The next decade of the financial services industry will be tested by many disruptions that hold as much risk as they provide potential. On top of for instance promising new technologies and the rise of many neobanks, the growing concerns about climate change and social impact will force banks to reprioritize their role in society and sacrifice short-term gains for long-term sustainability. The best way for the financial industry players to keep themselves relevant is to create an Offer You Can’t Refuse for their customers. And, as I explain in my new book The Offer You Can’t Refuse, to accomplish that, they will need to invest in these three layers: offering the ultimate convenience, becoming a Partner in Life and help their customers Saving the World.
It’s great to see how financial players all over the world are doing everything they can to offer the ultimate convenience for their customers with frictionless, proactive, zero effort, invisible and personalized services. Alibaba Group’s mobile and online payment platform Alipay’s “Smile-to-Pay” system is probably my all-time favorite in the matter. More and more players are in fact using facial recognition features to allow payments with Tencent’s WeChat, for instance recently launching the “Frog Pro” payment machine. As is always the case, of course, we should note that the ethical use of these data, especially in non-democratic nations, is of the utmost importance.
It may already exist for a while, but one of the most fantastic initiatives in convenience in the Benelux has to be Payconic, which allows to pay cashless in stores with one easy smartphone app. That’s no longer groundbreaking today of course, but I love how ING Bank took the initiative and was later joined by its competitors KBC, Belfius and BNP Paribas Fortis, pushing their difference aside to offer a frictionless customer experience.
Another great example of frictionless customer journey is that of GoCardless, a UK-based company, whose platform enables small and large companies to accept bank-to-bank payments as an easy, fast and fuss free alternative to card payments. Or the Dutch challenger bank bunq’s real-time connection with accountancy software to provide users with an overview of everything that happens in their account. And, instead of customers waiting in line at bank branches, Chase Bank installed self-serve teller kiosks in many of its branches so that customers can quickly help themselves. Idea Bank, in Poland, then, offers branches and co-working spaces on trains so that commuting customers can use their desks and conference spaces, plus free office supplies, Wi-Fi and coffee.
Even the – notoriously unpopular – insurance industry is trying to remove all friction from the interactions: Esurance Insurance Services, for instance, sells auto, home, motorcycle, and renters insurance direct and fuss-free to consumers online and by phone.
A truly visionary example, again from ING, is their subsidiary FINN. Its task is to make payments between machines possible and safe, which will be of tremendous value in an upcoming age of IoT. ING believes that most product purchases will be replaced by services in the future. For instance, we may no longer buy a washing machine, but will rent one instead and pay for each time we use it. So if a washing machine is fitted with FINN technology, there will be a constant flow of payments between the washing machine and the original manufacturer. Every time the machine is used, it will automatically pay the manufacturer the required fee. This kind of safe machine-to-machine payment opens the door to a completely new business model.
As income and savings are some of the top frustrations and concerns of consumers, this part offers an enormous potential to those financial players that want to enable a better life journey for their customers. Many are already stepping up to the occasion to become a Partner in their Life.
Hopes and dreams come in many forms, and very often, saving money to be able to accomplish them is an important part of that. The Spanish bank BBVA answers to this need with the personalized app feature Bconomy. The latter helps customers set goals, save money, track their progress and compare prices on things like utilities and groceries. Users can also compare their spending to people like them to see if their financial activity is on track. Bunq, too, helps people easily save when they are dreaming of their next holiday, house or just a good dinner.
Recent years have also seen the emergence of a large number of neo-banks: new, smaller and generally more innovative banks. Their success is usually based on a strong digital and highly user-friendly offer. Monzo is one of my favorite examples here, really starting everything that they launch from the customer: they first made a summary of all the frustrations, problems and ambitions that people have with regard to their daily finances and then formulated an offer that addresses each and every one of these. One of the best examples is their Salary Sorter. When your pay is deposited into your account, it is divided up into three portfolios. In the first, sufficient money is set to one side to cover all the obligatory monthly costs (rent, electricity, food, etc.). In the (optional) second, money can be set aside for savings. Whatever is left over goes into the third portfolio, which is available for the customer’s free use. Of course, the customer retains at all times the right to decide what he or she spends, but these tools help to give a clearer picture of his or her financial position. As a result, the likelihood that someone will spend too much in any given month is significantly reduced.
