As the UK and much of the developed world races ever closer to a cashless future, traditional banks are fast disappearing from the high street. Indeed with six out of 10 young adults preferring not to use cash at all, it’s only a matter of time before the ATM is relegated to the nostalgia-tinted tourist corners of our cities alongside the Internet cafe and the phone box.
But with the disappearance of bricks-and-mortar comes the opportunity for Big Banks to break new ground on even more valuable real estate – customer smartphones – and provide them with a banking experience far more relevant and powerful than any counter teller can. Unless, that is, the new breed of fintech start-ups gets to them first.
With almost a decade of designing and developing digital products and services for the finance sector – including the likes of J.P. Morgan, Worldpay, Barclays, and American Express – ustwo has long been at the forefront of helping businesses meet the needs of real people. Rather than feel threatened by these newcomers, traditional banks have a unique opportunity to leverage their trusted brands alongside all the best practices new technology can offer.
Here are 5 lessons from new start-ups that old money institutions would be wise to learn from now:
1. Talk Like You Actually Know Your Customer
In a crowded financial advisor market, newcomer Stash is unique in its success appealing to 'H.E.N.R.Y.s'. These are 'High Earners, Not Rich Yet', and people who, in their words, 'are 20- and 30-somethings who kick ass at life, make good money and want something to show for it.' Peppered with gifs, hashtags, and plenty of attitude – Stash is age-old sound financial advice, packaged up in a millennial box and bow.
With the ability to reach people directly on their personal devices, the way banks speak with customers doesn't need be a one-size-fits-all approach. Going beyond basic demographic information such as age and location, and looking to publicly available social media profiles could inform tone and manner of communication. The rapid pace of development in chatbots and Natural Language Processing means that scaling personalised communications and customer service is closer than we think.
2. Use Data to Drive Risk and Reward Pricing
Banks offering a pre-defined selection of credit cards or mortgages is about as useful as a shoe store with only three sizes and styles in stock. Everything from interest rates, account fees, credit limits, and membership benefits can – and should – be reflective of customers’ actual spending habits and financial situations.
Taking a cue from the 'insuratech' sector, US-based Metromile is at the forefront of measuring observable user behaviour to inform individual risk profiles and pricing plans by offering pay-per-mile car insurance, to the great benefit of low-mileage drivers.
Similarly, the relatively new offerings of Vitality Health Insurance with its Fitbit integration are, in principle, designed to encourage and reward customers who pursue healthy and active lifestyles. This, in turn, keeps the number of overall claims down.
Were banks to consider the full picture that one’s personal finance can offer – interest premiums might change dynamically according to a person’s age or earnings. Better yet, they might be able to anticipate those who show the greatest potential in becoming high-value customers in the future, thus locking in their loyalty early.
3. Trust Everyone With Your Money
Back in 2013, we profiled Bitcoin and surmised that early adopters of the currency could establish a competitive advantage in the finance sector. Nowadays, 9 out of 10 executives say their bank is exploring the use of blockchain – and it’s about time they did so.
With bank hacking on the rise, so-called 'Bitcoin banks' like CoinsBank are not only well poised to make use of the unquestionable security that decentralised ledgers offer, but also to ride the wave of interest from customers distrustful and wary of scandal-fraught banks.
And if people find the abstraction of Bitcoin wallets too difficult to grasp? Then look to your peers on Funding Circle with its nearly £2 billion in small business loans to fill the lending gap.
4. Become Invisible
Never has the old adage of ‘the best technology is invisible’ been truer than for the mobile-first generation of young people who expect to move, communicate and transact seamlessly throughout their daily lives. The friction-free transactional experience of using apps like Uber, which allow you to set-it-and-forget-it, have become the norm – enabling everything from financial investments (Moneybox) to charitable donations (Bstow) to happen on such a small scale and with such frequency that customers hardly notice it is happening.
But it's China’s WeChat and its dominance over almost every aspect of the digital landscape –and increasingly, the real world – which offers a glimpse into what it means to truly be a part of customers lives. Every day, millions upon millions of transactions across retail shopping, online gaming, utility payments, let alone the 32 billion in 'red envelopes' sent peer-to-peer during Chinese New Year, are carried out over WeChat’s platform with the ease and simplicity of sending a text message.
5. Adapt, Innovate or Die
No one lays it out in starker terms than Tom Blomfield, Founder of next-generation banking start-up Monzo, who believes that without investing in digitisation projects and new innovations, 'many of the big incumbents right now will die. They have not kept up to date and they are technologically bankrupt.'
Apps which provide speed, transparency, convenience, personalisation and intelligence are the standard for dozens of other industries transformed and disrupted by tech newcomers – and it’s high time that banking caught up. Indeed what Monzo and other mobile-first banks, such as Atom, offer is – quite simply – a great user experience.
Despite the considerable challenges traditional banks face in overhauling their back-office technologies and databases to make them fit for modern-day app purposes, it doesn't mean their mobile offerings have to suck. We are immensely proud of our work with Barclays, which helped make them become the UK market-leader in mobile banking apps. But the bar has – and continues – to rise to the point where being best-in-class means looking far beyond your biggest competitors.
If you’d like to have a chat with us about how your company can stay relevant in your customers’ lives and smartphones, get in touch at firstname.lastname@example.org.