The rise of mobile banking strategy

Over the past 10 years, the number of consumer finance service providers has skyrocketed as new mobile-centric banks have stepped up to challenge traditional banks. 2018 only continued this trend as evidenced by it being a bumper year for banking license approvals in the UK. In 2019, increasing competition in the marketplace has now trickled down to benefit the consumer and has begun to affect the way that we move and use our money. I’ve noticed a change in my own experiences in finance products over the last 12-18 months. Most notably, I use Apple Pay over plastic cards and a review of my personal accounts over the entirety of 2018, showed I only withdrew £180 in cash (enabling me to eat at the non-iZettle stands on Leather Lane Food Market, London). Although Leather Lane Food Market may still be relying on cash transactions, other businesses are quickly adapting to the cashless and, in some cases, cardless model. In fact, beating Apple, Google, and Samsung to the number of user transactions in their mobile wallet is Starbucks, the coffee company, which is predicting over 25.5 million user transactions in 2019. This change doesn’t seem to only be affecting consumer good industries, either; according to CACI, bank branch traffic is expected to drop by 36% by 2022, while mobile transactions will rise by a massive 121%. Meanwhile, VCs have also taken note of this change in consumer finance, which has led to the billion-dollar valuations of mobile-first financial service providers Revolut ($250m), N26 ($300m), Klarna ($250m+$20m from H&M), and Monzo ($85M).

Last year’s World Retail Banking Report by Capgemini reported that customer satisfaction in retail banking is low, that consumers are open to BigTech companies expanding into finance, and that banks offering personalized digital experiences have increased customer satisfaction. While 2018 was a big year for the evolution of consumer finance, 2019 looks to be even bigger.

I’m lucky to be joined by three guest writers at the forefront of transforming consumer finance, who are sharing their predictions for the state of consumer finance in 2019 below.

Challenger banks are aiding the improvement of customer experience in digital finance. But, these challenger banks are only solving part of the problem as customers still need to attain their IBAN and Swift codes when sending or receiving money from abroad. The payment may not always be in real time or they could still be charged for overseas transactions. Cryptocurrency can create a globally accessible digital money tied to a customer's phone number or email within an app, going beyond both the traditional and challenger bank model. The rate of change in technology has dramatically increased over the last 50 years, but the financial sector has been slow to adapt. 2019 will see a distancing between the brands taking part and those taking over.

2019 will bring a raft of new innovations in finance, driven by open banking and the emerging trend of tech firms that drive change by creating a positive social impact, reversing the traditional banking approach of overcharging for basic products and services.

Better info provided by universal access to banking data means affordability scores can be far more relevant on an individual basis, reducing the onerous bank charges and high-interest penalties that are forced en masse to lower-income workers.

Over the next five years, let’s all hope the demise of high-interest lenders and corporate wongas will become reality, as political and social movement forces banks and employers to re-think financial products and services, and understand the amazing impact that proper financial wellness can have on the working population of the UK.

2019 is looking very promising for fintech in Nigeria. The active drive by banks to publicize and promote USSD (Unstructured Supplementary Service Data) as a transaction channel has increased inter-bank transfers and has reduced the reliance on cash. Micro-loans and savings products also saw great adoption with companies like Piggy Bank.ng, Lydia, Paylater.ng, and Cowrywise leading the charge to provide better rates than traditional banks.

These two areas are expected to grow even more in the subsequent years based on the current level of demand. In addition, the fintech sector currently provides the largest contribution to startup investment in Nigeria.

Despite these huge strides, cash is still going to play a critical role in the next 3-5 years. Digital channel reliability across the country is far from consistent due to infrastructural challenges linked to the nature of doing business in Nigeria (bureaucratic bottlenecks, government policy, lack of power, etc.).

Paga is strategically positioned in the market to scale access to digital financial services without eliminating the use of physical cash. We achieve this by leveraging our agent outlet business (the largest financial services agent network in Nigeria) to provide physical access to digital financial services to underserved communities across the nation.

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Brands such as Spotify, Airbnb, Amazon, Uber,  and Netflix have increased the expectations of all consumers. They’ve created a happy, loyal, and engaged customer by providing automated, highly-personalized, and predictive experiences. As consumers shifted from branch to digital, financial brands saw an increase in customers’ desire to use their products cross-device, an influx of new customer data, as well as changes in regulation (GDPR & PSD2) to accommodate for secure digital banking. All of this has resulted in low customer satisfaction, as customers’ growing expectations and their banking experiences drift further and further apart. It isn’t surprising that as customer satisfaction lowered, VC firms were throwing money at digital-first financial service providers promising to fulfill these expectations.

I believe 2019 will bring a rapid deployment of mobile first technologies to help traditional banks catch up and challenger banks stay ahead. Consumers have adopted mobile and expect mobile finance app experiences to be on par with those of other apps on their phones. If you want to learn more about how mParticle is empowering some of the most innovative brands in consumer finance to exceed customer expectations or have a prediction for consumer finance in 2019, get in touch.