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Technology
Dispatches from Banking’s Frontline
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by SEAN KEATHLEY


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Retail banking and financial services industry challenged by internal and external forces of change

At the start of every new year, companies across the country chart their course for the year ahead and take stock of the biggest roadblocks impeding them. Focused planning and honest assessment are at the heart of any growing enterprise. In banking, the forces of changes are both internal and external. Internally, bank brands have backend operations, culture and a growing branch network needing optimization as some of their most pressing issues. Externally, competition is king and it doesn’t just come from other companies within financial services. It comes from all quarters – retail, technology and consumer – to present banks with their central charge: evolve or die. 

To help articulate the current state of banking, the Financial Brand, the financial industry’s publication of record, publishes major insights and information from its global industry research study. The report taps industry influencers, analysts and providers to deliver a portrait of an industry in flux. According to the Financial Brand, “The question is whether banks and credit unions will prioritize the deployment of human and financial resources to respond to these changes. Will legacy financial institutions embrace change, take appropriate risks and disrupt themselves to meet the needs of consumers, small businesses and corporate customers?” 

At the same time, those from outside the financial services industry continue to come in and take a bite out of banking. With a loosened regulatory environment and supersonic rate of technological change, entrees into banking from “neo banks” are upending our traditional notions of what a bank can do. Here again, the Financial Brand tracks these disruptors – “digital-first players [who] are aggressive, app-driven, CX-obsessed upstarts.” To gain a fuller picture of the financial services landscape, we’ve looked at central areas of intersection between these two reports. We’ve assessed where insiders see a need for change and where neo banks have come in to fill that gap and what we can learn from them.

Challenge: Removing Friction from the Customer Journey

Global Report Findings: “The banking industry continues to talk about ‘customer-centricity’ and ‘improving the customer experience’, but most organizations have had difficulty breaking down product silos or leveraging internal data to deliver a contextual digital experience.”

Neo Bank Solution: BankMobile with its 1.8 million account relationships, primarily with college students. Highlights to its service offering include: 1.00% APY on balances up to $15,000, online bill pay, P2P mobile payments, budgeting tools, free ATM access, and no overdraft fees. 

The Takeaway: What BankMobile has been able to do in the branchless space is bust through traditional institutional silos to offer best-in-class rates without extra hang-ups and red-tape. Most traditional banks offer rates and products with strings attached – like having to meet three of ten rules to be able to get a certain service for a fixed price. One slip of these arbitrary bank rules – not using your debit card for transactions often enough, for example – and you’ll be hit with additional fees. BankMobile has provided a simple set of straightforward services, understandable guidelines and useful tools to make banking based on the real-world. The marriage with T-Mobile will expand its reach even further. 

Challenge: Expansion of Digital Payments

Global Report Findings: “Digital payment trends have consistently been ranked in the middle of annual projections. During most years, the payment space has changed less than anticipated. The long-anticipated surge in mobile wallet usage seems to be underway, though, as more consumers are reaching for their phones instead of their wallets to make payments.”

Neo Bank Solution: Revolut. What is being called “The Amazon of Banking,” Revolut is a mobile financial provider that is the marriage of banking, payments, budgeting, insurance, and soon a stock-trading option. Highlights of its service offering include: checking accounts; three tiers of Mastercard debit card, budgeting tools, money in 150 currencies, and cryptocurrency functionality. 

The Takeaway: What Revolut is doing is cracking open the idea of the “payment” category. Part of the challenge with traditional bank approaches is that bankers still see challenges within their own siloed, structured worldview. Revolut, much like Amazon before them, has taken seemingly disparate areas of financial need and married them together into one platform. This is the young person’s way of thinking about finance – they need access to banking, insurance, credit, investment, and loans, so why not bundle them all together? Access to cryptocurrency is a natural for an organization that doesn’t even like to be considered a “bank.”

Challenge: Investments in Innovation Initiatives

Global Report Findings: “The banking industry is beginning to incorporate the traits and practices that were once the domain of fintech startups. Banks and credit unions have become more comfortable with a faster pace of innovation, using data and analytics more extensively and digitizing processes as opposed to simply turning paper into PDFs. This [is an] increased commitment to innovation in response to consumer expectations and increased fear of non-traditional players.”

Neo Bank Solution: Another rethinking of financial categories, Varo Money fuses mobile banking and money management into one platform. Highlights of its service offering include: high-yield and automated savings; personal loans; cash deposits at Green Dot merchants; AI-based spending tracker, and live customer service seven days a week. 

The Takeaway: What Varo is doing is an additive approach. Instead of taking away service options and providing a scaled down mobile banking solution focused primarily on transactions, Varo is looking at how to deliver what is typically considered branch-based solutions – consultative services – but in a convenient, where-you-are delivery method. By adding loans, money management and all-hours real-human service, Varo hopes to essentially bring the branch to you. When you need to talk with someone about your financial needs, you can connect. The challenge for this brand will be whether they can deliver meaningful consultative services 24/7. 

There are distinct advantages to coming from outside of banking. Without having to consider the current state of your institution and how to align what is and what could be, disruptor brands are able to remake entire categories within consumer financial services. But they, too, have their own trials and tribulations. With digital-only platforms, disruptors don’t have the benefit of foot-traffic, in-person relationship building and consultative services that traditional banks are known for. Instead of focusing on one silo – digital delivery – banks have multiple channels of consumer interaction that ladder up to a more holistic customer journey. The real challenge now for banks is how to not think like one. 

For more information on trends in financial services and banking or to speak with one of our experts, contact us info@adrenalineagency.com.

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