In their different ways, services like Moneyhub and Plum show how messaging is central to the customer experience offered by new Fintechs. They value the asynchronous quality of messaging. They know it lets people digest information immediately, but respond when convenient.

Of course, the new Fintechs are able to deliver their nudges, real time alerts and chatbot sessions thanks to ‘communications platform as a service’. CPaaS turns communications into software. It gives companies the option to integrate voice, video and text functionality into their own customer-facing applications as the need arises. CPaaS has been central to banking innovation. In the absence of such a flexible and affordable API-based model, it’s arguable that most Fintechs would simply not exist.

The disruption ushered in so far by the challenger banks is just the start. Technologies such as artificial intelligence, voice interfaces, augmented reality and blockchain will no doubt bring forward fresh thinking and new start-ups. But one thing will not change. People will demand the ability to retrieve information and get answers when and where they want them. Communication will be a constant. Even on weekends.

If you want to find out more about how CPaaS is shaking up the banking space, take a look at the first in our series of 4 eBooks: Enterprise CPaaS, The Customer Service Imperative.

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