The demise of RBS’ digital bank and its banking app, Bó, has been recently announced after sunken profits and low customer numbers, with the bank being wound-up and integrated with Mettle, another of RBS’ “flanker brands”.
While the uncertain environment didn’t help matters, they are far from the first digital bank to struggle to compete in an increasingly crowded marketplace. In 2019, J.P. Morgan Chase closed its millennial-focused banking app Finn, choosing to rely on its established Chase brand rather than create a new one from scratch.
Both of these examples come from established banks attempting to launch a digital arm that is aimed at a specific audience, but the challenges they faced in keeping their banking app alive can apply to any business that is entering the market. After all, if banking giants such as RBS and J.P. Morgan Chase struggle to get a digital bank to succeed, it highlights the difficulties in finding success as challengers and traditional providers battle for space in the market.
So what does a banking app need to do to survive? Is it all about features or are there other fundamentals at play that you need to succeed with a digital banking product?
This post will take you through the 13 fundamentals that you need to have in place to keep a banking app alive.
1. Sound technical infrastructure at launch
It is reported that Bó went live with a host of technical problems, with the team spending the first three months bug fixing which led to worries from investors.
The lesson? There will always be pressure from investors to launch quickly, but get the tech wrong and launch with a broken product and you’ll always be facing an uphill battle to gain credibility both with customers and internal stakeholders.
As more digital banks are expected to come online from non-banking companies and no-branch banking increases across the sector, traditional methods to meet Know Your Customer (KYC), anti-money laundering (AML) and due diligence requirements seem not fit for purpose and the temptation can be to take shortcuts in the race to stay ahead in a crowded market.
But steep fines and the loss of integrity that can come from not getting it right should serve as a reminder of the importance of compliance in a sector where trust is everything, for both customers and investors.
3. Good user experience
Whereas good user experience used to be a point of difference for challenger banks, it is now essential as customer get more used to an intuitive, easy to use platform from their banks.
From using biometrics to make accessing accounts easier, or managing savings and monitoring their spend with insights and analytics, digital banks such as Revolut, N26 and Monzo have succeeded in part by making their customer experience seamless.
4. High levels of engagement
It’s no good driving new customers if they don’t actually use your bank day-to-day and as you make the sign-up process easier, you can end up with a lot of “ghost customers” that join-up but never use the app.
Consider the onboarding process and how you will get people to make those first interactions with your app and drive the engagement that will lead to long-term, active customers.
Partly because of the success of the challenger banks above, traditional banks are adopting new “flanker brands” to distinguish their new and more innovative arms from the “stuffier” image of the established parent organization and think more like technology companies to drive innovation.
With changing customer demand being met by ever-evolving technology, staying innovative is key to the success of any digital bank.
6. A strong Core
You wouldn’t build a house out of materials that have been lying around since the 1950s, so why would you build a bank? A lot of traditional banks have been hamstrung by COBOL, a programming language invented in 1959 that over 40% of banks still use as the foundational technology of their systems. And it’s not great for setting up digital banks with.
New technologies are now disrupting this area of digital banking and allowing a new generation of banks to thrive. Products such as Vault from Thought Machine, Mambu and Matrix from Five Degrees are providing solutions that are removing the technology debt and providing a platform for digital-first banks to thrive.
You can see more about Core Banking in our blog post: The Mysterious World of Core Banking
7. Tribal banking
Tribal banking is the concept of creating a financial “tribe” designed specifically for people with shared interests, values or beliefs. Many modern banks are now basing their entire proposition around specific niches, which dictate both the benefits to the customer as well as areas such as ethical investments and raising money for specific causes.
Two examples of tribal banking are Doconomy, that offer banking based on a sustainable lifestyle and ending climate change and Insha, a banking service that follows Islamic values. They both offer services that are consistent with the way people live their lives and provide services that are relevant to these individual groups, enabling them to corner potentially valuable corners of the market.
8. Let the user take control
Logging-in to your app and managing different functionality is a key part of the customer experience and features such as allowing people to intelligently forecast their expenditure, manage bookkeeping and invoices for small businesses and give more clarity over how people are spending their money are becoming a crucial part of the digital banking experience.
Customers increasingly want a financial “hub” where they can manage their money, and you need to give them more than simply the ability to check their balance or make a payment.
9. Be Quick
A key driver of the digital experience is the speed at which people can sign-up and start using the service. The digital generation expects online sign-up processes to be fast and while compliance will always play a part in slowing down the process, the most successful digital banking apps make this process as fast and as pain-free as possible.
10. Global banking
International payments, whether that’s sending money abroad or making payments in another country have always proved a logistical (and expensive) challenge. Many digital banks are removing these hurdles, offering fee-free international payments and making it as easy as possible to use your account across borders. Using the tribal banking mindset, this is a feature that will particularly appeal to niche groups of frequent flyers.
11. Flexible finance and point of sale loans
A feature that is becoming more common in payments is point of sale credit, offering customers the ability to get fast, affordable credit for their purchases and transparent repayments over an agreed period. Companies such as Twisto are already offering this service, as the lines between banks and credit providers are becoming increasingly blurred based on the abilities of new technology.
12. Good service
While technology may be able to create a great user experience, there are some elements where a personal touch is preferred. Where big banks have branches that people can visit or customer phone lines that are well-staffed by knowledgeable teams, new digital banks simply won’t have the infrastructure (or possibly the desire) to replicate this.
So how do you get around these issues? Identify the main reasons why people will visit a branch, and come up with a technical solution to overcome it. Whether that’s paying in cheques, requesting more credit or getting advice, people will still have a need for these services, so successful banking apps need to have a provision for these traditionally “in-person” transaction types.
With Facebook developing Libra and planning to launch in 2020, cryptocurrency may be about to hit the mainstream, so how will your digital bank handle cryptocurrency and do you have a solution in place to cope with any large-scale adoption by customers? While this isn’t a feature that will sink your app now, it’s one to consider for the future longevity of your product.
It has become very competitive in the digital banking market, and as we’ve seen even the biggest companies can struggle to gain traction with their app products. But this shouldn’t stop ambitious fintechs and established financial institutions from taking advantage of the considerable opportunities that now exist to create innovative products that revolutionise how people and businesses interact with their finances.
It is a rare opportunity to get ahead in a developing marketplace that hasn’t moved considerably in a generation, and by avoiding the mistakes of others and putting innovation at the heart of your product, you will have a thriving banking app that evolves with the ever-changing demands of the future.