A tale of old banking, new banking and the missing wallet
I was travelling in the UK earlier this year and I managed to lose my wallet. That is a horrible experience at the best of time, but absolutely the worst experience when sitting at a train station outside of London, heading to Heathrow to catch a flight to Zurich.
Hmm, little money (about 5 quid in change), no cards, no drivers licence. What does one do?
The ‘old bank’ financial services provider:
Emergency phone call to Visa and the Bank in Australia. Absolutely no way I can get an emergency card quickly in London, but I can arrange an emergency funds transfer to Western Union in 48 hours. No worries, I will walk from Zurich Airport to the Airbnb and eat nothing for 2 days!
I borrow 200 Pounds from a friend in London (phew) and get on my way.
The problem, no confirmation ever arrives of the emergency funds. I phone Visa and the Bank a grand total of seven times. Each time I get one step closer to my emergency funds. Then, the final hurdle; the Bank won’t release the funds because Visa has spelled my address with ‘St’, rather than ‘Street’. Serious!
Later, when I get back from Zurich to London, I get my emergency card via courier, but my unbranded Visa card comes with no Pin Number (so unable to use a cash machine) and no bank in London has any idea what to do with the card. Four more calls to the Bank in Australia and I give up.
Are you wondering how I survived?
The ‘new bank’ financial services innovator:
Straight after the first call with Visa and the Bank in Australia, I called American Express to cancel my Amex Card and order the new one. Within 2 hours I received an alert on my Apple Pay Wallet on my iPhone that my new Amex Card had been loaded and activated. Wow. No more calls, no need for a Pin number, no courier.
I survived for the next 7 days on the cash I had borrowed and using Apple Pay on my phone absolutely everywhere – The tube in London, supermarkets, cafes, shops and Uber. I became the walking example of the cashless society. Before trying to buy anything, I would check for the Apple Pay sign.
The point of this story is not to promote Apple or Amex. They are well and truly big enough to do that without me.
The point of recounting my story is that technology needs to make a difference, not just a little difference but a big difference. Combine that with good marketing and excellent management and you have a winner.
So, how to cut through the hype of Fintech?
The ‘difference’ can come in a number of ways:
- Deliver convenience
Make people’s lives easier – Much, much easier. Cut out the friction in the way we interact with financial services. By reducing waiting times, cutting out painful steps in a process, eliminating repeated identity verifications, paper, printing and postage and offering services when the client is free, not when you are.
The story above, whilst being an infrequent occurrence, is all about convenience. Automated advice tools (whether adviser or consumer led), online foreign exchange, virtual meeting rooms, video banking, digital signing, digital mortgages, mobile payments, digital identification, biometrics, all fall into the domain of enhancing convenience.
- Save people money – lots of money
As consumers, we don’t generally change our behaviour for a small saving, but offer exceptional value (and that generally means savings) and you will be onto a winner. Innovators in the foreign exchange space are great examples. The large banks are making huge returns on small business and consumer foreign exchange, which is now being eroded by new entrants. Peer to Peer lending is another example, providing lower cost lending to many individuals that might otherwise be denied credit or use pay-day lenders.
- Enhanced security of services:
Consumers might not pay for this, but businesses will. Cyber-security, identity theft, payments fraud are all huge businesses. In the UK, for example, 1 in 10 people have been subject to some form of Cyber Crime, with 5.8 million incidents in 2015, costing UK residents some GBP 193 billion per annum (Office of National Statistics, 21 July 2016).
In South Africa, it is more difficult to determine the exact extent of Cyber Crime, partly due to the lack of a legal requirement on electronic service providers to report cyber-related crimes. The Cybercrimes and Cybersecurity Bill of 2015 is yet to be enacted (Legalbrief eLaw & Management, 11 November 2015). While there are claims that 8.8 million South Africans experienced Cyber Crime in 2015 (News24, 07 July 2016), exact government statistics are not yet available. Estimates on the economic loss caused by Cyber Crime in South Africa also vary, with evaluations ranging from R1 billion (Dingaan Mangena De Rebus, 2016) to R5 billion per annum (Legalbrief eLaw & Management, 11 November 2015). There is however, a growing awareness that Cyber Crime represents a major challenge to the South African economy (South African State Security Agency: National Cyber Security Policy Framework 2015). Some examples of forms of Cyber Crimes affecting South African individuals and businesses include:
- Email spoofing (creating email messages with a forged sender address),
- Malware (software used to disable or damage computers),
- Phishing (attempting to obtain personal information, such as a password, by disguising as a trustworthy source in an email) and
- Ransomware (malicious software designed to block access to a computer system, until a ransom amount is paid).
As a result of these high levels of Cyber Crime, biometrics (voice, eye, thumb print, facial) are growing rapidly and will make a substantial difference to the security of our online and mobile transactions of the future (forget cards, what will a card be?). Back the leaders in enhancing the security of our financial transactions.
- Create an exceptional customer experience:
Innovative client facing experiences are not an area that the financial services industry is well known for. Delivering a mobile app is not enough. A staggering 23% of apps are abandoned after first use and 90% after a month (Localytics, April 2016). Fintech innovators are changing this rapidly, with the use of innovative user experience design, gamification, behavioural psychology and more.
- Collate, use and share (API) data to create powerful insights and connected eco-systems
Fintech leaders know how to source and use data. Credit scoring for example might use information not just from a credit agency (the majority of the world is not scored in credit bureaus) but also source data from social media. Wealth platforms may source website search histories and social media to predict consumer behaviours before they occur. AI engines can assess personality profiles based on written content and social media posts.
Data itself is not enough, but when combined with smart algorithms, powerful and valuable consumer insights are created. These insights are valuable.
Fintech is big, a buzz and it has the attention of the incumbent financial players globally. Spot the difference that a Fintech innovator is making, validate it against objective criteria, strap in and enjoy the ride.