ApplePay, Challenger Banks, e-commerce, eWallets, mobile banking, SamsungPay

Why are there so many Financial Health apps now?

The trend of mobile banking apps is rapidly growing around the world.  I’ve counted more the ten in UK and hand-full in Europe and the United States.  They are typically built in partnership with either MasterCard or Visa and often have a sponsor bank or are in the process of getting their own banking license (which is harder in the United States) to support and maintain their activities.

If you’re between 20 and 35 years old you’ve probably heard of one of them and if you like technology and money management app, you’ve probably downloaded one (or more) and used the service.  But, is this better than the traditional banking experience? Throughout this piece I’ll try to detail why the market is heading in the mobile only direction and what it may look like in 4-6 years for the incumbents and what impact will it have customers.

Who are the major players?  The mobile banks in the UK are the most advanced, so let’s focus here. 

Monzo Bank have probably been the most visible in the market, with the unique ability to create a tribe within a short period of time.  The have used a combination of VC money and customer adoption through crowd funding – which I think they broke a record and a user experience that was one of the first to provide a different flow to the banking experience.

Starling Bank and N26 are not far behind with a great user experience and a more European approach, rather than just the UK.  N26 have also announced they’re opening their services in the US in early 2018.

BBVA are one of the worlds largest banks and have been strategic about how they are approach the new generation of banking.  They have made some acquisitions on the mobile banking space in the United States through Simple and Holvi in Estonia. They are also creating a culture and marketplace to enable entrepreneurs to use data to build the next version or feature of the banking experience.

 Customers – Do customer need a better mobile banking experience?  Yes, apparently, we do.  The customer need is there.  The market indicates that customers want more from their bank and want it on mobile.  The majority banks are still transitioning to a successful mobile banking experiences and this is where the new start-ups have found an opening and customers are agreeing.

What are they looking for?

Flexible Spending and Transnational Overviews – good engineers and designers can create awesome visual concepts when it come to data.  And especially on mobile, where our focus is only for seconds before we switch to the next app.  Banks like Monzo and Starling have nailed this and make the user experience the core feature of the bank and got users saying longer in their app.

Payments – Mobile Payments have also increased the visibility of banks on mobile devices and decreased the friction to enter the banking app.  Mobile Payments like Apple Pay and Samsung Pay are new and not widely used (but are widely available) also focus on the user experience and convenience and most mobile banks are support the most common forms of mobile payments.

Financial Goals – Gone are the days where we keep cash under our mattress of a rainy-day fund. Now we can use mobile banking apps to help us refine our spending habits and guide us to save more for specific goals, like holidays – which is actually a good idea – but I’d prefer to save for a bigger purchase, like a house.

Fundamentally, the product that is being built is a bank account, a current or saving account primarily. Probably a credit facility in the future, like credit cards or mortgages.   But they are also doing something different;

Cloud Based – One hundred percent in the cloud.  Provides them flexibility to grow fast and add new features easily.  This is a given in 2017, but some traditional banks are still assessing the future.  This doesn’t provide a competitive advantage for customer acquisition, but hopefully reduces cost for these mobile banks.

Business to Business Transfers (faster payments) – the UK market is miles ahead in payments and clearing functionality and many start-up banks have already plugged into the network and are processing payments for big business payrolls and Governmental activities already.

Card Acquiring Services – Like many incumbent banks who are acquiring platforms and process billions of dollars of transactions, Start-up Banks want to join the club.  The major benefit is that merchants directly or via payment processor can integrate directly into the acquiring platform, like a Stripe API connection.

Third Party Partnerships and Open API (marketplaces app store) – This is a concept that we’ve heard a lot of recently, but its put into place here. For example, YoYo is an email receipt service for mid-tier merchants in the UK and customer can use this service with several start-up banks for their purchase reconciliation activities.

So, what’s next?  Many of the challenger banks have raised large rounds to build a bank from the bottom up, which includes the infrastructure and security, which is primarily cloud based.  They also focus on the customer, the user experience from becoming a new user to the day-to-day activities that users want to focus on.  This allows them to be flexible and enable new features faster and get customer feedback in a more structured way.

In general, the numbers are good for the larger banks, they have seen the trend in mobile first banking and are constantly improving and updating their apps to make them more user friendly.  Obviously, there is still a gap between them and a Facebook or Uber app, but closing fast.

Because there is feeling in the market that traditional banks are bad and don’t understand technology and want the new generation of bank account holders really want.  Which is, a Facebook like banking experience

 However, how are they going to make money when the VC capital is gone?  My guess is that their trying to get customer growth and eventually looking for an exit via a large bank that is looking to appeal to the younger generation and mobile first generation.  The most obvious outcome is that these start-ups get acquired by a larger Financial Institution or tech companies that are looking to expand their financial offering to a non-traditional segment of the market.

 The next five years in the financial app space will be exciting.  Already we see Financial Institutions like, JP Morgan Chase acquire mobile only bank, Finn.  It has also been reported that Monzo has had offers from several larger Financial Institutions but have not accepted at this point and have indicated they want to go it alone and truly build a bank of the next generation.  I think this is important for the future of banking because they’re independent and can test and try new ways of meeting customers banking requirements in different markets.  The constraint they’ll have is how to grow the customer base big enough were they become profitable without forgetting about the customers they started with.

I think the future is bright for the next generation of banking customers.  Technology can help us have disciple when it come to saving and planning.  But of-course we still have to follow-it.


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