Banking on the Future

KPMG recently wrote a report titled “Banking on the Future: The roadmap to becoming the banking partner of Gen Y Professionals.” In this document, they outlined eight key trends taking shape in consumer banking, and how this will shape the future of the industry in years to come. Two clear points standout

Technology Impact: The new generation of consumers, has been bred on technological innovation, with highly developed products accompanying advanced customer experience. There is an expectation arising of this continued simplicity into other areas.

Disengagement in Financial Products/Brands: Gen Y professionals are spending on average two hours per month managing their finances, due to a lack of consumer experience engagement, the general perception of the industry and time-pressure. Further, consumers are holding a multitude of different products due to the evolving perception of value.

One of the key implications form this report, is that ever-increasing computational power combined with a disengaged consumer base should have the banks alarmed. Banking dominance has traditionally been upheld by massive economic and informational economies of scale, creating large barriers for newcomers (as well as extensive government regulations) which have acted as a ‘shield’ for the major players. However, technological development has removed many of these barriers, which combined with a disengaged customer base creates an ever-increasing risk of disruption.

While this discussion is interesting, perhaps a better question for the sector and entrepreneurs alike, is whether consumer disengagement is due to the nature of finance or because of the current delivery of it? If the answer is the former, then it validates and reinforces the dominance of the established players who currently enjoy one of the ‘stickiest’ markets, both in Australian and throughout the world.

Although if it’s the latter as was beautifully demonstrated by the recently launched start-up, Spaceship, there is a challenge to this assumption. Spaceship effecitvely managed to communicate superannuation as sexy and engaging, a feat which only a few years ago would have been near impossible. We believe that this is not just a ‘one-off’ event, but is evidence of people’s willingness to engage in innovative new financial products. The shape and form of these new products however, still remains a mystery.

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Therefore, perhaps the best place to explore the future of banking is through seeing trends in society. One interesting observation, is that Gen Y will spend more time on Facebook in three days, then on managing their finances for a month. New applications will automatically download personel data from other sources (e.g. Facebook) to make acquisition seamless, and yet when my co-founder and I, tried to open a business bank account last week – 3 banks, 5 branches, 4 hours later we were told we would need to come back another time.

In 2015 alone, the ‘Big 4 Banks’ made over $27 billion dollars profit. Let that sink in for a moment…. $27 BILLION DOLLARS. It is not the amount that has me concerned, but the fact that a company can make that much money for doing something that constantly leaves me frustrated and inconvenienced, while not producing anything. Why can’t banks tailor products to my individual needs? Why can’t they focus on me the customer? Quite often I hear the comment that people feel like they are just another number to the banks and from both an emotional and rational standpoint it is hard to argue against that assertion.

We believe at some point in the future someone is going to come into this space and completely change it. Whether that is a Tech Giant or some other party, a company that is focused on customer experience that bridges the disconnected world of financial products into one seamless platform has the potential to fundamentally disrupt this sector. An account that passively works for you, that is simple to use and easy to understand. In fact, we believe this truth so much that we have started a company trying to do just that.

The company is Mosaic. We announced it publicly last week having recently received backing from H2 Ventures. We’re creating a platform that combines your savings, investment and transaction accounts into one and reduced cash held in order to maximise investment and drive stronger returns. We’ve had incredible feedback so far with the Mosaic beta waitlist tripling in size in less than a week. We are deep in production phase and are aiming to begin consumer trials at the backend of the year.

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Want to know more? Drop us a line or come in for a chat!

Sam Nixon is the Co-Founder, brains-trust and Com Sec at Mosaic.

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