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The past few years have seen huge changes in the way we manage our money, with the adoption of digital only banks and other technologies such as Open Banking.
But what does the future look like, and what kind of innovations can we expect from financial firms?
Revolut is a good example of innovation. According to Wombat’s Kane Harrison, and like many successful FinTechs, they’ve always made things cheaper, easier, simpler and have achieved huge scale – even if they’re not making profits.
“I’d expect them to follow that US, Facebook style model: achieve vast scale and then figure out how to monetise that scale later,” he adds.
Firms that focus on a core product supported by education, are expected to do particularly well.
Lendwise co-founder and chief executive Rishi Zaveri says: “We enable access to higher education with a complete approach to assessing creditworthiness and we did it through a peer-to-peer funding model.
“Now we’re speaking to institutions. And all this progress has the benefit of attracting more customers – which makes us more competitive.”
But as the sector gets more crowded, differentiation becomes more challenging. OpenMoney’s Anthony Morrow argues that FinTechs typically tend to be incremental improvements of what’s been before, adding that: “The main thing they bring to the table in, say, banking is a better user experience – so it’s hard to say they’ve moved the model forward dramatically.”
A question of perspective
However, the question then arises whether incremental improvement is innovation. PensionBee’s Jonathan Lister Parsons believes it is.
“If you were a bank executive five years ago you’d be astonished by the rise of the new banks – on mobile phones and with no branches. We shouldn’t underestimate how radical FinTech has been, as we move to better services.”
And within this incremental improvement, perhaps something that an incumbent bank might class as a gimmick is itself the key to engagement.
Kane Harrison believes so: “We hired a 23-year-old content specialist to help us create a platform that didn’t sound financey, hardcore and formal. We wanted something fun that talked directly to the customer – and be gender neutral.
“Is this gimmicky? All I know is that you can do anything to get people to engage with your brand but the proof is the long-term value the brand delivers to the client.”
There’s also good precedent for the way in which FinTech is innovating – thanks to the big tech firms.
As Seaton points out: “If you look at the way Google maps has changed the experience of getting from A to B it’s really profound. Again, is this incremental or radical?
“These things sneak up on us and consumer expectations are way ahead of what we can deliver – in financial services as much as anywhere – but I think we’re so close to the detail that it’s sometimes hard to see how far we’ve come.
What’s clear is that UK FinTech has significantly moved the customer experience on – irrespective of what might be classed gimmicks, and in more ways than perhaps some might realise – but there’s significantly more innovation to come.
Seaton adds: “There’s every possibility that change will be dramatic. Open banking came about to try and break the hold the CMA 9 and credit bureaus had on the sector. But over time I expect it will actually get rid of retail banks and only the institutional banks will survive.
“In 10 years’ time I’ll probably option my mortgage – I don’t care who runs the product – as it’s the institutional lenders who really matter. We need to think more outside the box –what can we do to entertain, make people safe, or save them time and money. Thinking about how we automate these three areas is key.
“Banks have had all this data for years and done nothing with it. One of my data scientists told me the other day that people who shop at Sainsbury’s and get their hair cut regularly are not good at budgeting.
“Insights like these can help us understand how to get someone ready to go on a journey to become better off. The better FinTechs will be excellent at this, while the banks are likely to stay poor.”
Edmund Greaves is editor of Mouthy Money. Formerly deputy editor of Moneywise magazine, he has worked in journalism for over a decade in politics, travel and now money.