Beyond banks: The rise of contextual financial services
4 minute read
… and the digital revolution merging banking services with our daily lives.
When you think of financial services, from making a money transfer to applying for loan, convenience probably isn’t the first thing you think of.
The digital revolution that has completely refashioned the way we approach shopping (Amazon), interact with our friends (Facebook) and seek information (Google). Banking has been slow to catch up.
“Most people don’t want to have to think about banking. They just want it to work.”
When was the last time you visited your local bank? Not just to get cash from the ATM, but for any number of financial products and services. Can’t remember? Neither can I.
For most people, going to a brick-and-mortar bank branch brings up memories of a time when you actually had to drive to the video store to rent a movie. US banking giant Wells Fargo announced in January 2017 that it was looking to close 400 of its offices. And this trend of customers cutting the cord to a physical location is only going to accelerate in the coming years, as banking becoming increasingly contextualized and intertwined with our daily lives.
The fact is, most people don’t want to think about their banking. They just want it to work. For example, buying something — both online and in the real world — should be effortless. I’m paying you my hard-earned cash; so don’t make it hard for me to give you my money.
But it wasn’t so long ago that simply purchasing something online was a huge hassle. No doubt someone in the late 90s got super excited about winning an eBay auction for someone’s stamp collection — that is, until they realized how difficult it was going to be to pay a stranger in Ingolstadt for it.
Then along came PayPal to revolutionize the payment process for the digital age. Suddenly what was once so hard became easy — and enabled commerce to take place in an entirely new context. A new financial channel was born and set new expectations for everyone — including banks. PayPal’s total payment volume in Q4 2016 clocked in at $99 billion, up an impressive 22 percent.
“Soon, banking will not be a separate part of your life. It will be seamlessly integrated into multiple aspects of your daily experience.”
In the previous banking paradigm, banks forced customer journeys to revolve around them. In the future, banks will have to be part of and enable digital customer journeys.
Payments via Facebook Messenger and other similar platforms are the logical extension of this digital financial revolution. People want their banking services to meet them where they are, in the products and channels they use. And this is driving fundamental changes in the financial sector and beyond.
As we can already see, banking is increasingly integrating with our everyday lives. Banking has to follow customer journeys; nobody gets up in the morning and says “Yay! Today is the day I get my loan!” It’s rather, “Yes, today I get my new car!” The loan simply enables that, and ideally, is integrated into the car-buying process. The context will become paramount and it will determine the services that your bank — or other financial services provider — makes available to you at any given moment. These contextual experiences are set to rapidly become the future of banking.
We need only look to the success of China’s WeChat messaging app to see the future. WeChat was used to make a staggering $1.2 trillion in payments last year according to a recent UN report, up from $11 billion in 2012. And Facebook, with its huge trove of user data, is extremely well-placed to anticipate and deliver on the financial needs of millennials as they come into their prime earning years.
“At solarisBank we’re focused on empowering our partners so they can provide pioneering financial services to their customers.”
But the contextual banking experience will go even further. It’s not hard to imagine a future when virtual assistants like Amazon’s Alexa and Apple’s Siri will be able to tell you if you can afford to buy a house as you happen to cycle by. Given access to the relevant information, it will analyze your financial situation, current mortgage rates and variables like estimating college costs for your three kids. AI has the potential to completely refashion the classic banking business.
Almost certainly, some financial pioneer is out there working on a feature or service that people will consider crucial to their lives in just a few years’ time. This is what we’re focused on at solarisBank every day: empowering our partners so they can provide pioneering financial services to their customers.
And just how do we facilitate that sort of innovation from both inside and outside the banking industry? We’re a tech company with a full banking license. This attitude comes through in our approach to everything we do.
Our modular API-powered platform enables all kinds of companies to offer relevant banking services via their own unique digital channels and customer touchpoints. A good example is how we’re helping an online marketplace for classic cars, provide escrow services and secure, payment for buyers and sellers. It’s all about making the most of existing customer relationships by offering financial products tailored to their specific needs.
At the same time, we’re helping traditional banks innovate by using our platform for rapid prototyping. Some legacy players are starting to respond to the new financial landscape. And what exactly will that look like? The only thing for certain is there will be a vibrant mix of players and channels shaping banking in the 21st century.
Facebook could leverage its vast knowledge of its users to become a global financial services powerhouse. The integration into Messenger of foreign exchange and payment bots for TransferWise, Visa and other providers is merely a first step in that direction. PayPal, on the other hand, is already transcending its e-commerce dominance with ingenious new products and channels. Acquiring Venmo, which doubled its mobile payments in the first quarter 2017, is just one example of this. And there will undoubtedly be newcomers joining them at the forefront of contextualized banking.
So forget about visiting your local branch. If we have anything to do with it, the days of clunky, standalone, inconvenient banking will be a distant memory sooner than you think.