Tag Archives: fintech

Fintech Innovation Watch – What’s next!

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There’s so much is happening in the financial services world that its enough to make your head spin. At the same time, if you take a look at the news today, you can see who’s getting it and moving forward, and who’s content with playing the same old game risking their very survival.

Here’s my Fintech Innovation Watch. With a twist! With every news item, I’ll also go out on a limb and derive some future potential innovations that might happen (or might not)!

APIs: Xero tied up with Capital One. Its a great partnership but the news is getting old now with Wells, SVB etc. already on this bandwagon. I’m sure better things are coming soon. This integration is great for a customer to import their bank transactions into Xero (and hence be happier with Capital One), but banks need to prepare for the new frontiers in customer engagement? For example, in a connected world, a simple 2-way API that helps build up context of the customer transactions that’s available in Xero to help with analytics on receivables and other cash management needs? The number of value added services (perhaps paid) that can be developed by banks are countless. We only need to look beyond the traditional products of business checking account and loans. Read the original news item here.

Core banking and community: In another interesting development, Fiserv signed up Apple Creek Bank. This is a small community bank in Ohio. The reasons for moving to Fiserv are based on traditional metrics of faster processes and providing additional digital services like PopMoney to customers. Fiserv has started to do that really well no doubt. And great goals by Apple Creek too. But if you think about it, the goals also reflect the pains of all banks who are severely constrained, and perhaps trapped inside their own perimeters. With less than deep pockets, many of them rely on their foundation platforms to carry them into the new world. Banking providers should be enabling Internet of Everything for community banks, and helping to actually build a community connected by exciting types of commerce. By serving same old same old, the community banking menu of offerings won’t be able to make escape velocity. Read the original news item here.

Payments: Then we see the continued rise of seamless payments. M&B restaurants are leading the way just like Uber and Lyft did, by making the payments and ordering seamless with Flypay. We order, we eat and drink, and we walk away. Its like Panera++ and Starbucks++! There’s also the added bonus of seamless loyalty across all the M&B brands, not to mention lots of labor efficiency gains. No doubt future enhancements like order ahead and recommendations are on the way, and we should be closely watching how these sector specific payment models will work with more traditional models such as cards and even Apple Pay. Will the list of payment options always be available? Going even further, will restaurant platforms open up APIs for ordering and payments  – to be skinned by anyone? Now, that would be a mashup to watch! Read the original news item here.

Robo-Advising: What a model this news represents! Something for all banks to think about. Danske bank launched its digital investment platform (June) to put to work deposits that are earning practically nothing where they are! Sure, all of us need a little cushion for the rainy day but lets face it – most of us have way more sitting in our checking accounts than we would like. So Danske has turned that simmering dissatisfaction into something of a delight. Independent robo-advisors watch out! Even though June itself is a robo-advisor it is showing us a model that so far has been limited to the large wealth managers like Vanguard and Schwabb. Now if only my own trusty old bank can get its act together, and actually help me manage my money better! Danske got a couple of things right – first they make it easy for customers to take an action, they offer a defined and tailored portfolio, and they’ve opened it up to customers outside of Danske. Now that’s a nice escape from the Innovators Dilemma and creating new business models of the future. Way to go! Read the original news item here.

Hope you liked my take on these innovations. Each of these innovations is awesome in its own right of course. It does take a lot of make a change, however incremental it may be. Do let me know what you thought of this Fintech Innovation Watch. These leaps of faith are based on the principles I used in my new book Connected! How Platforms of Today Will Become Apps of Tomorrow.

Thanks to Finextra for the daily sources. If you liked my take, do subscribe to the blog for when the next edition comes out in a few days. And PS: If anyone wants to partner up to target any of these innovations, look me up! Image courtesy Pixabay

Until next time!

Building the Future of the API Economy

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The impact of API economy is across all industries. Because APIs by their very definition are supposed to promote interaction and dialog across multiple companies, often in different industries.

In my article on American Banker Don’t Give Away The Store When Enabling APIs, I brought out the focus on ensuring that banks maintain their customer experience front end, while allowing additional channels for growth. For example, allowing travel sites, Facebook and retailers to access the bank’s services were examples which if taken too far with potential competitors could result in commoditization and loss of value (as the service providers are hidden as utility providers).

APIs are the future in today’s connected world. In this new post on American Banker titled 3 Steps to API Success, I tried to provide a simple framework to guide the development of Bank APIs with those customer experience principles in mind. Essentially, apart from going to market rapidly by opening up new channels, it is important to start building a sticky and value-adding customer experience by focusing on projecting the bank’s brand, not just the utility service itself.

The 3 steps in the framework sort of follow a road-map because they increase in complexity of course. Also read the full article on American Banker.

