I was talking with a few fintech firms the other day. They are all fully licensed banks, and are less than 15 years old. They all seem to have one thing in common: refreshment. What I mean by this is that they talk about technology in a very different way to traditional banks. Traditional banks, as I’ve blogged regularly, are encumbered by legacy. I almost see it as a bank that has cemented itself to the floor. All these new waves of tech come around, and this heavyweight bank, cemented to the floor, tries to adapt. It doesn’t look good.
- What these new banks were telling me illustrates the point well. The first said that it launched its online banking in 2010. It ditched its platform in 2013, as it wasn’t working to its satisfaction, and regenerated itself onto a new platform. It’s doing it again in 2017.
- The second bank said that it started in 2003 and is now working on its fifth-generation architecture. By my calculation, this bank refreshes its technology structure every three years. That’s some going.
- The third new bank was telling me that it can provide core updates to its apps every day, sometimes even twice a day if necessary. Typically, it’s refreshing itself every six months, and its apps every week.
How many traditional banks regenerate their systems every three years and their apps every week? To be honest, in traditional banks, I’m amazed if they’ve actually regenerated anything, and, if lucky, update their app once a year.
This illustrates a gulf and divide between large, dominating bank and new, upstart bank. The new begin with a clean sheet of paper, build for today and renovate regularly. The old start with what they’ve got, try to change what they’ve got to keep up with today, and renovate hardly ever. Does the customer notice the difference? I think they do. After all, I’m a customer. I have several apps from both newbies and oldies, and I can see the difference. A fundamental is the information I receive. The oldies give me no information. I regularly see transactions on my account and have no idea where they came from. A direct transfer listed as ‘1/3E60’ is really useful … not. I have no idea where that money came from or who sent it, as it has zero correlation with any invoices or clients I deal with.
I go to my new bank app, and every transaction is enriched with information. I can double-click and drill down to not only who sent me money, but what it relates to and when it was sent, by whom, how and why. It’s far easier. It’s a little like the third-party digital financial team, who do everything for you in a completely automated way. That’s the way it should be. In this age of automation, it amazes me that I’m capturing receipts in apps to send to accounting services that I then have to administer. In this digital age, the receipts should go straight to my digital accountant – I shouldn’t have to do anything. And that’s how I feel about banking, and why so many new digital banks are getting started.
Things will change
The new banks have a dream: they dream that customers shouldn’t have to think; they dream that the bank can run their financial services for them, in a completely automated way, linking everything with everything through apps, APIs and analytics. The old banks are getting away with terrible service because no one knows the difference. The old banks give me transactional bank statements, with ledger services that record references and give me zero knowledge. The new banks tell me all I need to know.
Eventually, people will wake up and smell the coffee. Eventually, people will know that the old banks are dumb and the new banks are cool. Eventually, things will change. Eventually, the old banks will buy the new banks to be cool too. I can’t wait.