Here’s the TL;DR on articles about neobanks in Australia:
1. People don’t trust banks
People don’t trust banks: It started with the GFC and then got cemented over the last couple of years when we found out that:
- banks were charging dead people for services,
- banks were paying schools to sign up kids for their services, and
- insurance companies hard-sell people things they don’t necessarily need;
Apparently more people woke up to the truth that bankers lie than ever before.
2. Millennial banking is a thing (?)
Apparently millennials do banking different than the rest of us. When thinking about banking, millennials…
- Turn to their mobile phones: Since there is a greater chance of most of us leaving the house without breakfast than without our phones, this one’s a no-brainer.
- Phone does not mean talking: When we mention ‘on-the-phone,’ we don’t mean phone banking. Seems obvious but probably worth a mention.
- Instant: Millennials don’t like to navigate their way through cumbersome forms or complete cumbersome steps. When they want something done, they want it done instantly. If ‘instantly’ isn’t possible then they want it done quickly. Basically they don’t want to have to wait.
Moral of the story: Turns out that millennials want the same shit that we’ve wanted for years.
The only difference being that technology hadn’t caught up with this want. Contrary to popular belief, no one likes going to a bank branch and waiting in a queue only to be told that they can’t withdraw more than a certain amount. Or that we would have to pay the bank to give us access to our own money – that we gave them to keep safe in the first place.
Here’s my argument: Everyone who has to deal with the banking/personal finance world for the first time is left bewildered. Concepts are confusing and it feels like everything is designed to trick you. At the same time, everyone is convinced that there is an easier way to do it but is told “that’s not how the system works.” Eventually we move on.
Now, it just so happened that it was the millennials who were going through the same bewilderment when technology caught up. And as a result of tech catching up, companies had the right tools to make the system less confusing.
So millennial banking is basically everything that everyone wanted from the world of banking and personal finance. Except for one thing…
When did I become so old that I don’t understand why banking needs to be cool
The words ‘cool’ and ‘fun’ tend to come up a lot when we talk about millennials especially when marketing wearables, games, selfies and bots. But what happened in the world that marketers decided that banking needed to be cool?
And I’m happy to accept that this is an age thing. But it’s not as if Gen Xers didn’t go through their 20s. Banking was as boring and complicated then as it is now. And we all wished it could’ve been easier to understand, or easier to navigate or didn’t have so many forms, but I don’t recall thinking that it needed to be ‘cool.’
So here’s my argument as to why marketers decided that ‘money stuff’ needed to be cool.
Tech’s a given for neobanks – What else do you have?
What if you’re no different from regular banks but come with a fancy wrapper? You would need to constantly tell everyone that you’re cool and they’re not – because that’s the only point of differentiation.
And for me, this is what going to be most interesting and appealing about switching to neobanks. Whether they’re simply adding a cool user interface on the same archaic systems or whether their online/app/mobile/voice/chat channel experiences will be frictionless because they’re looking to solve user problems.
And no user problem starts with “I have to open a savings account.”
It’s more like “I have to open a bank account but I don’t have 100 points of ID because I’m an international student that landed in Australia last night” or “I’m trying to save for a holiday” or “I have $1000 and am trying to find the smartest way to save it.”
Here are some of the frustrations with the current banking/personal finance world that I’m going to be hoping neobanks in Australia would be able to solve…
Be a financial dashboard – I’m ready to say ‘bye’ to Sheets
I’m working with the assumption that people don’t use one service for everything. It’s more like Bankwest as the salary deposit/transaction account, term deposits with Me, credit card with HSBC, Commsec for investing in the ASX, Stockspot for ETFs and Stripe for US stocks.
Are neobanks going to try to woo us over one service at a time? Are we going to see transaction accounts launch with the goal of moving our salaries to the new account? Then they’ll start term deposits with rates so attractive that there’s no way we wouldn’t switch to the neobank?
Or are we going to see genuine innovation like offering a single financial dashboard where we can see all the different balances and moving parts in one place?
Unlike Personal Capital in the US, there’s currently no one offering a way for people to get a snapshot of all their accounts – other than Google Sheets. As a result, there is no easy way to take stock of your overall financial health or financial well-being.
And the reason I’m excited to see neobanks solving this problem is because the opportunity to help Australians improve their financial well-being was identified, ironically enough, by a big bank.
Be nice. Be honest.
No one expects bankers, financial advisors and other finance-related professionals to be nice.
When the bar is this low, it should be pretty easy for the challengers to make a good impression by being nice, honest and working in the genuine interests of their users.
Turns out being nice and honest is genuinely difficult for finance professionals.
