What do Airbnb, Uber, and the neobank ‘N26’ have in common?
You’d be correct if you answered “they’re all digital platforms”, yet they are actually more than that.
Airbnb revolutionized the hospitality and tourism sector by creating a platform where travelers choose accommodation that homeowners rent out for very competitive prices. Until not long ago, Airbnb has started offering tourism experiences and excursions done by locals of the country you’re visiting. (1) On the other hand, Uber offers peer-to-peer (P2P) ridesharing services, where both drivers and riders are put in contact via their app. (2)
However, the most important aspect about both companies is that all their financial transactions are done through their platforms, via their respective mobile applications. There is no physical cash exchange between the two parties using their services, which leads me to our next point: neobanks, like ‘N26’ that is based in Berlin, Germany. Launched in 2013, N26 accounts for over 500 employees, 1.5 million customers, and 215 million US dollars invested (11).
What are neobanks?
First and foremost, neobanks are not to be confused with other mobile applications who are merely an interface between traditional banks and their clients, that make financing and account managing user-friendly. The Seattle Times business journalist Robert Barba warns “it is important to know that neobanks are usually not banks: They do not have charters from the Office of the Comptroller of the Currency or state regulators, and they do not have coverage from Federal Deposit Insurance Corp. (FDIC)’’ (10).
Their definition, as explained in (BBVA) Bilbao Bank’s research paper (3), is that they are a digital substitute for traditional banking institutions. Therefore, what we call a ‘banking experience’ will only be experienced through mobile applications or other digital platforms. Robert Barba further explains “they work with specialty banks that are chartered to gain FDIC coverage for deposits created at neobanks, and provide prepaid cards in place of conventional debit cards.” (10)
For example, the way you would add money into your N26 account differs whether you live in Germany or not. If it’s the case, the app has a “+” button that enables you to enter to sum you’d like to add to your account. The app will then generate a barcode relative to that specific amount that you will scan and pay for in cash at the nearest branch (8). If you live anywhere else and have an N26 account, you may transfer the required amount of money by entering the IBAN number of an account you have in a traditional bank.
Until recently, neobanks’ biggest challenge was obtaining a banking license, however, with some governments -like the UK for example, having simplified the process, their numbers are now on the rise.
In fact, according to a study of variant market research (5), the compound annual growth rate is expected to significantly increase between the years 2017 and 2025.
The reason behind this trend is what most neobanks currently offer in comparison to regular banking institutions.
What do neobanks offer?
In an article written by Sia Consulting (6), those virtual banking institutions propose an array of benefits like being able to open a bank account in a 3 to 10 minutes using only your passport or ID, a free debit card that is completely manageable through their application, instant payment transfers, and use of their international debit cards abroad at no extra fees.
In addition to that, they also offer instant balance orders and expenses analytics, multi-currency accounts, and a virtual vault so that their clients are able to freeze a sum of money for future use.
Even though all the above seems tempting, there is still a lot to consider before diving into the digital banking realm.
“Neobanks might seem to spell disaster for traditional banks: an irrevocable move toward speed and simplicity. I don’t see it that way. This shift signals progress for consumers and a tremendous opportunity for banks — if they’re willing to modernize.” – Trevor Dryer
Trevor Dryer, a financial counselor for Forbes magazine, writes that the majority – specifically 90% of millennials, “have an active financial services relationship with traditional banks and only 4% use neobanks” (7). Both customers and businesses still rely on them for loans as they offer better interest rates, good payment installments alongside trustworthy financial expertise.
Nonetheless, digital banks still have the upper hand in eliminating lengthy paperwork, especially concerning loaning applications, thanks to an algorithm that will determine each client’s financial case. This, in return, will save time for both the bank – in the lending process, and the client waiting for an answer on the other end.
In conclusion, neobanks still have a long way to go in order to truly gain a foothold in the banking sector. Its attractive app design, user-friendly and time-efficient interface could prove to be its biggest forte. But in my opinion, one of the improvements that neobanks should opt for is a better understanding of consumer needs whilst simultaneously finding relevant solutions for them within the neobank framework.
On the other hand, traditional banks are now facing a challenge and would have to digitize their services in order to remain in a position of power.
It would be interesting to monitor this rising trend and watch out for the traditional banking institutions’ strategy to cope with the continuously ongoing digitization of everyday life.
Written by: Serena Shaar
Logo credit: https://n26.com/en-fr/logo-assets
Venezuela has been in the headlines for many moons because of the social, political and economic crisis that is going through. There are continuous protests, shortages, and hyperinflation. For this last reason, the demand for bitcoin (BTC) and other cryptocurrencies has boomed in this country. Venezuelans see them as a solution to inflation.
