Digital banking came as a solution to address some of the common flaws of traditional banking services.
While digital banking may still be a few years away from the norm, the FinTech industry is known to lead by innovation, so challenger banks are always thinking ahead to increase customer acquisition and retention. In addition, some digital banks are expanding their services to reach a wider audience.
What is digital banking?
Digital banking is a system where banking services are entirely online, whereas, with traditional banking, customers need to go to a physical branch to request assistance. As a result, digital banking allows for easier and faster access to services. In addition, it improves the communication between banks and customers, as customers can get any information they want 24/7 or connect to customer service with one click.
Digital banking allows traditional banks to reach customers globally and reduce operational costs as everything is based online. In addition, traditional banks can use their savings to invest in improving customer service.
From paying and transferring money to opening new accounts and managing finances, customers can do pretty much anything in a few minutes, stress-free. However, customers now want a faster, more straightforward service customised to suit their needs. In addition, they expect to choose from a wide range of options and be fully informed about the products.
Progression from a digital bank to a “super bank”
Digital banks are paying close attention to customer behaviour, and with the adoption of technology and masses of data, it is easier for them to adapt to customers’ changing requirements. Convenience is now the key piece of any banking product, and while digital banks are already gaining traction in the market, supported by customers’ loyalty and love for the brand, they can be quick to jump on the next big trend.
Enter the super banks- the banks that offer all financial services a customer might need in one single product. From providing insurance products to facilitating and managing loans and offering wealth management solutions to investment advice. These super banks have an extensive product range and service coverage. The goal is to be a one-stop-shop, meaning that the customer doesn’t need to go anywhere else to request a service and can do it all through their one bank.
This trend is growing quickly in the banking sector, as banks want to grow beyond their core products and become the go-to place for all things banking. Some banks are moving into insurance, regulation, loans, and even mobile phone networks, for instance, and others are partnering with external companies to expand their product offering.
Companies that are conquering the super bank
In the UK, the super bank that is rising above all others is Monzo. In 2017, Monzo launched a coral-colored card and an easy-to-use mobile app that grabbed the attention of millennials across London. You could barely go to a bar or tap into the underground without seeing a colorful card around you. Now the digital bank is well-established and able to secure its top position in the market, it is planning to expand. Monzo’s goal is to become a super bank, providing customers with a range of easy-to-use services to reduce the stress that comes with financial chores.
These services include helping customers with finding the best energy deals, getting better savings rates, or managing their finances more efficiently. To offer all of these services, Monzo partners with other service providers and gains commission from them every time a Monzo customer purchases a product through the app. Its energy switching service launched in May, and based on its success, Monzo’s founder expects this revenue stream to account for 80% of all the business’ revenue. Increasingly more digital banks are following this path.
What challenges do super banks bring?
Essentially, super banks bring commodities. Therefore, the possibility of combining all financial services in just one app is an appealing proposition, especially for the later generations that grew up alongside the technological revolution. However, super banks can also blindside customers to choose a service that might not be the most suitable for them by tempting them to opt for convenience rather than doing their research into what company best suits their needs.
Super banks also impose a challenge to FinTech startups, particularly the niche ones, as the potential monopoly of the FinTech market can hinder smaller companies from reaching their target customers. However, it raises an opportunity for them to partner with bigger digital banks, or super banks, to provide their services to retail customers. The FinTech industry is changing quickly, and financial institutions need to make quick decisions. The rise of the super banks comes with both incredible challenges and opportunities, and only time can tell what the best strategy is for tackling this trend.
Your Partner In Growth
If you are looking to expand your FinTech company and want to grow your team, reach out to us here. At Storm2, we know the importance of hiring the right talent for your company. Our consultants have an extensive network of highly specialized FinTech talent, so they will be able to help you and guide you through your expansion plans.