The Bank as Life Coach: The Quest for 'Everyday Banking'
Citi was one of the first banks to open its application programming interfaces to outside developers, leading a movement that's picking up momentum. For this and other efforts, Bank Technology News has chosen Heather Cox as its top 2015 Digital Banker of the Year.
Qapital, which launched its app in Sweden in 2013, is making its American entrance. It is the latest example of how firms are trying to inspire young consumers to save and mashes personal financial management with money movement.
Our model must change to reduce embedded friction, whether in the form of fees or complicated processes. We must keep up with the simplicity, usability and transparency customers now demand.
A call to improve customers' digital-banking experience was the top theme during SourceMedia's Digital Banking Summit. Banks should imitate the Apples and Googles of the world, not each other, experts said.
It sounds prosaic, but "everyday banking" could be a way for retail banks to stay relevant in the digital future.
The idea is that rather than interacting with customers only when they ask to store or move money, the bank becomes their round-the-clock financial advisor, almost a life coach. A banking app could, for instance, estimate how much someone can afford to spend on a given day to remove the mental math needed to decide whether to buy shoes (as Simple, a unit of BBVA, does). It could move small amounts of money every few days into a savings account, depending on what its algorithms think a user can afford (as Digit is doing). It could also point out behavior changes that would yield savings (as wallet.AI is working to do).
The case for everyday banking goes beyond convenience and brand differentiation. According to some analysts, using technology to help customers manage money and build wealth would help ensure banks continue to have retail customers.
"As the middle class declines, the customer pool for banks is drying up," said Ben Jackson, director of prepaid advisory service at Mercator Advisory Group and author of a recent report making the argument. "If [banks] want to exist in the future, they will have to do something to reverse the trend."
Unlike personal financial management tools, which consumers have accessed on desktop computers for years, everyday banking is a concept born of the mobile era. And while traditional PFM software helps users retroactively analyze their spending, everyday banking would alert them before they make unwise choices, or it would move money on their behalf, or both.
It remains to be seen whether banking apps can bloom into a helpful, regularly consulted lifestyle aid rather than delivery mechanisms for overdraft fees. But some see a transformation brewing for banks worldwide.
"We are just starting to chip at the surface of what a bank will look like in the coming decades," said Bradley Leimer, head of innovation for Santander in North America.
An increasing number of startups and financial institutions are crunching financial data to try to help consumers adjust their behaviors to save time and money at a time when the majority of Americans continue to struggle with their day-to-day finances.
Much of the innovation is being driven by the startup community, which champions digital features to help consumers manage even the smallest amounts of money. Among the many fintech companies gunning to create experiences that better connect lifestyles to money are Qapital, Moven and Level Money all of which updated their apps in recent weeks to become more relevant to consumers. Level Money, which is owned by Capital One, now predicts income and upcoming bills for those working irregular hours while Qapital and Moven updated their software to make savings more of a breeze.
Broadly, Leimer envisions a day when a financial services app helps build behaviors to help someone, say, have a greater chance to move to an area with better schools by providing the same kinds of insights and advice high-net-worth customers receive today.
"It's not just a one-time thing. It's a lifestyle change," said Leimer. "It truly is monitoring the financial account with a broader mandate to change their opportunity.
"We should embrace this message: 'We will help you save money. We will help save you time. We will help you in so many financial ways.'"
A Qapital Idea
One of Leimer's ideas, which he articulated in 2013, has recently come to life at Qapital. The app now lets consumers tie seemingly disparate areas of their lives together so customers can set triggers to, say, transfer $2 into a savings account, after they buy a coffee at Starbucks or post something on Facebook. (A company called Piggymojo introduced a similar "impulse savings" service a few years ago.)
The capability is a result of Qapital forming a partnership with the web service If This Then That (IFTTT). In so doing, the startup is betting people want to make money management a more integral part of their lifestyles but without having to think too much about the task.
"It's all about small amounts you don't feel, and all of a sudden, it adds up," said George Friedman, chief executive of Qapital, which partners with Lincoln Savings Bank in Reinbeck, Iowa.
And the savings account, which ties directly to goals and wishes, focuses on positive emotions in an area largely ignored by banks: Rather than emphasizing longer-term goals like retirement, Qapital is encouraging shorter-term wishes like 'go on vacation.'
"We are focused on the much bigger pie that is a little out of focus for banks," said Friedman. "It's sort of a black hole: where did my money go on an everyday basis."
Sure, there's check account balances the most popular mobile banking feature. But that's not exactly answering the consumer's real question.
"The question you are trying to answer isn't 'what's my balance," said Omar Green, founder and chief executive of wallet.AI. "It's really trying to get at the core level of: 'am I doing better? Or am I doing worse?'"
Green believes an app can change the banking model from penalizing people for their mistakes into guiding them into leading healthier financial lives.
"The promise is there," said Green.
Some believe the guidance is ultimately destined to come from a bank.
Startups, after all, are focused on narrow slices of financial services and lack all the necessary products needed to help someone do something.
"They can tell you how much to save every month," said Mercator's Jackson. "They can't offer you a savings account or the loan."
Michal Panowicz, senior vice president and deputy head of digital banking at Nordea, believes banks are best poised to help people manage their liquidity as they possess the many services and therefore data that startups typically lack such as bill pay. He believes mBank, his previous employer, embodies some of the themes of everyday banking such as providing offers and quick loans through an app.
"This is everyday banking: it gives you deals and helps you manage money better," said Panowicz.