Since 2003 Venezuela has implemented a tight currency control policy that means that any person or company that wanted to exchange their bolivar’s (Venezuela’s official currency) to a foreign currency must turn to the government for permission and the exchange rate. Otherwise, they will have to go to the black market where the rate is much higher.
Maybe you are picturing a hard way to find dollars but is not as bad as it sounds: it is as simple as checking the price of the black market dollar on a website and posting a message in your Facebook wall saying that you are buying or selling dollars. Eventually, somebody will come and agree to do the transaction.
However, inflation has skyrocketed. Hugo Chavez (previous president) in 2007 took three zeros out of the currency, and the current economic policies of the government have led the currency to devalue by 90%, eliminate five zeros and rename the currency to “Bolivar Soberano”.
Capgemini signed the largest Fintech Report by releasing its second World Fintech Report in collaboration with LinkedIn and EFMA. In this article, I want to make a deep dive into the first part of this report called: “Fintechs are redefining the Financial Services Customer Journey”
This first chapter is divided into three parts:
– First-one is enhancing the push for Customer-Centricity due to fierce competition and always rising customer expectations.
– Second-one is focused on the contribution of the emerging technologies (e.g. IA, IoT, RPA, Blockchain …) considered as enablers of the customer journey transformation.
– Third-one details the key success factors: trust, delivery, agility, efficiency.
Customer Journey is definitely at the heart of Financial Services and Fintechs have well understood it.
Being customer-centric is not anymore a basic marketing concept but now must-have for any Financial Institutions. Customers are indeed calling for always more convenient and personalized experiences. Fintechs but also BigTechs (e.g. GAFAs) are raising the bar of the customer journey by implementing new golden-standards regarding user interfaces. They are able to provide a seamless experience to their customers by engaging them on numerous touchpoints.
Fintechs are capturing considerable market shares in almost every segment of the Financial Services. They have succeeded in bringing new business models, faster and more efficient services, transparency and often free services, personalization, predictive modeling and innovative distribution. Traditional Financial Institutions are suffering from huge pressure on margins and fees due to the operational efficiencies created by the Fintechs.
China is now the No.2 economic country in the world, as you may already know.
However, what do you imagine first when you hear of “China”?
Delicious Chinese food? A lot of people riding on bikes?
Messy, loud and busy cities as a scene of a movie?
If you haven’t taken a look at China, the digital reality of China may be surprising to you!
Would you imagine that this mysterious country has become one of the most evolved countries regarding digital? I guess that you wouldn’t, so I will show you current China with surprising examples!
- What’s happening in China?
Nowadays, innovative services have been born in China, and it’s really changing the population’s life styles!
How do you usually pay when you are enjoying shopping?
I pay with credit card, bank card, and of course cash, and I believe you are doing it as well. However, in China, people are going for a cashless-society now!
They can pay for anything with smartphones, in restaurants, stores, markets, cinemas, taxis…anywhere! I can say we don’t have to go to China without any cash.
But how do they do that? The answer is simple, they are just using “QR-code” and “Smartphone apps”
In most stores, there are QR-codes for payment instead of cash registers,
and all we have to do is just below process!
1. Launch an app
2. Scan the QR-code
3. Enter the password and price
4. Send the money!
Example of QR code usage at a restaurant
Now, can you guess how much FinTech is booming in the society?
There is a surprising result of surveys!
1. The size of the mobile payment market in China has reached $8.6 trillion (RMB58.8 trillion) in 2016
Source: China Mobile Payment Report 2017, WALKTHECHAT
2. 84% of Chinese people say that they don’t feel uncomfortable even if they don’t carry any cashes
Source: 2017 MOBILE PAYMENT USAGE IN CHINA REPORT, Ipsos
3. On average, 82% of Chinese people in all of regions in China accept this cashless lifestyle
Source: 2017 MOBILE PAYMENT USAGE IN CHINA REPORT, Ipsos
Also, there is a story which might astonish you.
According to a Chinese friend of mine, even beggars in the streets show their QR-codes to pedestrians to get money!
Now you see that Chinese people really love FinTech!
And I will tell you why they have been succeeding at FinTech later!
At the beginning of this article, probably some of you thought of “Bikes” about China, and now this traditional transportation is booming in a new way thanks to technologies! This is “Bike-Sharing”, but it’s not like “Velib” in France or other services, so take a closer look!
In China, we don’t have to look for bike stations and go through sign ups!
We can ride on bikes and put them back anywhere, anytime!
I will now explain how it works!
