Introducing this Week’s Extracts from Extractable, a condensed roundup of #UX and #DigitalBankingInnovation news for financial services institutions — and our take from San Francisco.
Here’s what’s been on our minds in banking since our team went fully remote.
Covid-19 Impact on Retail Banking
The COVID-19 pandemic and its effects on customers, markets, and organizations dominated the conversation this week; as the virus exacerbates a distance between financial institutions and their customers.
It is apparent across the industry that the manner in which financial institutions conduct business will be disrupted on a historic scale that may change the future of banking forever.
There were several stories about the impact of lockdowns on accelerating the change in customer behaviors away from the branch and towards digital.
Bill Streeter writing in the Financial Brand posits that customers will start adapting video banking. Also in Financial Brand, Timetrade makes the case for increased adoption and use of branch appointment scheduling as a result of social distancing.
Fortune covers how consumers may start adopting contactless cards faster than expected. TechHQ highlights the use of virtual assistants in banking. All of these technologies, along with the basic digital banking, are being highlighted during the current situation.
We also expect a certain level of acceleration, but it is always hard to predict which behaviors will change for the long-term. FIs should be aware and ready to change their plans based on what behaviors are being exhibited by customers.
At Extractable, we believe financial institutions must demonstrate leadership in empathy for customers and their financial well-being. Those who are unaffected now fear they will be soon, and those who are affected today face unprecedented challenges that we must face with sincerity and tact. Billionaire entrepreneur Mark Cuban warned CNBC that how companies respond to the outbreak will “define their brand for decades”.
Unbundling or Rebundling
Several years ago, many people in the #financial services and #fintech world were talking about the unbundling of banking. The theory was that as more fintech firms entered the market, each with a laser focus on a specific service, there would be a trend towards the unbundling of financial services.
Customers would clobber together a collection of frictionless fintech services that would replace a traditional #banking relationship.
Around 2017, we started to see a future in which the trend reversed. Rebundling became a topic of discussion, generally around the idea of Open Banking or #Banking-as-a-Service. However, the rebundling story is once again changing. As fintechs begin to extend their services beyond a single product, such as SoFi and Square, they are starting to replicate banks.
“with lower barriers on the infrastructure side for fintechs, it’s becoming easier to launch other features that aren’t core to a company’s mandate.”
This week, GlobalData’s Fintech Analyst Sudheshna Karukula is quoted in Traders Magazine echoing the same observation. Trader Magazine gave Robinhood and India’s Paytm as prime examples of the trend.
The bottom line is that fintech firms see an opportunity to extend the relationships they have won through great customer experience by providing more products.
The big question is whether the legacy FIs can respond in kind.
Tale of Two Neobanks
Nine years ago, Brett King’s Moven became one of the first American neobanks. Sadly, last week, Moven announced a winding down of their direct to consumer app to focus on partnering with banks. Two weeks ago, Moven announced a partnership with Saudi Arabia’s STC Pay.
From a strategic standpoint, it makes sense to focus on the enterprise side of the business. However, the decision to leave the direct to consumer market was made mostly due to funding that was pulled due to current market conditions.
In the meantime, European neobank Revolut continues to be well-funded. This week they officially entered the US market. We’re curious to see how a neobank, whose main proposition is reduced exchange fees, will fair in a market, unlike Europe where most people aren’t traveling outside their country.