If fintech wants to meet consumers’ aspirations it must create new services not just gimmicky, good-looking products rooted in traditional banking services.
Brands style themselves as innovators when all they’ve created is a novelty app to dress up traditional financial products
Fintech wants to change the world with new models of finance, but if this sector really wants to meet that aspiration, firms should come up with new ways to give consumers access to finance, not just create nice looking apps with novelty functions.
As a financial journalist I spend a lot of time reading press releases sent to me by brand new companies. It’s heartening to see the depth and breadth of new entrants, innovators and ambitious start-ups looking to provide for consumers. I am still left somewhat bemused, however, by many brands that style themselves as innovators – when often all that has been created is a novelty app to dress up traditional financial products.
Open Banking, for example, was widely touted as a game-changer a year ago. The updated rules allowing brands to access other providers’ customers’ financial data through APIs was heralded as a big step for consumer data control.
But so far, Open Banking has largely only led to a proliferation of big banks creating apps that capture consumers into their own infrastructure. And those that do use API technology tend to just do so to create nice-looking budgeting apps, but don’t actually use data in a meaningful way to help customers access new financial products.
A firm that commits financial business errors does not illicit much confidence. If it cannot look after its own affairs properly, I for one would not trust it with my money.
Powerful new firms have also been beset by old-fashioned problems. Revolut is a high-profile example of this. The company positions itself at the very cutting edge of fintech but underlying problems have affected its reputation. A PR debacle around tone-deaf Tube advertising, which exposed the use of fictitious data, and an emergent investigation by the regulator over compliance failures have exposed the hubris of a business outgrowing its own capabilities.
A firm that falls foul of basic financial business errors does not illicit much confidence. If it cannot look after its own affairs properly, I for one would not trust it with my money.
Then there’s the issue of companies not actually innovating. Tech giant Apple recently announced it was entering the financial services industry with a credit card. One of the big features touted by Apple was that the card would be essentially ‘informationless’ with no numbers or pins that would make it insecure. This innovation is fantastic, but it is not Apple’s; The Times newspaper reported back in September 2018 that Visa and Mastercard were both hatching plans to do the same.
The other big feature the firm promised was spending analytics, something savvy UK consumers are already very familiar with from a panoply of banking apps. So, what is Apple actually innovating? Its credit cards’ fee structures are more interesting, with essentially none to pay, other than the APR on the credit. This is where the firm could use its resources to make a difference.
Credit cards can be used effectively by people to manage short-term cash deficits and for planned purchases that get paid off on a schedule. But they can also cause a toxic spiral into debt when used recklessly or as a last resort for someone struggling financially.
Apple can truly break the mould by positioning its card as one that will never send a customer into toxic debt. In my opinion, that would be a truly novel idea and not just the gimmick it seems so far to be.