Tech futurist, Brett King’s interview opened my eyes to the way technology is changing the banking world. He said something rather interesting - with 25000 fintech start ups around the world, in ten years the biggest and the fastest growing ‘banks’ will be technology companies. Amazing! A little reading up on the subject absolutely astonished me about the new trends in the BFSI category. Here are some key trends which I would like to share:
Game Changing Service Experience
The new banks are not really banks. They are merely customer interfaces of white labeled FDIC insured banks. Check out Simple and Moven. Two new age banks who have completely revolutionized banking. They are not just transaction oriented digital terminals of brick and mortar banks. Simple and Moven are both revolutionary experience providers. Apple of banks, if I may say so.
Just to give you an example of their level of ‘customer centricity', a much abused word in the financial services sector, Simple’s Safe-to-spend feature tells the user how much she can spend today without hurting tomorrow’s plans. When users want to know their bank balance, the app does a simple math – it subtracts upcoming bill payments, pending transactions and any goals that the user is saving for and then presents a more accurate picture of how much money can be spent today.
Digital transaction slips enable users to attach memos, photos and notes. The user can attach these via the Simple app or website to create a diary which records where they spent, on whom and why.
Peer to Peer Loans
Leveraging peer to peer sharing trends which is extremely popular among netizens, online platforms such as Faircents enable people to take a loan from othe individuals at a lower rate of interest. The lenders get higher rate of interest than they would have got had they kept their money in a bank’s Fixed Deposit account. What more, the interest amount is completely flexible. If you are willing to take a very high risk, you could earn as high as 36% on the money you lend out. The service provider earns a small fee from the transaction for scrutinising the borrower's credentials and ensuring safety for the lender’s money.
Banks really need to watch out for these platforms. As per Rajat Gandhi's article in ET, despite two rate cuts in 2015, about 70 banks have still not cut their interest rates and passed on the benefits to their customers. While the poor in this country regularly die as they are unable to service their debts, our top ten banks have an average profit margin of 30% and have been growing at over 25% for the last ten years.
Thinking Like A Designer
Banks such as Fidelity are increasing employing new age methods such as Design Thinking. To develop a new product or even customer interface, banks now think like designers – observe customers in mutidisciplinary teams, develop ideas iteratively and evaluate these ideas using prototyping. Apple captured this spirit in 1997 and the rest is history.
If you visit Fidelity’s My Money website, the simplicity of the user interface, the dejargonised content and their compeling proposition communicated through videos – will blow your mind.
Brands such as USAA actively let users rate and review their products online just the way one would review a film or a gadget. I was surprised to read that they are one of the few retail financial institutions which allow people to review their products! No wonder, they have 84.7K twitter followers and 794K fans on Facebook. For the size of its assets and audience, they have a tremendous ratio of fans.
According to a recent CGI report titled 'Understanding Financial Consumers In the Digital Era', people expect a lot more than just digital services from their financial Services brand’s online assets. These expectation will only be met by understanding people’s behaviour outside the limited world of finance.
In face of stiff competition from upstart fintech start ups, established FinServ brands need to take a hard look over their shoulders to keep from going the Nokia or Kodak way. Perhaps, just like the fintech companies, they too need to look at Apple for inspiration.