Interconnected

Some ideas for banking apps

Something interesting is happening in UK retail banking... a transformation -- as far as I can tell it's triggered by the impending (and catchily named) European PSD2 which includes new rules designed to open up access to payment account information to third parties and the UK preparation for this, commissioned by the Treasury and led by the Open Banking Working Group, defining exactly how we'll be able to, for example, plug apps into our current accounts.

Q. What?

A. This:

If you've ever complained about your sucky bank mobile app, this will let third parties replace it. If you've ever used Transferwise because it's a cheaper and easier way to pay for a holiday hotel, this will open up competition and make the banks get cheaper and easier too. If you've ever wondered why, in the UK, we don't have apps like Acorns which automatically rounds up all your transactions to the nearest dollar, and sweeps the round-ups into your investment portfolio, this will fix that.

Naturally the UK banks are scared they're about to be commoditised AND responding with vast and impressive innovation efforts.

This is anecdotal. I have a friend who works in retail banking, I've had a meeting with a couple of other banks, and I'm hearing faint noises on the grapevine.

So I was talking to my friend, and wondering - this opening up of UK banking - which will be a cross between being able to move my mobile phone number between operators (which wasn't originally possible) and Youtube and iTunes which democratised music production... what will happen?

It might be like newspapers. It turns out newspapers were an accident of distribution. They were really good at printing for cheap and getting bundles of papers into every pair of hands in the country. But then the internet emerged as a rival form of distribution, and the newspapers were unbundled -- classified ads to Craigslist and then Facebook, ads to Google, breaking news to social media, expert comment to blogs. And as the readers go, so does ad value. It's a death of a thousand cuts, and although journalism is still useful, it no longer sits catching cash at that valuable mountain pass. We'll have to find a new way to fund it.

You know, no huge loss. It's important we find a way to properly fund investigative journalism, but it doesn't need to be these particular journalists or those particular publications.

Or it might be like Uber.

What happens when driving a car from point A to point B is no longer a specialised profession, when Google Maps can tell you what to do?

What happens to retail banking when...

  • overdrafts come from a pay-day loan company
  • the mortgage market is frictionless
  • investments are made with an app that seamlessly integrates with your current account, gamifying savings and the stockmarket both
  • getting a new third party credit card is as easy as downloading an app, thanks to Apple Pay... this could be the golden age of American Express
  • switching your standing orders and direct debits is either automated -- or unnecessary, because you take your current account number with you between banks
  • and now you've almost forgotten who provides your underlying personal bank account, and you haven't visited a bricks and mortar branch for years, you switch to another current account provide with a cuddly logo, some other bugger who can spend more on marketing because their operating costs are radically lower because they run all their banking with modern web tech instead of ancient and expensive mainframes

Goodbye existing UK high street banks.

All of which means the question becomes:

As a retail bank, what do you do to ensure you're not just the plumbing, that you provide enough value that (a) customers come to you and stay with you; and, (b) customers use you enough that there multiple low-friction upsell opportunities to those services that actually make a profit?

In short, how can my bank be a platform more like iOS (as gorgeous as Android is, I'm never going to switch because I can't be bothered to re-download all those apps and learn new habits) and not a platform like my electricity suppler (electric potential is electric potential, switching is a phone call, and I'll give my money to the folks who build those beautiful fields of windmills thankyouverymuch).

I was chatting with my friend in banking (remember I said I have a friend in banking) on Friday.

I said:

Look, what apps can you build on the current account. Thinking about that service in the US that sweeps your small change... there's Digit which is a text-message-only artificial intelligence that helps you save money. Clever. Catchy. And I'm sure I read about one that watches your current account and automatically donates money to charity.

Well there's a service like that charity one in the UK, something offered by Lloyds that handily and easily donates your spare change to charity: Save a few pennies every time you spend with your Lloyds Bank visa debit card. Problem being I've never heard of it.

And of course I haven't. Lloyds has a thousand products. They aren't existentially threatened if this particular one doesn't take off, and it's a marketing expense anyhow so it's barely possible to tell whether it matters. But the charity idea is a good one.

How about this -- spitballing an idea...

What if a consumer bank partnered with an online fundraising service, let's say Just Giving which makes it super easy for charitable causes to set a goal, and allows individuals to spread the word through their social networks.

They partner and set up a new form of charitable giving called "sweep" -- it gives your spare change to some some organisation for 3 months, say. And it's frictionless... one-click for this particular bank if you already have an account, tap and it's connected, enabled by the technology built to meet European PSD2.

Just Giving (or whatever service) is crazy incentivised to market this. It's a competitive advantage, it's existential for them, they live or die by that KPI. And the bank... well, they do what they do best. Only now their name is out there, customers have both the warm fuzzies and a new incentive to stick with this particular account. Sure other banks will catch up, but keep building apps and get partners whose interests are exactly aligned with getting the word out and making the partnership succeed.

Maybe the next one-click integration is Square retail payments.

Maybe buy the Square kit in the UK, you click a button and BOOM you have a small business banking account with insert name of forward-looking UK bank here. Sure you can't withdraw any cash yet due to European anti money laundering regs but hey the same is true with PayPal right, so come into the branch whenever you're ready and we'll do the paperwork. Meanwhile you can run your shop, go ahead, make sales.

Where does this lead?

Perhaps, just perhaps, it leads into a form of customer relationship which is more relevant to people under 40 than in-person meetings and robot voice phone menus.

Why shouldn't I be able to follow my current account on Twitter and get a direct message when my salary hits my bank? And if that same current account asked me, in that same DM, Hey, Matt, look, I can set you up an ISA, you've got a couple hundred a month spare to save into it, you up for this Y/N? Sure I'm going to say yes.

These are simple concepts to implement. But they're also forward looking, aligned with strategic interests, and might actually get some attention.

My point is, for the UK consumer banks, the ideas are ten a penny. The difficulty, as ever, is going to be the organisational change to take the opportunity, and keep taking it.