Will deposit accounts be the next wave of fintech innovation?

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There’s one sector of finance that really doesn’t get a lot of airtime when it comes to fintech – deposits. Checking accounts, savings accounts, transaction accounts – while they’re the bread and butter of banking, they’ve been relatively untouched since they were first invented. You put money in, and, if you’re lucky, earn a little interest before you take the money out.

In today’s world, the humble bank account hardly feels revolutionary, yet the brilliance of it is we all need one. Is there an opportunity here for a fintech startup to slice away this part of a bank’s core business, by adding a little flavour to the whole deposit experience?

Saying yes to this question is easy. But working out ‘where to next’ means nutting out the exact problems banks and account holders face when using and setting up deposit accounts. Also, we shouldn’t avoid asking ourselves the hard questions. One being, if it ain’t broke, do we really need to fix it?

Serial fintech investor and entrepreneur Peter Thiel certainly thinks there are opportunity in deposits. In January of this year he invested €1M into a German fintech startup Deposit Solutions.

Deposit Solutions is the first open architecture platform for retail deposits in Europe. Among many things, it solves one of the central problems for account holders related to accessing great deposit products – it eliminates the need to switch banks. Instead, a saver requires just one master account with Deposit Solutions and can then pick and choose their deposit product of choice from the Deposit Solutions marketplace.

Banks also benefit by leveraging the Deposit Solutions back-end, enabling them to collect cross-border deposits and market to and acquire new customers.

Are there other opportunities in deposit innovation? Yes, but they’re possibly less obvious, and more on the innovation curve than traditional pain point entrepreneurialism. Taking an agile methodology approach, we could use the following user stories to help us identify what opportunities might exist when it comes to devising the new breed of smart deposit accounts.

For those of you not familiar with agile user stories, they typically work this way, as described eloquently by Mountain Goat Software:

As a <type of user>, I want <some goal> so that <some reason>.

For example.

  • As an account holder I want to access the best deposit interest rates without switching banks.
  • As a business owner, I want to organise and pay my bills automatically so I can spend more time on growing my business.
  • As recent graduate I want my bank account to teach me good savings habits so I can buy my first home in 5 years.
  • As a bank, I want to increase my cross-border deposit funding without having to maintain expensive deposit architecture and thousands of bank accounts.

There are a number of other fintech startups playing in this space, either building the deposits piece from scratch or interfacing into an existing authorised deposit taking institution. Digit, SmartyPig and Qapital are a notable few. With lending having taken most of the glory to date, opportunities here are getting thin on the ground. Maybe the humble bank account is the next big fintech play.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.  

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