FinTech
How incumbents can disrupt themselves to remain competitive
A couple of days ago I compared the rise of the 2 peer-to-peer payment apps Venmo (U.S.-based) and Swish (Sweden-based). I noted in my post that Swish, which is owned by the leading Swedish banks, is a rare case in which incumbents succeeded in “disrupting” themselves.
After I had written my article, I came to think a bit more about the success of Swish, which according to my estimates has a market penetration of more than 50 % among Swedish adults. I happened to have an electrician at my apartment who helped me to install a new stove. After the work was done, I paid him through Swish (his company uses the business/retail offering that was recently launched by Swish). He told me that Swish is great and that he also uses the service in his private life, e.g. to send money to his son. He looked like about 50 years old. It’s only an anecdote but it shows the user penetration past the usual early adopter groups of teens and tech savvy people.
At first, the story of Swish might not appear to be very relevant to people outside of Sweden, since it is not available abroad. However, if you look closer, it provides some valuable insights for companies, industries and organizations that are trying to adapt to the digital age. The success of Swish should serve as best practices for how incumbents can reinvent and disrupt themselves. Here are some of the lessions I find noteworthy: Continue Reading
Spotting the Butterfly effect in Fintech
Most of you are familiar with the Butterfly effect, the phenomenon describing how a tiny event or change today can have much larger consequences tomorrow. In most cases, the Butterfly effect is hard to spot while it is unfolding, since at the time of the initial event, nobody pays attention. However, when it comes to upcoming technology, one might be able to catch the Butterfly effect in its early stages. FinTech, or more specifically, the rise of mobile money apps, looks to be one of these occasions.
To illustrate what I mean, I will compare the rise of two rapidly growing peer-to-peer (p2p) payment apps, one in the U.S., and one in Sweden.
Let’s start with the U.S.. There, the p2p money app Venmo is getting increasingly popular with teens and older people for splitting payments, paying small debts and conducting commerce transactions. Continue Reading
Let’s hope that Number26 can stir up Europe’s complacent banking sector
Most traditional banks have failed to create exciting e-banking and mobile banking solutions. Because of that I was very interested when Number26, a new “mobile first” banking startup from Berlin, announced its upcoming launch last year. I covered the news in German and made sure to sign up for early access. Very recently, the company opened its closed beta period for customers in Germany and Austria – and I received my invite code by mail.
So what’s my first impression? Well, Number26 for sure presents itself as a full-flegded banking account including all the major features which are needed for that purpose. The service claims to offer “Europe’s most modern bank account”. Especially thanks to the intuitive and easy to use mobile app, this could be the truth already in this early stage. Of course the traditional banks’ failure to delight customers means the bar is not very high.
Feature’s that should be common in every banking app – but aren’t.
What makes Number26 stand out is a combination of the state-of-the-art look & feel and usability optimized for smartphone usage, analytics features to help customers manage their finances, as well as the cost structure. Currently neither the banking account nor the MasterCard debit card come with any fees. ATM withdrawals are free (except ATM-imposed fees), and there is no foreign transaction fee. These conditions make the service especially attractive for travelers. I actually opened my account while in the U.S., which felt kinda cool. It’s the first bank account I ever opened while not being physically present in the bank’s country.
The process of opening a banking account can be completed online. Number26 uses the services of another quite young startup, IDnow, which allows for identity verification via Webcam. I had to show my national ID or passport and answer some questions. After that my registration was completed. The overall procedure took about 10 minutes.
I expect Number26 to have an impact on the banking landscape in Germany and Europe – the latter assuming that the Berlin-based startup will expand to the rest of the continent. In Germany, the only serious competitor I am aware of is DKB, which has similar customer-friendly terms, but comes across as more conservative. So there is lots of room for Number26 to grow and to capture the hearts of tech-savvy mobile users.
One challenge that Number26 will face is the European Union’s plan to cap interchange fees for card payments. The startup’s current revenue model is based on a commission it receives from MasterCard each time a Number26 customer pays somewhere with the card. If the E.U. forces banks and MasterCard to dramatically cut the fees that retailers pay to them for card transactions, then MasterCard will have to cut or completely cancel the commission it offers card resellers such as Number26. The actual implementation of the fee cap could still be many months away. But when it happens, the company will have to come up with new revenue streams. Apart from that there of course is no guarantee yet that the commission alone is sufficient to create a profitable banking endeavor anyway.
Nevertheless, right now Number26 is a very welcome addition to the rusty European banking sector. Let’s see if the company can stir up this industry.