It is therefore not a surprise to us when we see banks closing down branches one by one, as a means of lowering costs, without attempting to find a position of power in their newly evolving ecosystem.
This indicates a flawed understanding of the threat along the lines of: fintechs are winning because they offer similar services at a lower cost with better, digital-only customer experiences. Nothing could be further from the truth. If there is anything to be learned from disruptions in other industries , it is that disruption is not a simple substitution at a lower cost.
When customers adopted digital cameras they did so not because the quality of image and cost were now comparable to film, but because digitised images could be shared electronically. What photographs meant to people, who took them, when and of what, all changed in one fell swoop. Fintechs are similarly changing what banking means to people, how they engage with it and what their expectations will be from their financial providers in the future.
What killed Kodak in the end was not that they could not keep up with the technology, but their inability to appreciate the wider cultural and behavioural shift that ensued. In the case of banks, the most important aspect of the shift is the move from product-focused to platform-based competition. Bankers feel good after making a profitable sale, or clinching a deal. Platforms are not about making profit from individual sales but how an expanding user base creates value for the entire network — a concept foreign to most banks.
It would be a mistake for banks to view the Apple Card as yet another card. So, offering a no-fee account is already a huge plus. You go through the sign-up process, and it pre-fills a lot of the information for you.
In our student business, this might be their first account. You want to be able to reward them, not just for good financial behavior, but [also for] good academic behavior. Our Passport program rewards them for both of those with discounts, et cetera. For us, it allows for high-volume acquisition of customers at very low cost. In higher education, we solve a pain point for colleges and universities, which is sending payments between themselves and the students.
We interject the bank account in there, and the students have a choice. What is the opportunity you saw there and how did you address it? In both our products, we start with a checking account. But then we want to be able to grow with the customer. Specifically, student refinance is an obvious place to play. A lot of students have debt, and being able to provide a product where they can refinance their debt at a lower rate and make payments that are easier over a fixed period of time.
Knowledge Wharton: Clearly, BankMobile has come a long way. If you think back on the past five years, what has been the biggest leadership challenge you have faced? How did you deal with it? What did you learn from it? Sidhu: The toughest challenge was when we launched as a direct-to-consumer strategy in I had a goal [to address] consumer pain points, and create a consumer brand around banking. We still grew relatively fast in our first year.
We had about , accounts, but they were small balance accounts, and there was a decent amount of fraud in the accounts. So, we had to pivot. Now what do we do? That was a turning point for us. It was about how we could take this challenge and find an opportunity. Knowledge Wharton: Do women in banking and fintech face unique challenges compared to men?
What is BankMobile doing to help combat these kinds of challenges? We were a disruptor in this business. We wanted to be a mover and shaker in banking. One thing about me is that being a young woman, and being a minority, aligns well with the disruptor model. I almost felt there was congruence between the business model and what I represented.
I just felt like I represented it well, and I thought there was a lot of congruence in that. Challenges continue to exist.
I start my day with meditation and chanting. That is how you become strong. On the other hand, neo-digital banks find it difficult to obtain low-cost financing and maintain long-term relationships with their customers through more than one point of contact.
Many of them will shift to credit services and try to help banks do more in the backend, or they will try to work with them to consolidate their technology. Traditional banking sites do better than online banking, but they are dead banks. Online-only banks are nowhere near able to overtake traditional banks, but they are on the rise. Traditional banks are anticipating this shift and expanding their platforms with mobile banking options.
If you are considering switching to an online bank account, take a look at our test of the most popular online banks. Internet Cocoa Bank, a financial services app from Toss, recently highlighted its ability to offer its customers bespoke services by leveraging big data. Like Cocoa, the company teamed up with a local card issuer earlier this month to offer credit card services for the first time. While traditional banking skills based on a range of customer-centric soft skills are in demand, the advent of digital banking requires specialised digital skills to facilitate mobile apps and digital banking.
In summary, older consumers signifie less retail lending. Banks will struggle on growth and interest rates and will have to face pressure on their profits. Rethinking the banking strategy with a digital-first and transformation strategy seems to be the only way out and the only chance of survival for traditional banks. Latest thinking in respect to Banking Strategy, Digital and Transformation. Harnessing our collective wisdom to make banking better.
Ambrish Parmar. Abhinav Paliwal. Tatsiana Kuchminskaya. James Mingard. Blog article. News in your inbox For Finextra's free daily newsletter, breaking news and flashes and weekly job board. Sign Up. Channels Retail banking. Banking Strategy, Digital and Transformation. External what does this mean?
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