If you’re in charge of a mobile bank, you’d think your top competition would be — well, other mobile banks, but evidently that isn’t the case, at last for one neobank.
“Our competitors are the incumbents, the Bank of Americas and Chases of the world, which have banking products that haven’t been innovated in twenty years,” said Ash Shilkin, CEO and founder of the mobile banking service ChimpChange, which he named to sound “nothing like a bank.”
Considering Chase and Capital One are nearly always in the top five for personal finance apps, the banks certainly aren’t going down without a fight, so what can mobile banking app providers do to stand out not just from others in its field but from the incumbent banks–which, according to Shilkin, are the real enemy?
“We built a product behaviorally; we tried to focus on what people are actually doing as opposed to what banks are trying to push them to do,” says David Schwartz, managing director of USA at Moven, which markets itself as a neo-bank—in this case a mobile-first alternative to pushy and staid traditional banks which started off as brick-and-mortars.
According to Shilkin, ChimpChange is also often described as a neobank; it is an entirely mobile solution designed to appeal to those getting shortchanged by traditional providers. That’s why Shilkin has his sights on them rather than GoBank or Moven — after all, that’s where the customers are.
It is worth noting here that ChimpChange is partnered with Central Bank of Kansas, which houses a user’s money, and Moven is partnered with TD Bank–so it appears that one can’t quite challenge the incumbents yet without a little bit of help from the traditional end.
It also raises questions regarding what a “neobank” or mobile bank actually is–since, traditionally speaking, a “bank” is the actual institute that holds a customer’s money, not the technology they use to do so.
To that end one could approach the problem from the other side of the cooperation vs. competition debate; by not just partnering with a traditional bank but by making this partnership a cornerstone of your app’s service–as long as the partnering bank isn’t an industry titian, one supposes.
“We help customers live within their financial means by helping banks deliver value through analysis of data,” says Cesar Richardson, VP of sales at Strands, which markets itself as a fintech providing services and integration to the mobile apps or services of banks (interesting side note: this company is actually older than Mint but started off in the music industry; its algorithms were bought by Apple in 2011). “That’s the way fintech development is going; applying it to products that are relevant to your lifestyle.”
When it comes to customer appeal, Shilkin, Schwartz, and Richardson all cited contextualization and transparency as two elements an app has to have in order to compete in this space.
Now, transparency in finance is vastly appreciated as a consumer, as I’m sure you’ll agree, and that can really only be created when personal data is put in context—like an app letting you know just how much you spend on coffee on any given day, for instance (surprise, it’s too much).
But—and there is a but—that’s become the bare minimum that apps need to do nowadays, because when 92 million people (the millennial population in the U.S. alone, which is who neobanks tend to market to, though ChimpChange is seeing high usage from unbanked or underbanked millennials) want speed and simplicity out of a personal finance app, then it’s a given that your app should have both of those things.
Which in turn brings up the billion-dollar question of all business—how do you make sure consumers go to your product instead of to your competition? And are you sure incumbents should really be your main competition? The key in finance might be approaching money from a different perspective: looking at it as creating a social experience rather than as growing a business.
“When we talk about traditional banking it’s transactional in nature, not advisory,” says Mark Zmarzly, founder and CEO of Hip Pocket and the soon to be launched Hip Money, which analyzes a user’s spending habits and offers recommendations for savings. “So it’s not just about digitizing financial literacy but about how do we create a better engagement? Millennials want to do the minimal simple interaction.”
Millennials already treat finance as a social exercise. This is why we’re seeing movement away from original offerings like Mint (a product that hasn’t really evolved much from its first form) toward things like Venmo; an app that relies on a user’s social group also having it in order to provide value. That appears to be the main advantage these apps and neobanks provide over the incumbent banks.
But for now, and perhaps forever, they still need the banks. It just may turn out that the banks — and their customers — also need neobanks.
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