The FinTech Chemist: Are We Under App Attack?

Studying the properties and composition that make up the FinTech ecosystem

Welcome to this week’s industry analysis with the FinTech Chemist. While I may not be literally mixing solutions and preparing reagents, I am studying and testing out the latest and greatest in FinTech. A scientific investigation usually starts with an observation, so, let’s talk about mobile banking and investment apps. Hate to love them, love to hate them, they can be useful, yet polarizing. Staying true to the scientific theory, I called up some millennial friends and asked them a deluge of questions about their saving and spending habits.

Like religion or politics, the subject of money can be a taboo subject and often comes with varied sets of assumptions. Luckily, my peers are open-minded, and their responses completely obliterated my preconceived notions about mobile banking and investing. What notions? I had assumed most millennials wanted to try the latest apps, especially if it makes money management easier for them. We’re constantly bombarded with news about how startups and FinTechs are attracting thousands of millennial customers – a demographic they’re eager to capture as, in the US, millennials wield about $1.3 trillion in annual buying power. So, I was surprised to learn that many of my friends have abandoned investment apps altogether. What gives? It turns out the biggest complaints were around customization and becoming burned out with so many options.

“You have to be so committed to making everything work, linking accounts, and understanding all the different features in each app. I actually tried Mint for a while, but I didn’t like having everything in one spot because it can be overwhelming,” said Astrid Mignon, a customer success manager in New York.

“What I find with a lot of investment apps is that they’re not customizable enough – there was always something missing based on my needs,” said Ms. Mignon, and her fiance, Tim Rowan, a systems and web administrator at Showtime Networks, chimed in and said, “That’s where machine learning will be a gamechanger in financial services. Eventually, these apps will be able to efficiently track your spending and savings habits and make recommendations.” Mr. Rowan did add, “I know everyone is going the subscription model route, but I hate it for investment apps. Spending money to manage money? No thanks, a one-time purchase is preferred.”

When it came to asking about mobile banking apps, the conversation was much more positive. According to a study by App Annie, the average user checked their bank account on mobile nearly daily in 2018. This has ultimately put pressure on traditional banking to maintain their relevance in the face of FinTech competition. Everyone I spoke with said their bank's app is the most important, if not the only, digital platform they use for managing personal finances. Ms. Mignon loves her online banking apps and rarely visits a physical branch. “I love my Chase app, and that I never have to make a deposit at a branch. I use Ally Bank for my savings account, and like having the convenience of a fully online bank.” Ally actually came up in a few conversations because several of my friends enjoyed the easy account opening, earning competitive returns on savings accounts, and the options around CD, retirement, and money market accounts.

After asking many questions, my hypothesis is that several variables go into choosing the right apps for money management. What I did glean from these conversations is that millennials (myself included) value mobile banking and expect to have the ability to check balances, transfer funds, and pay bills via our preferred institution, and we’ll continue to force FIs to continue innovating. Now, onto my next scientific… I mean FinTech hypothesis adventure. And, as always, remember to take your vitamins!

Read the previous edition of The FinTech Chemist.