The Belgian bank KBC, then, has the ambition to become a partner in payments and daily financial transactions. Other than banking and payment, its app also offers a range of other services, such as automatic car park entry and exit, the booking and payment for tickets on public transport, the use of share bikes, etc. The reason is because it has examined all the services where the payment process costs the customer additional time and effort – queuing up for the ticket machine in a car park, waiting to buy a train or bus ticket, and so on – and so it decided to solve these frustrations via its app.
The insurance sector, too, is trying to figure out how to solve the fears and frustrations of their customers. One of my top favorite examples that I mention in my book The Offer You Can’t Refuse is of course Centraal Beheer, which “wants to become a partner in living instead of just selling insurance”. A fantastic example is their ‘Uber for handymen’ platform Klushulp, where people can hire a handyman for small chores. You can listen to my interview with their management here (in Dutch):
Another Partner in Life champion in the insurance industry is Trōv which offers, among other things, flexible on-demand mini-insurance that covers individual items like cameras or bikes. The great part is that you can activate it for any duration you require with a simple swipe on a smartphone. For many people, these types of insurance are too expensive or too much of a fuss but Trōv makes them accessible: for instance allowing a freelancer to insure his or her PC or smartphone against loss, accidental damage or theft when leaving home.
In his paper Creating shared value in the Harvard Business Review Michael Porter argued that (1) the world is facing many challenges and that (2) the companies have the means and the resources to solve these challenges. In this new phase of capitalism, companies, according to Porter, will generate both economic and societal value, by making use of the strengths of their organisations to make a positive difference in the world. We see this dynamic surface in the financial services industry as well.
Bank First, for instance, was born when a group of 48 educators came together with a shared belief. They had grown disenchanted with the way many Australians were being treated by the big banks and wanted a financial institution that placed a value on what people did for the community – not simply by how much money they made. So in 1972, they started their own financial institution – a mutual bank owned entirely by customers. Founded on care and compassion, their first loan was to a single mother for a bond to acquire housing for herself and her two children. After 4 decades of financially empowering educators to realise their dreams, they are still driven by the same founding values and focus on putting their customers first.
Amsterdam-based digital neobank bunq, has put going green at the core of the company ethos. It was the first bank in the world to offer ‘freedom of choice’, letting its users choose what their money is invested in so they can make sure the funds aren’t used to benefit the tobacco industry, weaponry or any other kind of ethically questionable business. In 2020, bunq, which now operates in 30 countries throughout Europe, took its efforts one step further. The company partnered with Eden Reforestation Projects to plant a tree in Madagascar for every €100 spent with bunq’s SuperGreen account. The reforestation efforts are also aimed at providing jobs and security to locals. Today, the bunq community has already planted one million trees, a threshold hit six months before expectations. The app also allows to create a Common Goal for any cause that matters to you, no matter how small or big: from renovating the sports court to saving the ocean from nasty plastic?
GoCardless, the online payment services company I mentioned earlier, recently announced a strategic partnership with goDonate, the next-generation online donation platform for the charity sector. goDonate’s mission is to provide charity supporters with the optimum online user experience, making it as simple and convenient as possible to donate through a charity website. The platform manages millions of pounds in donations annually.
MasterCard, too, has been engaged for many years in a project to help people who have no access to financial services. Their Centre for Inclusive Growth has already given 400 million people better and safer financial assistance. In 2018, MasterCard invested 20 per cent (500 million dollars) of the fiscal benefits it enjoyed as a result of tax reform in Europe and the United States in the fund it had set up for this purpose. This project has already created social value for half a billion people and in the long run it will provide MasterCard with a bigger market that will allow the company to create economic value as well.