On the 20th of June 2018, fifty-five organised an informal talk around the banking and financial industry, the third of the series of “BrandTalks”! This free discussion club aims to bring together actors with very diverse profiles, so that each participant may benefit from other points of view, on subjects related to digital, innovation and data.
The subject of this BrandTalk: what the future of banking will look like. fifty-five brought together major French network banks, such as Société Générale, La Banque Postale, and Crédit Mutuel Arkéa, but also new banks and FinTechs, such as Revolut, N26, Yomoni, Bruno, Pumpkin, or manager.one. The France FinTech association and Facebook were also present to share their expertise during the debate.
Mobile banking and open banking: a wind of innovation is sweeping the banking industry
First things first, let’s focus on two recent trends that have pushed banks to engage in a new pursuit of innovation: mobile banking and open banking.
What is mobile banking?
The concept of mobile banking refers to new banking services which can be accessed via mobile or tablet-based applications. Also called neobanks, these digitals banks take the concept of digitisation even further than simple online banks.
Some of its services include: opening a current account, ordering one’s credit or debit card (sometimes for free) or report its loss, perform transactions instantly, take out insurance from abroad… all via one’s smartphone.
What is open banking?
Open banking is based on the concept of openness and data sharing between the various banking players, in particular through APIs. This data can then be collected by other banking players, enabling them to create new services and products. The information collected may, for instance, include: bank branch locations, ATMs, money transfers and other banking transactions…
Open banking is made possible by the European Payment Services Directive, adopted on 13 November 2007, and replaced in 2015 by the Payment Services Directive, commonly referred to as the DSP2 (2015/2366/UE).
FinTechs have come along with a vision that focuses on new uses and user experience, and open banking opens the way for them. Indeed, “several million French people have already given their account management ID and password to banking aggregators. French players are at the forefront in Europe in this highly strategic segment” Alain Clot, President of the France FinTech network, points out.New forms of customer behaviour, changes in regulations and, above all, digitisation are blowing the wind of change on the banking industry. Today, it’s easy to make an instant transfer using a mobile number, or to receive a credit/debit card without going through an agency!
Banking industry developments triggered by new players
In the course of these discussions, three major underlying trends emerged:
- Changing user behaviour: users prefer online services, while still wanting the opportunity to speak with an advisor. As Géraldine Cozenot-Lerouge, digital expert from Crédit Mutuel Arkéa, put it, “Clients want more autonomy, but they always want to be able to talk to someone about their projects: that’s where the advisor remains indispensable.”
- Improved access to information for consumers: for instance, 32% of French individuals consider they know more about managing their own budgets than do their advisors (Deloitte, 2016).
- Finally, new, open and fully online market entrants who “disrupt” the sector and gain market shares. In 2018, we could already count more than 7,500 FinTech firms in the world ! (Capgemini, 2018)
New products attract customers who are eager to experience innovations, such as that of being able to pay in foreign currencies free of charge. Indeed, the “customer centric” vision is the new standard!
“We still haven’t spent a penny on marketing! Customers arrive on our website through our most original value proposition, one that is rarely found elsewhere,” emphasises Revolut’s CEO for France Benjamin Belais.
But FinTechs did not invent this – Alain Clot rightly reminds us that, “while FinTechs are usefully disrupting traditional players, it was banks who initially drew consumers to the Internet and invented the first neo-banks.” 7 out of 10 Internet users worldwide already use an online banking service, whether it is their traditional bank or a neobank (Global WebIndex Survey, 2017).
Transparency, trust and the “human factor” remain the cornerstone of the contract between banks and their customers
While new entrants are driving down bank fees, customers are also asking for more clarity on the overall charges associated with their services. Consumers are now more demanding: “It is a pity that pricing is felt to be suffered, and not as a fair reward for a service. For example, overdraft fees are seen as simple punitive payments,” explains Géraldine Cozenot-Lerouge. Banks therefore have every interest in playing the game of trust and transparency. Of course, price is not the only (nor the first) criterion. “Customers favour user experience over price,” notes Alexandre Giros, Head of Digital at La Banque Postale.
On the other hand, the people aspect remains at the heart of client concerns: proximity to a branch often remains a determining criterion in the choice of one’s main bank. A paradox, especially when we know that clients are going to agencies less and less and are taking advantage of more convenient online services. For Jérémie Rosselli, N26’s General Manager in France, this recalls “the ATMs crisis in the 1970s, which led to an in-depth transformation of the banking sector, services and products in order to create a differentiated value proposition.”
Isn’t finding the right alchemy between the digital and human aspect the key to success? This is what Yomoni and Bankin’ are betting on with their multi-chat service, among other features. “Savings, loans, frequently asked questions… For each question or project, a different expert answers, depending on the service or product at hand,” explains Sébastien d’Ornano, founder and CEO of Yomoni. Another example is the name of start-up Bruno, which refers to the popularity of this name in France in the 1960s: “Bruno could be your bank advisor!”, explains its co-founder and CTO Louis Chavane.
Network banks and FinTech: two players who finally complement each other and develop the banking business in their own way. “I don’t think that one of us will eradicate the other, but rather that competition stimulates activity,” says Alexandre Giros. So, the banking sector is not done surprising us!
Translated from French by Charles Rogers.