Musings of a FinTech: Same, Same but not all that Different

I was recently asked to take part in a focus group with one of the Big 4 banks who shall remain unnamed. They had flown a (presumably) very expensive consulting group out from San Francisco to help them to define their “purpose”. Whilst having a clearly defined purpose is a great idea, I couldn’t help but think that it was just another example of the big banks doing everything they can to differentiate themselves from their competitors except the thing that would truly allow them to.

What I’m talking about of course is product innovation.

Banks are trying to innovate on everything, bar the thing that matters most – their products. I mean think about it, without products we wouldn’t even need the banks. Their core service is to provide us with great financial products that allow us to make the most of our money and help us achieve our dreams. Be it buying a home, building wealth or starting a business (now it sounds like I’m the one defining their purpose).

Don’t get me wrong, banks are doing a lot of work to change themselves through innovation in their retail arm with new branch designs and services, improved customer service through social media etc. or better digital offerings with great apps and technology. All of this stuff is necessary and hugely important but the elephant in the room is that we still have a set of financial products that seem almost identical across the major banks.

Same, Same

In a recent Q&A at the FinTech Melbourne Meetup, new ANZ CEO Shayne Elliot stated that his bank would be looking to invest in and partner with startups to help improve their customer experience. We totally agree with his sentiment but once again the focus isn’t on their products. Funnily enough in the same session he also said “We make most of our money selling mortgages”, yet no mention was made of the fact that their product is barely differentiable with the other 3 majors and FinTechs could help them to build out a truly unique product proposition.

At Huffle, we believe that product innovation can, and should, come from sources external to banks. Here are 3 key reasons why:

  1. Bureaucracy and speed-to-market: Over the years, banks have built up a number of processes and programs which make getting things to market quickly virtually impossible. No such barriers exist for a small tech company which has recently been established.
  1. Ability to run a Minimum Viable Product (MVP) under a different brand: Making big changes to existing products does present a risk to banks, having smaller innovative brands to test these with limits the exposure to reputational damage and allows unique propositions to be tested and refined before being adopted en masse.
  1. Fresh, outside-the-box thinking: Whilst there are probably a million good ideas floating around in a large bank, often people who have been working there follow a similar pattern of thinking. Startups that bring people together from a broad range of backgrounds have the ability to attack a problem creatively, from an angle which might not have been thought of before.

I would love to know your thoughts;

  • Do you think the banks products are up to scratch?
  • What kind of product innovation would you like to see them offer?

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Mondo Screens

Musings of a FinTech: The Banking Revolution will be Digitised

Whilst it may not have made the news here in Australia, earlier this month Holvi, a completely digital bank catering to small business owners and entrepreneurs in Finland, was acquired by BBVA. It’s the latest in a string of acquisitions and investments by the Spanish banking giant in digital banks. It started back in early 2014 with a $117 million acquisition of Simple Bank in the US, and now there are a raft of new digital banks in the process of being launched around the world with backing from them.

 

Much like other established industries, the banking system is sitting on a complex patchwork of technology and platforms that have been built upon over many years. What this creates is a costly infrastructure to change and update, and often small, customer-centric enhancements are so costly that they get de-scoped. Whilst some banks have forged ahead with building out a “digital first” experience, in Australia I’m thinking ING Direct and UBank (powered by NAB). Because they are still built atop the existing bank frameworks, limitations exist as to how far they can push the envelope.

 

The UK is the country that looks set to benefit the most from this new push into digital banks. With a low barrier to entry (you only need £1 million capital to get your banking licence vs $50 million here in Australia), and a nation that has adopted doing things online faster than most (the UK are some of the most prolific online shoppers in the world). There is now a slew of digital or mobile banks set to launch imminently.

 

Mondo Screens

Image credit: getmondo.co.uk

The most well known of these banks is Atom, they started 2 years ago with a vision to be a mobile bank with a heavy focus on personalisation – one of their early campaigns was to get 1.4 million logos designed, so every member can choose their own. They are the first of these digital banks to get their licence (in 2015) and have received £135 million funding to date. Mondo is another UK digital bank that has a good news story with their funding – they famously raised £1 million in 96 seconds via crowdfunding platform, Crowdcube. Two other names to watch in that market are Starling and Tandem. Brits are soon going to be spoilt for choice with new digital alternatives to the traditional banks.

 

But what about here in Australia? We know conventionally there is a lag in new tech developments reaching these shores, and this coupled with the aforementioned high barriers to entry makes it harder to break into this market. But it’s not impossible. Whilst at Huffle we are initially looking to introduce new home loan products, there are some logical steps we could take to build this proposition out to become a digital bank. Without the constraints of complex legacy systems, and fresh thinking from founders with experience both within and outside of Financial Services, it’s not a stretch to see Huffle making moves to create one of Australia’s first truly digital banks… But one step at a time, first we want to shake up the home loan industry with our great new mortgages.

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Musings of a FinTech: Why “if it ain’t broke, don’t fix it” isn’t always true

In 1977 Bert Lance coined the oft-used phrase “if it ain’t broke, don’t fix it” – but you only have to look at the disruption that’s happened due to technology over the past decade to know this isn’t true anymore.

Extensively covered examples, like Uber and the taxi industry, Airbnb and hotels or even case studies from closer to home such as Xero and accountancy, have shown that left field thinking and broad access to technology have changed the game. It’s no longer good enough to rest on the laurels of existing business models, just because they bring consistent returns and customers appear to be content. Chances are there is a better way to do things which someone is working on quietly in their bedroom or a co-working space somewhere.

If it aint broke fix it

At Huffle Home Loans, this is what we are looking to bring to the home loan space. For years, banks in Australia have delivered record profits driven off the back of a mortgage industry where the products have stayed stagnant and the public’s appetite for property as the most popular investment option has kept demand high. To the banks, and most consumers, the system isn’t broken… So why fix it?

We think there is a better way, and it’s all about fixing it!

Huffle has built a new home loan model, which allows us to take on some of the risk that a customer would normally absorb (through their interest rate). This in turn, enables our partner bank to offer a lower interest rate, fixed over a long period of time. The loan also come with added features like; no penalties for paying out early, and flexibility over breaking out of the loan after a period of time (before the full term).

The biggest hurdle is getting the banks on board. As mentioned, they have a proven model that continues to drive increasing profits with the added bonus of high barriers and government protection preventing new entrants. But what about you – the customer? Are the current mortgages in the market what you really want and need? Or can they be delivered in ways that better serve you?

That’s why we need your voice and support to join together and help bring our products to life. We’ve built the model. We have the team in place. The last 2 things we need are a bank to supply the loans, and most importantly, the customers telling the banks that it may not be broke – but we can surely FIX it.

Sign up at huffle.com.au to keep informed about our launch and lend your voice to our movement.

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