The era of “challenger” banks has seen many grand promises in terms of innovating on the old banking model to provide consumers with something more modern, responsive and customized. But when it comes to actually measuring results against the hype, the fact is that reality often falls a bit short.
The digital banking customer might get a few nice bells and whistles — a faster onboarding process or a slick digital app attached to a prepaid card that’s nearly functionally identical to a debit checking account. They’ll also see a lot of fees that consumers associate with traditional banks (monthly account fees, overdraft charges, etc.) reduced or even eliminated. It’s often a better experience, but to date, the improvements associated with challenger banking are more incremental than fundamentally disruptive.
The challenge, Aion CEO Wojciech Sobieraj told Karen Webster in a recent conversation, isn’t just creating a digitized version of how banking has always been done, but to create “mobile-first” banking that leverages digital tools to offer consumers a better, more cost-effective and more comprehensive experience all around.
Which is why Aion has put financial services on a subscription model. For about €20 a month (equivalent to approximately $22), customers enjoy a suite of concierge banking capabilities.
Subscriptions are novel ideas in financial services and a bit more expensive than the average checking account. But given the atmosphere around COVID-19 and the economic instability that has followed in its wake worldwide, will consumers be ready to try something as new as subscription service banking?
In a word, yes, Sobieraj said. He believes now might actually be quite a good time to make a change in the shape of financial services relationships because uncertainty gives consumers a greater incentive and interest in efficiency and value.
“We think within the safety of banking consumers will also be looking for the places where firms are actually perfecting their [relationships] only rather than merely keeping it,” the CEO noted.
And that kind of perfectibility over time is ideally suited to the subscription model, Sobieraj said. So is using subscriptions as a platform to launch more relevant concierge financial services.
Creating A Custom Financial Services Concierge
Specialized concierge services aren’t exactly a new concept in banking, Sobieraj told Webster. But in general, they’ve been largely limited to enterprise clients or very high net worth ones. They’ve also often had relevance issues in terms of what they offer.
Aion’s goal is to take the entire banking relationship and turn its service to continually monitoring and optimizing customers' funds. That means taking core banking services and layering on trading portfolio management, continual security monitoring, financial product optimization and commerce product optimization.
The idea is to let consumers essentially set these management functions on auto-pilot and let their banking services partner pick them up. For example, if a better refinance rate on one of a customer’s loans pops up, the bank alerts the user. Or if the person’s information shows up on a dark web marketplace, the bank pings the consumer. And if a person’s purchase history could be better optimized for a better price or reward, the system automatically makes that optimization for the user.
Consumers are the driver, Sobieraj said. They set the optimizations they want and determine how much access to their whole financial life they want to hand off to Aion.
However, he noted that because of open banking in the European Union, those opt-ins are fairly easy on the customer side and pay off. The service costs a little over €200 a year, but Sobieraj said the average customer saves over €650 a year when the person takes full advantage of the program.
“Our concierge model powered by [artificial intelligence] AI lets the customer tell us what they want and are searching for and the AI surfaces the most economical conditions,” he said. “So for online purchase options, say they bought the new TV with a lowest price guarantee. Our system is searching for the lower the price within the next 60 days to make sure they maximize their opportunity.”
Aggregated across spending, financial products and investing, savings add up fast — if a person is the right customer. That might not be every customer, as the product isn’t designed to be mass market. Rather, Sobieraj said the firm mostly pitches it to affluent working professionals and upper-middle-class to affluent families. It’s designed to work with those customers in a wide variety of contexts.
Redefining The Primary Financial Relationship
Since Aion’s founding, the firm’s ultimate goal has been to be customers’ primary financial relationship, Sobieraj noted. He said the firm wants to be the place to which customers’ paychecks are deposited and where they centrally manage their financial lives.
But he noted that that’s a big change for a lot of consumers to make. So, the firm is built to function in both a primary and secondary capacity for its customers and still remain profitable.
“In the situation that someone would like to keep the money with someone else and use us as a secondary bank, that’s OK with us,” Sobieraj said. “I don't see any big obstacle there. The prime source of our income is monthly membership — and the value is there for consumers whether we are their main checking account, or for savings or for a combination of our services.” Services, he noted, that are becoming increasingly important to consumers as instability leaves many looking for safety for their money.
In Europe, that has seen affluent families and urban professionals heading to the real estate market and the stock market, Sobieraj said. But as 2020 has gotten off to a shaky start, they’re going to be looking for financial institutions (FIs) that do more to help them protect and work their funds.
Of course, banks are entering into a low interest-rate environment where demand for service is rising, but revenue is taking a hit as rates are falling. “I think fundamental banking models will be under a lot of pressure, and I think there will be a flight from institutions that aren’t delivering at a higher level in terms of service,” Sobieraj said.