This is part 1 of the series ‘Succesful cases of financial firms’ digital business models today’ where we revisit cases of financial and non-financial firms successfully disrupting the banking industry, from Asia to Europe and the US.
The most successful financial enterprises today are those who have been effective in using first principle thinking. Furthermore, they have deconstructed the current structure of banking products in order to expose the basic usefulness of banking and create contextualized, experience-driven services that efficiently meet consumers’ demands without producing friction. These companies must incorporate this usefulness into the next decade’s technology, such as voice-enabled smart assistants or smart eyewear, and rethink their customer interaction strategy.
Does this, however, imply that branches will vanish? The answer is no. Branches will need to evolve into dynamic locations where the bank can provide consumers with a variety of value-added services like as conferences, co-working spaces, startup accelerator services, technology showrooms, pop-up stores, new service test zones, and physical customer assistance.
The amount of data collected from consumers through a system of sensors and strong analytics will be the actual value for the bank in the new branch model. Branches will transform into unique user experience laboratories while also serving as a powerful marketing tool for establishing a close contact with customers. We can already see some characteristics of how this experiential approach to banking will appear in the future in today’s markets.
Yu’e Bao became the world’s largest money-market mutual fund in just five years, with $250 billion in assets under management. JP Morgan was its closest competitor in 2018, with total assets under administration of about $140 billion over a 25-year period. Yu’e Bao is known as “the fund for the masses” because it lowered the obstacles to entrance for smaller investors, allowing them to invest a little amount of money and earn a return of roughly 4%. They marketed the product as a “savings experience” that could be accessed through apps like Alipay and Alibaba. The scalability of its digital capabilities, as well as the affordable prices they provide, have been critical to their success in creating one of the most significant deposit products in the world without having to have a branch.
WE CHAT AND ALIPAY
In terms of payments, the Chinese market is one of the most active. In 2018, the penetration rate was over 90%, implying that there were over 1 billion mobile internet users and over 890 million mobile payment users. WeChat Pay, which has at least 820 million users, and Alipay, which has 650 million users, are the two most important payment firms, according to an overview of the most major payment companies. These two businesses together control almost 93 percent of the penetration market. When we consider that 17 percent of the rural population, or 104 million rural consumers, use their services, we can see how significant they have become for the rural people.
The rationale for this intrusion is straightforward. These businesses created integrations with every part of life, including social media, e-commerce, payment, and a variety of other financial services. WeChat established a simple path that made buying and selling things easier. The procedure is straightforward: all that is required is a product image, a parallel description, and a QR-code image linked to a WeChat account. The users can then share and purchase the product in a few simple steps. A Point of Sale (POS) terminal is not required. As a result, the fees are significantly reduced. Users scan a QR code issued by the store and receive confirmation of the transaction through text message through the app.
WHATSAPP, SKYPE, MESSENGER, APPLECARD…
Google, Facebook, Amazon, and Apple have all made efforts into the financial services industry. Services like Google Pay and Apple Pay have already gotten a lot of popularity, and with the introduction of new services like the Apple Card, they’re sure to gain even more. These companies appear to be striving to keep money within their environment, which could pose a challenge to card networks. Facebook is working on integrating peer-to-peer payment capabilities into their messaging apps. Payments on Facebook Messenger are now available in the United States, but the service is set to be phased out in Europe due to a lack of user adoption.
Furthermore, Skype has teamed up with Paypal to allow users to make payments through its messaging software. These businesses are in charge of massive amounts of data and know how to use it to provide improved client experiences. They are at the forefront of digital business innovation and pose a serious challenge to the financial industry’s current participants. The key to success in the future market paradigm will be to provide the best possible customer experience and earn the trust of customers by being transparent and consistently meeting their expectations.
Revolut is one of the most important players in the Fintech industry. According to CEO Nikolay Storonsky, they are “running to be the Uber of finance.” From $350 million in 2017, this banking app and payment card startup has expanded to $1.7 billion in 2018. The company is now present in 28 European nations and plans to start in the United States soon. The number of users has increased from 450,000 in 2016 to 4 million in 2019, with users hailing from 168 countries. They have over 350 million transactions with a total value of 40 billion dollars. Revolut made it quick and painless to send and spend money in several currencies for a low fee. That simplicity is well represented in all elements, including onboarding, which in traditional banks is usually a tough process.