100% Banking for Everyone
The impact of an inclusive & seamless marketplace on brand love🧡
The rise of consumer fintech firms has undeniably shaken up the financial industry in its entirety, adding another layer to the already onerous battle for customer attrition. Be it consumer or business to business, the financial services landscape is very different compared to 12 years ago.
A fintech front-runner market such as the UK counts numerous of fintech unicorns and while vast sums are poured into Fintech across Europe, Asia and the US, 4 out of the 10 fastest growing UK scale-ups are Fintechs of which 3 are consumer facing.
Finance industry stakeholders will have seen a cloud of context, data and information in the past years. Most analyses of how fintechs are impacting the industry and its longer term trajectory remain speculative. Take a finance term, stick ‘-tech’ at the end and you will find a wealth of decks, reports, posts (like this one) and more. Yet to really understand impact, learning about the fundamentals is a great starting point, regardless as to whether you are in a greenfield or a saturated market.
The below video (please read the article first as I would hate to lose you as a reader) by 11:FS CEO David M. Brear is a great starting point in which he explains why that what is perceived by the consumer as ‘digital banking’ is actually a digitised form of the old analogue banking:
Young ambitious entrepreneurs…
Numerous of new players have entered different segments of the financial industry since the global financial crisis of 2008. While fintechs preceding 2010 were mostly providing B2B services (e.g. Adyen) it was Transferwise that entered as one of the earlier consumer fintech propositions.
However, as retail banking is most omnipresent in consumer’s lives, it was not until challenger banks (or neobanks) such as Monzo, Revolut, N26, Bunq and Bnext entered the market that more consumers became aware. These new fintech entrants are continuing to attract high costumer numbers. In the UK 13% of current accounts opened in the first half of 2019 were with a neobank (Ipsos MORI), and while there are a multitude of reasons for consumers choosing to use these apps, the apps stickiness’ depends on the provision of a seamless mobile customer experience.
The above more prominent consumer fintechs have all been set up up by relatively young and ambitions teams, with founders recognising early on that new Europe wide legislation, referred to as Open Banking or PSD2, will have a major impact on how people ‘bank’ in the future.
..and true financial assistants
Currently it will be hard to envisage as to what our banking apps will become capable of, just as it would have been hard to think of the impact of smart phones when the Iphone 1 was introduced to the world (or even the internet). Once full third party integration at the back-end becomes mainstream and machine learning algorithms start utilising all of our personal data (at our behest) imagine walking into the Apple store:
Once you cross the door step the APIs start churning in the background. A notification from your banking app comes in prompting this first question:
App: ‘Welcome, enjoy browsing in one of your favourite stores! Would you consider purchasing a refurbished Iphone 10 at half price or explore financing an Iphone 11?’
[The offer of a cheaper model and loan would be based on longer term analysis of your financial data and the projection of future budgeting, it might well be that it states you can best finance it out of your instant access savings account, providing an overview of how those savings can be topped up again]
You: tap or say Iphone 11.
App: ‘Based on analysis we advise to buy the Iphone 11 utilising Klarna paying 12 monthly installments at 0% APR. Would you be interested in going ahead?’
You: tap or say yes.
App: ‘Please choose your preferred model, colour and if you’d wish to include any accessories in the final purchase price’
The above is a very basic example; Open Banking/PSD2 legislation allows for such financial data to run freely between all third parties offering anything from lending to energy products.
“Truth is like poetry. And most people f*cking hate poetry.”
Quote overheard in a bar in the movie ‘The Big Short’
At present the brand penetrations of these new players is relatively low. However, their undeniable and exponential growth as well as the sheer amount of new players in the market means a tectonic market shift will not be prevented. Sure, we will see consolidation of these fintechs take place in the next 5 to 10 years, with mergers as well as acquisitions led by some of the more dominant incumbent players. Be that as it may, it is the constantly changing consumer needs that will decide which brands live or die.
Does anyone remember the social network Bebo or will your (grand)children ever see a Kodak camera anywhere else than in a museum? Plus consider what a matured blockchain technology implementation will mean for the 2 billion unbanked people in the world, leading to a more f
Monzo CEO Tom Blomfield once said that the longer term impact of legislation will result in a bank becoming a personal finance centre, that has seamless third party connectivity at the back-end. Very recently he has been quoted in the Economist saying:
There will be banks with very, very large balance sheets, but with almost no brand, no physical presence — like big oil tankers providing money.
I have no doubts that the way in which we bank will change completely and that even a successful disruptive brand will have to consistently reinvent itself. The question remains how this will play out on the banking battlefield. Which of the incumbent or white-labelling fintechs will become such large oil tanker banks and which providers will build successful and beloved consumer brands?
At the consumer’s behest
Tectonic market shifts are driven by consumers and in particular by their trust in brands. Our willingness to share personal data besides allowing utilisation are a tricky topic full stop and even more so in a financial services context; bankers do not usually get invites to popularity contests! Yet while incumbents enjoy only a basic form of trust, considering Pettit’s three forms (Ipsos, 2019), challengers seem entrusted with a more active and even interactive form of trust by their brand lovers.
At present, while these consumer fintechs are taking flight, the majority of incumbent banks seem to continue to dabble in their status quo. Insufficiently addressing a much needed change in corporate culture throughout their ranks and instead placing relatively small bets on building their own challengers (e.g. Bó by NatWest) or launching Fintech incubators/accelerators (read: top down and scrambled). If the culture of money-centric rather than customer-centric remains and if two types of banks emerge, those banks that have not addressed the right levers for change will likely see consumers flock to better offerings.
With instant switching creating full fluidity between financial products, there is a clear need to battle for brand lovers by delivering a truly seamless, trusted and personalised finance management tool. This also means applying successful ‘community marketing’ generating a loyal and growing base of brand ambassadors. It is these brands that will continuously receive consumer endorsements and be most recommended, resulting in the winning of the customer attrition battle.
Fintech’s democratising power and financial inclusive approach means user-centric will take on a whole new meaning in the decade ahead. Understanding how as well as where consumer sentiment takes us is crucial to make the right strategic decisions.