Fintech founder predicts the end of bank branches
Bank customers of the future will get a warning direct to their mobile phone or watch saying they’re spending too much as they load up their shopping basket.
It might also be a real time message displayed inside their interactive designer glasses telling them they cannot afford to pay for the new super smart TV they’re eyeing up as they walk into Harvey Norman.
This is the new world view of author and former Barack Obama banking advisor Brett King, who delivered the keynote speech to FINSIA Summit 2019 last week.
But while futurist and member of a so-called fintech mafia from Melbourne is now based in the US, it is China that the Moven bank founder looks towards for inspiration.
Banks there have adopted a branchless and almost cashless way of working through mobile phones. Technology and data-driven financial services is trusted to lead the way forward.
Just looking at the numbers, it’s hard to disagree with his argument that Australia has a lot of catching up to do.
WeBank, which is the largest Chinese challenger with 178million customers and up by 100m in the past year, is the best example of how it’s being done. Alibaba founder Jack Ma is to banking there who Steve Jobs is to telecoms in the West.
“The really interesting stuff they do is financial inclusion,” King explained.
“Things like micro lending where the average size of the loan is like 60 bucks.
“It is this real grassroots changes that are happening based on access to basic banking services.”
As a result of customers trust in the technology, they leave so much unspent money online that it is now automatically ported into savings accounts at the end of the month.
It’s the face versus the 16-digit PAN, which is why by 2030 we’re probably all going to be using Chinese digital wallets
One of the main reasons for this digital inclusion - where Australia is very much lagging behind partly because of poor internet infrastructure - is that customers are doing all their banking on their phones. Taking out loans, spending and saving. Everything.
He said: “We don't need to go to a bank branch anymore to do most of the stuff we need to do in banking.
“When I go to places like Hong Kong, Seoul, and Chennai in India, the internet is so much better than Australia.
“A few years ago, Australia was 16th in the world in terms of Internet broadband space. Now that is 67th in the world.”
Though it is not just Australia lagging behind, he lamented, laughing at the fact that in some parts of the US, children are taught how to write cheques.
Even the biggest names in technology are hampered in a desire to move forward.
Apple was unable to go down the full-scale disruption route with its own payment systems - as its credit card partners insisted on a physical likeness of the card inside the phone.
He added: “What did we do when the iPhone came, we shoved a piece of plastic inside the file - we replicated the plastic even though we didn't it. We don’t need a 16-digit number.”
But how can we trust the banks with our money?
Most of the trillions of dollars in transactions in China are secured through facial recognition.
“It’s the face versus the 16-digit PAN, which is why by 2030 we’re probably all going to be using Chinese digital wallets,” King predicted.
Though it is not just security that drives trust. The old adage of how bankers are just looking after other people’s money comes into play with this new order.
King’s own bank Moven, which works around the world including with Westpac New Zealand, provides behavioural models that help banks drive customer engagement and retention. The stop-spending and start-saving alerts are already at work at Canada’s second largest bank TD.
He said: “It was TD - where half the customers used our MySpend platform - was where it was really interesting because for the first time we had like a mobile customer base of more than 4 million customers.
“We would see a month on month reduction in spending by four to eight per cent just from the nudges we were sending.
“Just the awareness of what that spending make people change their behaviours. That increased loyalty to TD.
“Now if you want to know how this is going to go in Australia, I can tell you as we've seen it happen in those two markets.
“People don't shift immediately to a challenger bank. That's too risky.
“Most of what they do is they get a card from the challenger and they move their discretionary spending numbers.
“They use it for buying from restaurants or cafes.
“They try it out. Then a year or a year and a half later when they are convinced. They may keep their mortgage with the primary bank, but all of the day to day activity and spending shifts to the challenger where they experienced the app and the reminder servicing capabilities.”
This article was originally published in FINSIA's InFinance publication.