The smartphone revolution has radically restructured every industry from booking a trip (TripAdvisor), a room (Airbnb) or a taxi (Uber), but where’s the Uber of banking? There isn’t one yet and consumers will soon defect to new players unless high street banks wake up, says Chris Skinner, chairman of the Financial Services Club
Technology is changing every aspect of our daily lives and its march is getting louder, faster and stronger as each day goes by. You only have to look at the total immersion of people in their smartphone screens on the train or street to see the impact of consumer technologies. The imminent arrival of wearables, such as Apple iWatch and the Volvo helmet to keep cyclists safe, will have even more impact this year.
However, it is not these technologies themselves that make them so immersive and persuasive, but the apps that run on them. If you have not used Uber yet, it is the usual app focused upon by innovators as the gold standard of disruptive innovation. The reason it is cited so often is because it has emerged from nowhere as the app everyone loves. This app finds your nearest taxi, tells them you need picking up and where you want to go, and pays them, all within the app. That takes away two big barriers to people with a busy city life: finding a taxi and paying them. The app does it all. It takes away the friction.
That is what disruptive innovators have achieved in travel and related markets, but what is happening in banking? Not a lot. Most large banks have just taken their internet services to a mobile screen or, as I like to think of it, they’ve taken a big-screen banking system and converted it to a small screen. That is not particularly innovative thinking. For example, when the French insurance group AXA launched their mobile banking app, they invested in specifically making it a mobile-app-oriented experience. Similarly, new startups overseas, such as Moven in American, are creating new bank services with easy sign-on, touch-screen navigation, integration with other mobile apps and using fingerprints for authentication.
SMELL THE COFFEE
These are things we are not seeing from most mainstream banks, as most mainstream banks have to evolve their old systems to keep up with these innovations, rather than innovating themselves. In fact, it may surprise you to find that the most innovative financial app out there comes from Starbucks, the coffee company. Starbucks chief executive Howard Schultz, speaking about mobile payments during the company’s January 22 investors’ update, said: “Today, in the US alone, over 13 million customers were actively using our mobile apps and we are now averaging more than seven million mobile transactions in our stores each week, representing 16 per cent of total tender. That’s more than any other bricks-and-mortar retailer in the marketplace.”
And it’s also more than most banks, although in Britain we have seen a strong take-up of mobile banking apps. According to the It’s In Your Hands report, released last summer by the banking industry’s representative body, the British Bankers’ Association, we are downloading more than 15,000 banking apps a day and making almost £1 billion in payments per day via mobile and internet.
That is all well and good, but do you see your bank as an innovator? Are their apps as cool as Songkick or as informative as Flipboard? Have you found the Uber of banking: the one that removes all the friction from dealing with your money and makes it easy and fun to keep up with your spending? I’m guessing the answer is probably not, but two startups will address this challenge during 2015.
The first is founded by a team that comprises the former chief executive of First Direct and the co-founder of Metro Bank. It’s called Atom Bank, based in Durham, and launching as a pure-play digital bank. What this means is that the bank is geared for mobile-first access. There is no call centre, apart from one for technical support, as you should not need to call a call centre for financial queries. Those are all answered by the app.
The other is Starling Bank that describes itself as the “Facebook for finance”. Embedding its service in a cool structure that is social as well as financial, Starling expects to be one of the killer players in UK banking this year.
A third player that already exists is Fidor Bank which has been operating since 2009 in Germany and plans to open its UK service in 2015 too. What is interesting about this bank – and you should note that all three of these new startups will be proper banks with proper bank licences – is it specifically wants to appeal to the post-2008 disaffected customer. It will bank money, commodities, investments, and even bitcoins and World of Warcraft Gold. This bank is different and very social.
They are proper banks that are community focused first. Their community is primarily in the social media world of Facebook and they become relevant to that community by firstly offering preferential interest rates based upon the number of Facebook likes they receive.
By way of example, last year they ran a promotion where the bank would lower interest rates on loans by 0.1 per cent and increase interest on savings by 0.1 per cent based upon gaining an extra 2,000 likes.
Why would Fidor do this? Because it builds community. They get 2,000 Facebook likes and that translates to 670,000 friends and family influencing the Facebook community to also like Fidor. That is because, according to Pew Research, the average Facebook user has 338 friends. So every like gets 338 people influenced to be aware of and engage with Fidor, and those influencers are friends and family.
The result is that Fidor is being exposed to thousands of people every day, and what they hear and see is that Fidor is a cool bank, engaged with their community in a social conversation about money and finance. It is the reason why Fidor spends just $20 to gain a fully KYC (know your client) on-boarded customer, compared with $1,500 for the average traditional bank.
In other words, traditional banks spend a fortune pushing products through channels by shouting at clients in the media; new banks spend a minimal amount talking to people about money through their communities of interest.
This is the key to the Uber of banking. The Uber of banking will be social, cool, transparent, trustworthy, simple, secure and reliable. There are some new ones out there today that are specifically trying to embrace these values and, if your bank is not one of them, but you want to be with one of them, then you may wish to consider taking a look at the launch plans of others soon in 2015.
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