At ProductTank London, Tracy Abraham asked whether Finance will be the “final frontier” when it comes to disruption of our digital lives, given how heavily regulated and intense private our financial lives tend to be. Specifically, she explored the ways in which fintech startups are taking on the establishment, putting customers and tech ahead of bureaucracy and bonuses, and what has led to this disruption of an age-old industry.
Why the Banking Marketplace is Changing
At the core, the problem is that banks are not truly trusted anymore. They’re not seen as a reliable place to keep money, and very low interest rates have only eroded the benefits that most people see in most banking products.
Add to this the fact that the regulation around banking licenses is getting easier to navigate, the stagnant financial marketplace is leaving gaps for new business models to step in, and the amount of infrastructure required to set up and run a bank being much more accessible, and it’s looking like a good time to get involved in fintech!
The New Banks on the Block
Tracy lists a dizzying array of challengers, tackling several different aspects of personal finance. For example, Osper, Pocket and Monese are all totally focused on a single slice of the market (addressing one particular set of problems).
On the other hand, there are startups who are either offering more “traditional”, broad-spectrum banking products (albeit delivered and managed in new ways), some well known, and others relatively unheard of outside of fintech circles: Tandem, Mondo, Atom, Bunq and TDBank (not a startup, but a fresh way for customers to manage their finances). Naturally these are all differentiated from traditional banks in things like their relationships with their customers, how they enable customers to manage and track / engage with their accounts, and so on.
These startups are typically using several tactics to promote their products and drive growth – some of which are well-understood in general, but rare to see in banking products. More specifically, tactics which are typically quite difficult to use in a traditional financial environment. For example, getting customers to recommend other customers (Word of Mouth / Viral marketing), which is not something is typically associated with banking products (as few finance products are considered “delightful”).
More interestingly, these startups are integrating technology into their products and customer experiences right at the beginning of their existence, which drives modern customer experiences and a significantly higher degree of technical agility! And in what might be jokingly described as a philosophical departure from the world’s current banks, several startups are being inherently open with almost all of their data and roadmaps, and authentically collaborating with their customers.
The finance industry has become mired in tradition and regulation, despite the rapid advances in technology (both business and consumer) and changes in people’s spending and saving habits. This has not only left clear gaps for startups to enter the fintech world, but also lead to a sense of mistrust, or at least apathy, around existing institutions. The gradual reduction of regulation is leading to a relative explosion of startups which are typically targeting either very specific problems and audiences, or which are creating generalist banking products on modern technical and UX foundations.
In this sector which has been dominated by monolithic institutions, slowly aggregating products without significantly updating operating practices or attitudes, gradual relaxation of regulation, and increased market accessibility, has led to a flourishing “marketplace” of new products springing up in direct reaction to the “tension” between the established practices, and modern customer needs.