BankTech
Week in Review: Boiling Frogs
by 
Patrick Rivenbark · August 28, 2017
MEDICIVP of Strategic Partnerships
I have a confession: I wasn’t planning on taking a summer break from writing the FinTech Week in Review but the constant heat has a way of forcing you be a little lazy. It’s the slow, habituation to the heat which makes you forget that cool, activity-filled days are ahead of you. We’re boiling frogs - at least for a couple weeks.
Recently, FinTech feels a bit like the boiling water -- technology’s constant, unrelenting pressure, slowly making our entire industry feel lethargic. We forget what life was like before FinTech and that there will be life after FinTech - at least this era of FinTech. It’s in times like this you should talk with industry disruptors and veterans alike. It’s valuable perspective! This week’s review focuses on ideas that remind us that one day “FinTech” will just be the new normal and age-old industry issues will continue to persist.
N26 now has 500,000 customers for its bank of the future
"It’s a bit weird to see a bank adding new features as many banks have been standing still for too long. But that might be the reason why hundreds of people have created an account so far.”
Consider your digital experience today -- updates, upgrades, and new features is a way of life. We expect that our favorite apps, appliances, and cars become smarter and make our lives better. Now consider your mobile banking app. Sure, there has been a cosmetic overhaul but how often have you opened your bank’s app and been surprised by a new product or service?
The promise of FinTech is obvious when you read, “It’s a bit weird to see a bank adding new features”. That banks will add new features, products, and services will become as common as upgrades to Facebook. N26 is leading the way and continues growing. Importantly, every new customer expects their banking experience to iterate towards improving their lives - of course it should! Incumbent banks, particularly small banks, should not look at these challenger banks as a threat but rather as inspiration to seize the opportunity. If you don’t, you’ll find yourself sitting in boiling water with your board, customers, and shareholders trying to explain why standing still is in their best interest.
Digital peer-to-peer payments are the new norm
“That poses a problem for firms providing these services, though. Historically, most of these players have taken on mobile P2P at a loss because it’s a low-friction way to onboard users and won’t catch on unless it’s free, or largely free, to consumers. But as it becomes more popular and starts to eat into these firms’ traditional streams of revenue, finding ways to monetize is increasingly important. ”
P2P is the new norm. Really, you don’t say? The business of P2P is something we’ve covered a few times on our week in review (here, here, and here). In the US, P2P isn’t fully ubiquitous but that day is coming soon. Zelle, Venmo, PayPal, Apple, Amazon, and every bank out there is helping us get there. Outside of Venmo and PayPal, the experience of P2P payments is still a bit clunky but that will should improve. The common theme around P2P payments can be summed up with, “Everyone will use it but how do we make money?”. Those smarter than me are trying to figure that out for P2P payments. The more important lesson for you, FinTech aficionado, is this:
Assume P2P will be used by every single customer and you won’t make revenue from it. How does that change your strategy? What other products and services will become the new normal in a few years? How does that change how you best serve your customer? There is always an upcoming new normal and this era of FinTech will be no different. So ask yourself (not Alex, Siri, or Google) what do you do now?
Why Understanding Morality is Key to Understanding Future With AI
“As we look at crafting AI for better data-driven decision making in critical processes – such as optimizing far-reaching and complex value chains, making real-time decisions in applications such as self-driving cars and many more – we should recognize that without coded in morality, AI will actually act without the concept of morality or human subjectivity.”
Artificial intelligence and machine learning are certainly challenging all of us to think about the future. Its ability to make complex decisions in our lives certainly warrants its serious consideration and discussion. Regardless of how you feel about AI (or if it is really AI to begin with) the basic premise of this article is worthy of your consideration: what impact will technology have on our lives and how should that shape its implementation in society?
It’s good to remind ourselves that technology is a tool. Technology alone doesn’t make our lives better. We were recently having a discussion with a growing FinTech about the hidden fees in lending and we couldn’t figure out why the practice of hidden fees and deferred interest is still commonplace. Should customers incur penalties for not fulfilling their obligations on time? Sure, that’s fair. But how many financial institutions are making that contractual obligation abundantly clear before a consumer agrees to the loan? How many companies build in late fees and deferred interest as significant parts of their business strategy?
In the long run, it’s bad for consumers which means it’s ultimately bad for financial services companies. Financial services (and particularly FinTechs) realize that “coding in” humanity into their services is the right thing to do and is a sustainable business strategy - not just a marketing gimmick. Let’s hope others take notice and we soon live in a world where financial services is seen once again as a positive contributor to its customers and society.
Thank you for your time this week! Share with your friends and see you next week!