BOLTING ON A VALUE CHAIN
Your ecosystem or mine? Banks should not feel threatened or restricted by the rise of ‘partnership’ financial services, rather they can extract the nectar of success from them, writes Sue Scott “We have to acknowledge that we now have to share clients not compete for them. It’s no longer an exclusive relationship with the bank. Come together, cooperate, and digitise as much as possible.” That’s Paul Le, who leads on data and platforms for Dutch multinational bank ING’s trade business. It’s a pretty awesome statement; a ‘reset’, both of the cultural orthodoxy in banking and the technology around which it is built. At its heart is a recognition that customer behaviour, encouraged by regulators and facilitated by data and digitisation, is changing dramatically. As with every other area of their digital lives, customers are looking for ease of use, new experiences and infinite choice in their financial services. Even if one bank alone could provide all three, securely, and remain profitable, it’s unlikely that it would be rewarded with undying loyalty. Take the famously conservative Brits. Research by Sopa last year found one in three now hold two or more current accounts with different providers – an increase of 36 per cent on the number recorded in 2015. Meanwhile, intelligence company Compelo estimates that 61 million accounts remain idle in the UK as customers move their main banking activities elsewhere. Challengers are not (yet) the main beneficiaries of this capriciousness. Only Monzo and Starling Bank showed clear gains in the BACS table of UK current account switches last year. Nevertheless, that leaves all banks with a dilemma. If account holders continue to move between banks, looking for the sweetest service, like bees seeking nectar from the brightest flowers, the potential for
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new ‘found money’ ecosystem, based on banks to track their financial habits and open banking. The card, which runs on gain the insights they need to build the Mastercard network, is exclusively personalised offers is compromised, available to iPhone users and exists making it harder to retain those customers. physically and in the Apple wallet. Meanwhile, in the retail banking sector, a When a consumer uses it, they receive whole host of other non-banking providers a percentage of cashback on Apple are offering a range of personal financial Pay, while Apple benefits from the management apps that are moving interchange fee that Goldman Sachs towards offering payment, loan and collects from the merchant. But, when the mortgage services that are a substantial card is used to buy Apple products, the part of bank’s income. There’s a similar tech company pays no interchange fee, existential threat to wealth management saving two per cent, which it uses to fund and trade transaction services, too. promotional discounts. As you might As Microsoft puts it: “From an ad hoc expect, Apple has designed a slick digital wallet to real-time payments, budgeting interface for customers to the blurring of industry lines and track spending on the card. encroachment into traditional banking Crucially for Goldman Sachs, which territory is the new reality.” loaned $10million to users within the first In that case, how does Paul Le’s two months, it said the Apple Card was philosophy of camaraderie translate into the most successful credit launch ever a business model? (although comparisons “Anybody who’s trying Existing financial with individual cards are to build something that hard to come by). isn’t ecosystem-led, open institutions and Lúdvíksson sees this and isn’t collaborating, banks need to adopt and other initiatives as I think they have a short this new and different evidence that banks are shelf life,” says Elliott mindset – thinking of well-positioned to compete Limb, chief customer their competitors as – not by owning the officer for banking- and potential collaborators customer, but by owning lending-as-a-service in an environment the customer interaction. provider Mambu. ”Gone where consumer Ed Maslaveckas, CEO are the days where multi-banking is of Bud, the AI platform ‘collaboration’ just means becoming the norm for personal finance, a bank demands its Mike Kennelly, PwC which provides banks customers pay a certain and others with data way and the technology intelligence and fulfilment vendor sells what the capabilities to create new bank wants. Now, we’re features, believes that all working a lot closer. ‘no single institution can Composable and offer all services to a collaborative are customer’ and that a absolutely fundamental to competitive market is making this market work.” the best way to deliver what Georg Lúdvíksson, CEO they need. It was probably an inevitable and co-founder of white label digital short step, then, for the company to banking solutions provider Meniga, launch its own payment application points to the newly minted partnership programming interface (API), which between Apple and Goldman Sachs in the it did at the end of June this year. US, to provide the Apple Card, as an Designed to provide an alternative to example of how just such collaboration card payments and bank transfers, it can deliver value to all parties. doesn’t require users to share card He describes the new consumer credit details with third parties. card partnership as creating an entirely
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