Part 3: Digital Banking Trends and Tips for 2021 and Beyond

Part 3: The Self-Driving Bank

In part 3 of our digital banking trends series, Technisys’s head of Cyberbank Digital talks about the concept of the “self-driving bank.”

Contributed by Herber de Ruijter, Head of Cyberbank Digital at Technisys

Banks seem to try very hard to get me “excited” about the simple services they offer – things like every couple of months telling me that they have once again lowered the interest rate on my savings account, or after a market crash using my 401k retirement calculator to notify me that I now have to slave for 7.5 more years to responsibly meet my retirement income.   My disappointment isn’t as much about the rates themselves as it is about the lack of recommendations from a bank that is supposed to actually be looking out for me and my best interests when economic conditions change or cultural trends impact our society. 

In the same way that a GPS re-routes me to save time when there is a traffic jam ahead or Apple knows that I have both Apple Music and iCloud, so it offers me bundled services through AppleOne to save on monthly costs, financial institutions should be doing the same.  If SaaS-based product companies can offer “basic” pricing for a product that is very good by itself (and good enough for me) with the choice of upgrading to “better than good” and finally having the “ultimate” option, where I feel that every incremental offering is worth the money, then it begs the question: how can the financial services industry make consumers feel more in control of their financial lives too?  How can my bank offer simpler fit-for-purpose products that help me make decisions when something happens that is important for me and my family?

My bank has all kinds of valuable data about me, and technology can automate all kinds of products that can be delivered as an integral part of my lifestyle.  My bank should offer me products that fit like a glove for the stage of life I am in now, that understand my preferences, follow how my life is evolving and give me recommendations when my economic surroundings are changing.

As Open Banking takes hold in Europe, Open Finance makes progress in the United States, and fast payment settlements remove geographic boundaries, banks now have exponential opportunities for growth that proactively take advantage of this – services such as automatically sweeping money to avoid overdrafts or consolidating my personal funds where I dynamically get the highest leverage of my savings.  Isn’t that more valuable than my bank’s PFM telling me that I am spending too much on dinner this month?

If I want to transfer money to my family overseas, the bank should give me some recommended options based on speed, cost, or best currency rate.  Or better yet, similar to the way I consume subscription-based applications, my bank knows my intent already and shows me a “more than good enough” or “better option” for the transfer.  And because I make these transfers every two months, it should recommend me to hedge some FX with possible FX fluctuations coming.

I am looking to interact with my bank similar to how my GPS guides me and to preferably have their products embedded where and when I need them. The financial product is not at the center anymore, much like paying my Uber driver when he drops me off or offering a flexible finance product at the point of sale.  When it’s presented when I need it, it then has my full attention.

With the rise of “embedded finance,” where the bank is a supplier into the supply chain similar to eRetail and where customer-centricity is extremely common, banks can finally start to truly learn and build products that match the consumer lifestyle instead of trying to be the Swiss Army Knife that solves every problem.  Highly tailored products that address the specific needs of each micro-segment will accelerate banks to become BaaS providers, giving them access to incremental revenue streams that will allow them to be agile, stay competitive and win back customers for the long term. 

New fintechs are capturing the imagination of SMBs by offering services rather than rigid and transactional products.  While SMBs still depend on banking products, the services gaps more and more get covered by new challengers to the market.  A small business owner that has become comfortable buying products on eBay can now submit payroll on PayPal and, when he or she needs it, can even apply for a working capital loan.  Spotify provides loans to merchants who pay them off by the sales they make in their white label online stores, while Stripe helps entrepreneurs register their new LLC and provides treasury services. These services are helping small businesses get things done more efficiently but also provide new kinds of benefits that were once unobtainable without a heavy investment in technology or expert human advisory.  As a result, less and less money is moved into that business owner’s bank account, and the connection with the bank gets lost, maybe forever.

The conversations I have with banks today always start with them explaining to me how difficult it is to work with the underlying bank systems. Payment rails and card networks are complex.  But similar to how the motor management system in my car works or the software of a Tesla rocket can precisely return it to dock on a small barge in the middle of a huge ocean,

I don’t care how they work – they just always should and do work.  I have come to expect my bank to do the same kind of precision work, giving me oversight and insight that allows me to adjust my financial levers in a dynamic economical world – whether I’m a regular consumer or a business owner running a small mom & pop business.

But to achieve this, a different mentality is needed. The approach to product design must shift to spending more time understanding the problem (and identifying if that problem is even worth solving) which leads to much better financial products tailored for specific personas’ needs and micro segments… and then quickly prototype, test and launch these products to quickly assess market adoption.  In that process, barriers to behavior change that might block adoption are identified quickly without risking development time and money.