NEW BANKING REGULATIONS – FINTECH'S BIG BANG?
ustwo has been working in the fintech space since before fintech was a thing. We cut our chops in the midst of the financial crisis, bringing user-centred design and agile approaches to environments that had been built around hierarchy, and waterfall development. By doing so we learned about a complex sector and the people that work within it. The outcome? Back then we revolutionised the trading systems of tier 1 investment banks and came away with a deep understanding of how wealth creation works.
ustwo is well known for Pingit and Barclays Mobile Banking (BMB), which set the standard for user experience within the digital banking industry. Both products showed what was possible when you apply user-centric thinking to digital financial products and services. In an industry that is perceived to move slowly, Pingit and BMB have consistently been in the top three of the major app stores finance categories since launch. Both achieved extremely high NPS ratings, and Pingit was nominated for an Interaction Design Association Award.
Personal Finance Lab
We even challenged the industry further with our Personal Finance Lab – a day of talks from experts within the industry – complemented by workshops to generate new concepts for how we could make money more valuable, and more tangible.
What became clear with most of our financial technology clients was their desire – as customer-focused organisations – to make a real difference. Yet the traditional business models, legacy software and hardware systems that would power new products and services, prevent those customer-focused organisations from prioritising people’s needs. So, in a way, our hand has been forced to treat symptoms rather than cause by applying a superficial layer of ‘UI/UX’ on top of legacy systems and business models. That meant we could not give people a fully optimised experience, and we’ve had to wait for certain things to align for the real opportunity in fintech to present itself. That time is now, and it means revolution.
Regulations and technology are aligning
Calling out customer experience organisations for failing to grow and being held back by tangled, complicated root systems isn't a new thing. And it’s not insightful. It would be arrogant and wrong to suggest that these organisations are not acutely – painfully – aware of this. But now, more than ever, treating user experience design as a ‘skin’ that sits upon non-customer-centric business models and bad software is no longer going to cut it. Nowhere is this more obvious than within the fintech scene and, in particular, with consumer propositions that banks and financial services providers will live or die by.
What's different now is that a perfect alignment between regulatory and technological change has been joined by pent-up demand, caused by a significant lack of human-centric products and services. Couple this with the millennial generation’s bleak financial outlook and there is an opportunity to make a real difference to people’s lives.
Building businesses, products and services around a deep understanding of goals, tasks, and pain points are what great customer experience focused organisations are doing so well. Like any good startup, they are looking at problems to solve and building value propositions around them.
What does a transaction list actually tell you about how much money you have, whether you will overspend or if you have planned appropriately for little Sally’s birthday party? How does seeing the balance of your current account tell you that all of your outgoings are covered this month? How do you know that you can splurge on that spontaneous night out?
It doesn't. All our mainstream money systems tell us is the state of our accounts. The rest we have to process ourselves. If we are good, we keep a spreadsheet, use a tool, or count our pennies and plan the month. If we are excellent maybe we even plan the year – save 20% of our salary – and make some forecasts about the future.
The personal banking and finance industry consistently fails people because there is little focus on their goals, tasks, or needs when it comes to understanding day-to-day money.
That's because most products and services within the financial services space are aimed at saving, or borrowing money – because that's where the opportunity for income lies. Only rarely do we focus on helping people to understand the fundamentals of money or their day-to-day financial behaviour.
We believe successful companies of the future will succeed because they have helped people understand money and found a business model that supports this. Osper, Mondo and Go Henry exploited the e-money directive to create fantastic services.
What now for fintech?
So what? Why now? We know all this and have done for a long time. The biggest shake-up in the European money industry for a long time is underway. The updated E-Money Directive became law in 2009. This has allowed new, innovative and secure money services to be designed. As well as providing market access to new companies.
The incoming compliance with PSD 2 regulation and Open Banking is forcing the industry to invest significantly in technology. Similar investment in new value propositions could mean a competitive advantage.
In a nutshell, PSD2 regulation means that banks must allow third parties to access to your bank data, through the use of software APIs the Open Banking working group are pushing for. You can read Anne Boden’s great explainer over at Starling Bank for more detail.
new entrants vs industry stalwarts
The new entrants and challenger banks are primed to take full advantage of this new world. They will be able to read data from other providers to give you an overall picture of your financial health. Business models can be built around cross-sell opportunities and more efficient operations.
Whilst the new entrants have user-centricity, agility and novelty on their side, they also have a mountain to climb in order to gain traction within the mainstream. The industry stalwarts have trust, reputation, and a huge customer base to leverage.
Although this industry will constantly be in flux, what will never change is our need to understand the daily cause and effect of our financial decisions.
Supporting user behaviour
These regulations make it easier than ever to create valuable products and services that support our behaviour in the way that we spend money. It is now easier than ever to use technology to build a proposition and service that matches the needs of users.
We see this as the greatest opportunity to help people, and their relationship with money, since the invention of digital banking.
Technology has the power to level the playing field and boost equality. Let’s make the most of what we can do as an industry. Let's provide people with the proper tools they need to make the most of their money. Let's empower people to lead a financially healthy life.
If you’d like to talk to us about anything you’ve read here, or have a project to discuss, get in touch.