Considering how much evidence there is about how people don’t trust the banks because of their current strategies and tactics, it would be genuinely refreshing to see neobanks actually establish themselves as trustworthy finance professionals that are working in the interest of their users.
Be easy to use
This one is pretty obvious. No web/mobile/chat/voice app can be anything other than intuitive and easy to use. The challenge would be to make sure that we’re counting the CBA mobile app and Bankwest mobile app as the benchmark and not, say, St George’s mobile app.
That said, St George and Bankwest have one common problem:
Going back to the idea that neobanks need to be solving user problems, remember that no one wakes up one morning going: “I think I want to open a regular deposit savings account that lets me make withdrawals.”
Even with all the best practices and knowledge about user experience and human-centred design, the current banking apps are clunky.
And that’s because they are simply a new channel to offer the same old services. Wouldn’t it be amazing to have neobanks ask “What are you looking to work on today?” and then, because they are already a financial dashboard, direct you to the most relevant course of action?
Or better yet, because they have all our relevant data, instead of me figuring out what to do, you nudge me in the right direction?
Be meaningful – Less data for the sake of data
You can create all the dashboards in the world and calculate financial well-being as scientifically as possible but will that solve user problems? Data is a great tool to improve user experience but data alone probably won’t change user behaviour.
On the other hand, if neobanks were to use the data that they have collected to nudge me in the right direction, that would be true innovation because it would hit the sweet spot between data-driven decision making, frictionless user experience and improving user well-being using small nudges.
Bankwest wouldn’t need to offer me a page with a list of their products if they were able to figure out what I should be doing next.
Neobanks should be working on this challenge – My transaction account shows you how much I spend on rent, groceries, travel, utlities and CrossFit. Should I invest the rest of my monthly income or hold on to it because my statement history shows that I have a quarterly payment coming up?
And I acknowledge that this is going to be challenging to do.
The account would first need to identify all monthly bill payments, which would involve studying transactions and matching it to a list of known service providers. It would then need to nudge the user to automate these payments. The systems would need to be trained to identify one-off purchases vs regular purchases that aren’t monthly. It would then need to study recommended and successful investment actions that have been carried out by previous users in the demographic cohort. Only then could it kinda-sorta recommend a course of action.
The thing is that banks today are only focused on locking you into their products. So even though ING introduced the feature to round-up my spends and invest the spare change, it automatically saved it in its own account for a paltry 2.8% (the news story clearly stated that 2.8% is lower than other options available in the market).
To solve user problems, and not become just another bank, neobanks would need to not just offer innovative solutions using data, but they’d have work in the user’s interest too.
Do better – No fees should be a given
When talking about ING offering just 2.8% interest, the article goes on to say: “In its favour, ING does not charge account-keeping fees and refunds the fees for using any ATM in Australia.” Another perfect example of setting a low bar.
It’s not going to be impressive if neobanks say they’re not going to charge ATM fees, currency conversion fees or international transaction fees. What is going to be impressive is what they offer beyond that.
Innovation in neobanks would be if they behaved like a transaction layer, where they not just showed you, for example the term deposit rates for the other banks, but also allowed to transact with those banks.
I’m keen to see how open and honest neobanks are going to be about having the most attractive banking products compared to everyone else. Or are they essentially offering lesser products and charging us for ease-of-use – in which case we’re basically replacing direct ATM fees with hidden convenience fees.
Which goes back to neobanks failing at being nice and being honest, and putting themselves on the path to becoming just another bank.
Be innovative – Find new ways to make money
If neobanks are going to innovate to solve user problems in a way that the current banks are either unwilling or unable to, they would also have to find innovate to find ways to make money off those users too.
It’d be great to see neobanks flip the monthly-fee accounts into a subscription-fee based experience. If you are going to offer financial tools, the ability to see and manage all my accounts in one place and no transaction fees, why would you not Netflix my banking experience?
And the other space that’s going to be very interesting to study is how much attention neobanks are going to pay to the currency other than the dollar that users would be giving them: Data.
We’re already seeing companies researching whether they can create alternative credit scores by studying the way a person composes their emails and whether the bulk of their photos are selfies. Rather than slot people into available products based on a checklist, we would now have the opportunity to create products that are uniquely designed for each user, based on and backed up by the data you have not just about financial transactions but also personality data and behavioural traits.
And yes, this does sound very Black Mirror.
By this time next year, we’re probably going to have at least 5 neobanks in Australia up and running. And I plan to open accounts with all of them and try out as many of their products as possible.
While it’ll be too soon to see what direction they take in making sure they don’t end up as just another bank; it would be enough time to see how smooth the banking experience is – and which neobank I end up sticking with.