  1. Fill in the gaps in our customer journeys: Like any business, we often fulfill our end of the bargain, while leaving the remaining customer needs to the other players in the industry.  However, in this rapidly innovating world, the most important use cases for API banking will be driven by 3rd party applications that help customers accomplish the objectives that ultimately matter. Otherwise, this gap will be filled quickly by someone else. For example, banks provide a bank account but the space is rife with innovations around P2P payments and check sharing, spending pattern analysis, savings goals and calculators etc. Examples abound for small businesses, as well as commercial banking. Perhaps the first step could be to address these end to end journeys by enabling a 3rd party ecosystem around APIs developed for these purposes. These applications meets the objectives of low cost services provided to niche customer bases. These innovations often failed the “business case criteria” for in-house development. But they help the bank establish its brand by creating an umbrella ecosystem that is similar to how enterprise technology providers create their partner ecosystem.
  2. Moving towards an App Ecosystem model: The next level of the API model will go beyond exposing APIs to third parties towards building controlled environments where discovery, adoption, experimentation and payments will be seamless. Fidor and Mondo are 2 European banks that have laid the foundation of this model. Powered by 3rd party innovation and supported by customer experience experts from the bank, this app model brings a much tighter integration of the banks offerings and aligns them with the customers. Such a model reduces the go to market friction for partners (e.g. advertising, or fulfillment). It also ensures that the bank can market the entire package of services to customers and create conversations around their end to end needs, instead of negotiating on product features and price.
  3. Becoming a connector of value: The ultimate goal is not just to provide a service, but to anticipate customer needs, and ensure they are receiving the assistance they need as they make financial decisions. Over the years, banking has evolved naturally (like any service) from being a custodian of money, to being an agent that helps (or can help) make the right financial decisions. The API model now provides banks the right tools to make this mission come true. For example, helping the customers maintain the right balances for their upcoming payments, their IRA contributions, or just sticking  to a monthly budget for various categories of spend. As customers utilize the banks services (or the apps), this ecosystem will tend to grow stronger. In summary, for the first time, banks will be able to connect the different use cases and bring singular focus on the overall customer objectives. For example, Citi’s Price Rewind program tries to do this but relies on customer signups instead to gain access to transaction data and customer context. The Bill Payment service comes close but it needs to be integrated with the rest of the bank’s ecosystems.

Connecting individual value propositions by creating overarching customer identities and helping customers with proactive advice is what will differentiate one banking API platform from the other. And for this to take off, banks must take steps to make customers aware of the new capabilities, clarify each value proposition from the customer’s perspective, and on-board customers quickly and comprehensively. Such a model will obviously be based on ensuring privacy through various opt-in mechanisms. In summary, working backward from the customer motivations and experiences in the digital economy is key to innovate and maintain relevance.

Read more on American Banker at 3 Steps to API Success. Your thoughts and suggestions are welcome. Image taken from https://pixabay.com/en/users/geralt-9301/

 

The Banking API Leapfrog

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In a recent article on American Banker (Don’t Give Away the Store When Enabling APIs), I brought out three best practices for banks to adopt as they think of leveraging the Fintech and Banking API phenomenon.

Even as Banking API are being touted as a must for banks, the common position of argument is from the perspective of emerging companies and Neobanks who are trying to reach the customer in a world that has apparently just opened up. Banks are widely being positioned as too slow, expensive and unwilling to innovate with the customer in mind. While the API trend for open banking cannot be ignored, I’m summarizing the 3 key points of the American Banker article that highlight a 3-pronged approach:

  • A more open ecosystem does need to be created, but banks should be looking to improve, rather than letting the innovation defragment the customer experience. Banks should be looking at the innovations that meet the niche or fringe needs, and also build upon the customer 360, rather than destroy the integrated CX. The App store model that Fidor bank in Germany has initiated is a great way to do that. Citi is embarking on this too.
  • The benefits of Banking API should go both ways. Even as emerging players seek to leverage the bank’s data, the banks should be building a data pipe back into the bank as well. That will help build increased customer context (e.g. transaction detail) which has not been fully available as of now due to regulatory and privacy concerns. Citi’s Price Rewind program is a step in that direction that can be enhanced through such 2 way models with the consent of the customer.
  • Enable rapid innovation by engaging in white-labeled partnerships and perhaps acquisitions to accelerate technology innovation. Banks have been doing white-labeled offers for decades so this is nothing new. Services such as identity monitoring, and online retail marketplaces have existed for years. BBVA’s acquisition of Simple, and their real time payments service based on Dwolla are also examples of the acquisitions and partnership approaches. The key will of course be the pace at which banks can internalize these innovations.

Approaching the new digital world the right way is crucial to be able to maintain the customer front end. Its easy to be dis-intermediated. While being a provider of the banking and payments backbone is a viable option, the real risks may be about missing out on innovative revenue and business models that arising.

Thoughts are welcome. Photo credit: Kay Kim(김기웅) via Foter.com / CC BY

Read the full article on American Banker here...