Neo-banks are changing how we save and spend
The financial sector has entered a period of unprecedented upheaval. Entrenched assumptions and practices are being challenged by novel fintech solutions and banks are being forced to adapt. Instead of having to walk into a local branch you can now make a transfer anywhere in the world and this kind of convenience is now key to the overall customer experience.
Big banks are increasingly finding themselves challenged by so-called neo-banks, such as Revolut or Transferwise. These young competitors punch above their weight by offering consumers highly competitive pricing and a slick apps that make the whole banking experience more streamlined.
After decades of resting on their laurels Traditional banks have struggled to keep up and are finding themselves increasingly forced to up their game in order to retain existing clients.
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Transformation in the banking market
The global banking market is beginning to undergo a transformation in small steps: neo-banks have begun to appear, and some banks are beginning to position themselves as IT-companies with a banking license, which radically changes the approaches and opportunities to work with innovations. At the same time, it is necessary to understand that the developed innovative services on such a model can be ahead of the banking market itself. This trend is particularly true in emerging markets such as Ukraine.
For example, such services include the service of biometric payment for purchases FacePay24, which was recently launched in Ukraine. This is a “long game” and it takes time to adapt both retailers and buyers to work with this type of payment. It is also important to see the statistics on the use of this service, how popular it will be among users. Although with sufficient demand for biometric payment, banks will start to implement this service in their infrastructure to match the trend.
There are several approaches to working with innovations in the banking sector. Let us consider some of them.
The main principle is that the bank creates its own internal infrastructure for working with innovations. This can include the so-called “idea box”, where the bank’s employees generate ideas for simplifying and revising one or another process. Most of these ideas fall into the category of operational excellence.
The second way is to create an innovation unit or laboratory (innovation lab), where there is a “direct” work with innovations: their search, selection, and testing.
If a bank cannot create internal infrastructure for working with innovations, but there is a desire to work with them, the external approach is aimed at cooperation with innovative partners who specialize in working with the innovation ecosystem. These include various accelerators, incubators, innovative farms, and platforms.
Together with innovative partners, (for example 1991 Open Data Incubator, RE: ACTOR, RadarTech, Startup. Network, etc.) banks can launch various programs to find innovative solutions or visit startup pitches. They know the innovation market well and understand the mistakes when working with them. The external approach for banks is less risky, as most of the risks of working with innovations are assumed by the “innovative” partner.
Direct contact with the consumer
Another approach to working with innovations is to create the conditions for the expansion of client experience on the basis of branches of the new format. The main idea is to simplify access to banking services and to simplify the services most frequently used by the client as much as possible. This creates a new customer experience.
For example the Ukrainian national bank produced a specialized customer contact area. This space was filled with gadgets and information panels and a convenient 24/7 access zone was created, making it possible to use an ATM even in the absence of a payment card. In such a branch, customers can open deposits, make loans, pay bills, make credit payments and buy foreign currency.
What is necessary for the development of innovations in the banking sector
While these novel solutions are still relatively uncommon in Western Europe and many parts of the US they are commonplace in Ukraine and other emerging economies. The Ukraine National Bank has set up a strategic direction on innovation development department, with a focus on fintech and digital technologies. This has helped to spark interest in Ukranian fintech over the last three years.
During this time, several fintech catalogs have been published, forums have been organized, incubation and acceleration programs for fin-tech startups have been conducted: Fintech Master, Open Banking Lab, POPCORP, RE: ACTOR, and many others. According to the information from the catalog of Ukrainian financial companies prepared by the Ukrainian Association of Fintech and Innovative Companies for 2019, there are about 100 financial companies in Ukraine and their number is growing every year.
(Featured image by StartupStockPhotos via Pixabay)
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First published in HB, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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