Digital Banking

The Digital Banking Blur

There’s a lot going on in the digital banking space, as entrants are changing the way that people pay for things, how they consume commerce, and who controls the customer experience when it comes to making basic money transactions.

According to Alex Sion, President of Moven Bank, 2016 is going to be “the year it gets real” for digital banking, as general notions transform into real disruptions.

In a recent discussion with MPD CEO Karen Webster, Sion went on to define the two fronts on which that will occur.

“It gets real for the FinTechs,” he explains, “in that all of us are going to feel the pressure for real growth, real profitability and real business models.” On the traditional players’ side, meanwhile, it’s going to “get real” regarding moving away from experimenting to create a solid directional strategy.

“This is a permanent consumer change,” says Sion, one leading toward an end state where “there really is no such thinking as banking as we know it [today],” replaced by a scenario wherein banking services are imbedded into people’s lifestyles.

Sion and Webster agree that traditional banking institutions’ hesitancy regarding how they can make the transition into this brave new world will cause the change to take time; Sion assesses that “it will take a generation to work out completely.”

For consumers to get on board with the change, meanwhile, will require a bit of nuance.

It’s not a question of convincing people to trust a digital bank — that’s an uphill battle and the wrong tack, according to Sion. Rather, the method should be to convince consumers to “trust a digital service to enable money experiences”; that, Sion points out, is something that consumers already do every day.

While people wouldn’t call PayPal or Venmo (or any such services that have achieved mass adoption) “banks” — because they’re not — people nonetheless trust them to manage a core money experience.

“The fuzzy line” being tested every day, says Sion, is “the difference between managing a money experience and essentially holding deposits securely.”

“It’s only a matter of time,” he continues, “before the lines between those businesses completely blur.”

Sion refers to it as “the last horizon of innovation — where banking becomes the invisible force that enables commerce on a regular basis through a variety of digital experiences and apps.”

The move to a completely digital world of banking will, of course, depend upon traditional banks’ willingness to partner with companies like Moven. Compared to those institutions’ existing partnerships with online lenders, Sion attests that teaming with digital banks is actually a less intrusive process.

“Moven’s model is actually predicated on the idea that the everyday money experience” — rather than banking products — “is what banks need to be more aggressively partnering on,” Sion tells Webster.

While he believes that “probably nobody is ever going to be better” than banks at maintaining underlying components such as deposits, savings, and moving money — aspects that will never go away — he admonishes that “there’s a whole lot of companies that are dramatically outpacing banks when it comes to the experience itself.”

The “experience choice,” as Sion calls it, is what the highly valuable younger generation of consumers — millennials — is gravitating toward. To them, banking “is just an ancillary component.”

Webster draws a comparison between the digital banking/physical banking relationship and that of eCommerce and retail; in both cases, expanding technology allows consumers to do increasingly more on digital and mobile — but, at some point, they still have to go to a physical location to handle certain transactions.

As for banks, Sion notes that “the operative term is that they ‘have to’ go.”

“All things being equal,” he remarks to Webster, “people are going to choose the path that is the most efficient and the easiest.”

Because money is a big anxiety point for consumers, they want to take care of matters surrounding it as quickly and as easily as possible. “But at the same time,” notes Sion, “banks don’t often allow that.”

That’s why banking will eventually “all go digital,” he explains — provided that digital banks can maintain trust element of the equation.

The task of digital banks maintaining trust, attests Sion, is about more than requiring passwords for everything. Point of fact, Moven has removed the necessity of passwords for certain basic information-access behaviors on its platform, in response to the realization that, in Sion’s words, “in the app-centric world, there is a lot of friction in the banking paradigm that is frankly unnecessary.”

For activities that require money movement, the execution of a transaction, the changing of personal data, et al, Scion notes that Moven still requires multi-form authentication.

“But when it comes to just getting insights on spending habits,” and the consumer has established himself or herself as owner of the phone linked to an account, “they don’t want to have to log in time and time again,” says Sion, who notes that Moven’s decision to not require a password for that kind of activity was based on user feedback.

When it comes to consumers feeling secure in their digital banking transactions, Sion believes that mobile has a distinct advantage over other formats.

“It’s such a personal device that you rarely are parted from it,” he observes. “There’s an inherent psychological security in that it’s more precious to you than many other things.”

That security, in Moven’s perspective, renders the addition of points of friction redundant.

Looking to the future, Sion tells Webster that Moven — which generates its revenue both from its direct-to-consumer business in the U.S. and from partnerships with banks around the world — is remaining focused on innovation. On that ground, he believes the competitive advantage is a unique point of view.

“Everything can be quickly replicated once it’s out there, but what can’t really be replicated as easily is a perspective,” concludes Sion. How a business in the digital banking space views the future of money, he says, “will determine the difference between the winners and the losers.”

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