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Getting smart with money

Challenger banks and big tech are driving the digitalisation of personal finance management, but is a focus on features really driving value for customers?

At Canvas Conference 2017, we were joined by digital product leaders from both Monzo and Starling, two of the brightest brands in neobanking. Hugo Cornejo, then Head of Design at Monzo, and Sarah Guha, then Product Director at Starling, shared similar visions of transforming a broken banking system by designing modern, digital products which centered on the customer experience.

Fast forward a few years and many of the new personal finance management features and functionality that positioned these brands as innovators and disruptors have become par for the course, as the banking stalwarts play catch up with the fintechs. Real-time transaction alerts, categorised spending, and budget breakdowns have turned up in many of the major banking apps, alongside tailored loan and credit card offers, with open banking protocols allowing non-banks to get a share of the action too.

It’s true that these developments represent a leap forward for the industry, but the question that remains is whether these features really provide value for the consumer?

There’s clearly a market for personal financial management products, with Fincap reporting that 47% of UK adults say they do not feel confident making decisions about financial products and services, and 63% don’t feel they can determine what happens in their lives when it comes to money.

But does breaking down how much someone spends on Deliveroo each month really help them understand their financial wellbeing, in the long run? Do ‘personalised’ offers really give people more control over their financial decisions, or do they just help providers to upsell and cross-sell additional services? How can APIs, artificial intelligence and machine learning move personal finance management from surfacing information to providing insight, from comparison websites and simple spend tracking apps to valuable, personalised and relevant financial advice?

In other words, how can digital banking move beyond smart and towards intelligent?

"26% of mobile banking users expect a brand to provide services or products which help simplify daily life."

GWI, 6 Customer-Centric Banks Using Insight to Innovate

Lessons to be learned

There’s similarities here with the rise of the internet of things and the era of smart home technology. In a rapid arms race to connect everything to the internet, it has sometimes seemed like nobody stopped to ask whether anybody actually wanted or needed their fridge to send emails.

At one end of the scale, we’ve seen genuinely useful innovation in areas such as heating, lighting and security, where connected technology is changing the way we interact with our homes. At the other end of the scale, we’ve seen a flood of pointless, bandwagon-jumping gadgets that set out to solve problems that nobody has, and which largely have no business being ‘connected’ in the first place.

The lesson for financial services? Jumping on the latest technological trends then trying to retrofit them to the needs of your customers is a sure-fire way to launch a mediocre proposition. Take the short-lived neobank competitor Bó, a digital bank developed by RBS/NatWest which was wound down in May, just six months after launch. Poor feedback, tech bugs and a lack of engagement proved that a copy-and-paste approach to tech innovation is unlikely to win over users.

"Jumping on the latest technological trends then trying to retrofit them to the needs of your customers is a sure-fire way to launch a mediocre proposition."

The providers that are going to make the biggest impact are the ones that really understand the ‘jobs’ that their customers are trying to get done and, more importantly, the barriers that are getting in their way.

To create products, platforms and services that will truly gain traction with customers, they have to solve real frictions and offer genuine value to users. This means investing time and effort to uncover their needs and to understand the human lives into which these innovations will fit. Technology must function as a tool to solve a problem, not an endgame in itself.

To achieve this, product teams need to shift their focus from features and outputs to concentrate on outcomes.

Outputs to outcomes

Before we go any further, it’s worth defining what exactly an ‘outcome’ is in this context. Simply put, achieving an outcome means achieving a measurable change for the better.

We can think about outcomes both for the user of the product and for the organisation. In the case of an organisation, a desired outcome might be a percentage improvement in average revenue per customer. For a user, it might be to reduce the number of steps in applying for a mortgage.

The biggest barrier for financial services providers in shifting to an outcome-based approach to product development is often a disconnect from the customer. Whilst the concept of customer-centricity is certainly nothing new, few organisations have truly embraced the organisational and operational changes that need to be made to truly put the customer at the heart of the business.

Customer-centricity requires far more than contact centre training or self-service chatbots. It’s more than customer surveys, NPS or user interviews. It’s a fundamental change to how products and services are developed, starting with the goals and needs of the user and aligning these to business goals, rather than starting from specific features, technologies or outputs.

To realise the potential of personal finance management services and products, it’s vital that financial service providers can adopt customer-centric operating models. And for legacy banks, especially, competing with the wave of new market entrants is not as simple as developing similar features and like-for-like offers; in a commoditised marketplace, customer experience becomes the key differentiator.

Those that fail to understand the customer base risk developing products and services that fail to meet customer needs, and consumers have shown that their sense of loyalty is considerably lower than their expectations.

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