1. Launch an app and find a bike
(Left: Mobike, Right: ofo)
2. Scan the QR-code of a bike, and you can unlock it
(Left: Mobike, Right: ofo)
3. Let’s ride and you will see the cost after the putting it back!
Mainly, 2 Chinese companies, ofo and mobike, are battling for the shares of Chinese market, and both are amazingly increasing users! (May 2017, ofo:37.70 million, mobike: 34.54 million) And now they are already aiming at entering foreign markets too!
source: QuestMobile, 2017
- Why are they succeeding at new digital services?
I believe that you’ve understood how surprisingly China is changing, and now I want you to see why it’s happening in China!
(1) They love digital
At first, landline phone wasn’t popular in the past in China, and now there are a lot of useful and cheap services for smartphones, (Also smartphone isn’t expensive anymore). That’s why Chinese people directly go for smartphone and smartphone has been spreading in an extraordinary way in China!
Source: TechCrunch, 2017
Also, according to a survey of Deloitte, Chinese internet users spend twice time on the internet and social medias as much as American. Moreover, 93% of users are not only receiving also spreading information and contents!
Source: Deloitte, 2016
(2) The Government and IT-Enterprises leading innovations
3 biggest IT-Enterprises in China, Baidu, Alibaba, Tencent, which are called “BAT”, and their social medias and services are used by most Chinese people
While they are doing business surprisingly well (Their revenue in 2016: $42 billion altogether!), the Chinese government is backing them up with “Great Firewall”.
Because of Great Firewall, generally it’s not possible to access websites prohibited by the government in China. And they are blocking Twitter, Facebook, YouTube…actually a lot of websites and social medias. It means “BAT” and other Chinese companies can protect their users from foreign competitors, so their services have become standard and infrastructure in China!
Also, the major applications are integrated with other services, so users can do a lot of things with one application. (Below examples, it’s an account of my Chinese friend!)
(1) WeChat (Social media produced by Tencent)
As you see, there a lot of functions! For example, you can look for shared bikes, making a reservation of tickets, hotels, etc, and even transfer money to other users! (For just showing the functions, my friend gave me about 1 cent, how generous!)
(2) Alipay (E-payment application produced by Alibaba)
You see a lot of functions on Alipay as well!
Thanks to these applications, one of my Chinese friends living in Paris told me that she didn’t have to use cash at all when she went back to China and now she can enjoy shopping at some stores in Paris with her smartphone as well as in China!
I believe you’ve now seen how fast China is changing and how far they are going.
In fact, they aren’t taking the advantage of “super new technologies”, but they profitably combine technologies to generate new services! Moreover, their services are steadily spreading all over the world, so let’s keep watching on how this country will surprise us next!
The 4th Revolution
The fourth revolution of technology will break into many industries. For example AgroTech (technology for agronomy business), InsurTech (technology for insurance industry), RegTech (technology for regulation bodies), and last but not least FinTech (technology for financial institutions). All these new technologies are driven by analyzing huge data streams and aggregating data into new products.
FinTechs have not in every country the same focus. In saturated countries like USA or Europe new technologies in the financial and banking industry are most used to add an additional marketing channel for the same target group of prospective or active clients. Research(1) have shown that through FinTech mostly the same client groups are served as with brick and mortar branches. Only client experiences will be improved. FinTechs as banks and other financial institutions focuses on the same 20% of super prime customers, the underbanked people or so-called subprime market was yet not in the focus of most traditional banks and FinTechs in mature markets.(2) In emerging markets like Nigeria or south-east Asia the focus of Fintechs is slightly different. Inclusive banking is the most used term to integrate people into the financial market.
The idea behind crypto-currencies are different from the FinTechs motives. While FinTech companies at the end have an intrinsic motivation, sooner or later, to earn money, was and is the motivation of the first crypto-currencies different. The main aspect of these internet currencies was to democracies the way of payment as well as the storage of a value. As Antonopoulos says: “…represents a fundamental transformation of money… …by changing the fundamental architecture into one where every participant is equal… …where your money is yours… …you control it absolutely… …and no one can censor… …no one can freeze it.”(3)
Atonopoulos made this statement regarding the aim of Bitcoin (currently most used crypto-currency in the world). It has a clear statement regarding privacy, identity and surveillance of money. Out of the statement it is also clear why governments and in their name central banks crypto-currencies do not like. Their favorite respond to this new kind of money is it that can be used for criminal actions and there it must be banned or brought under control. Furthermore, in Antonopoulos mind should crypto-currencies be a liberator of the banking system.(4) Today’s banks are the limiter to free people if they want their freedom of their money. This is a radical point of view but with the underlying infrastructure of blockchain no central bank, retail bank or government can avoid or control a payment between two parties anymore. But out of the architecture, a payment is secure and cannot be stopped but the transaction is not hidden. With a simple effort a payment between two parties can be recognized and therefore each transaction is transparent to the world. Crypto-currencies like all other national currencies are reluctant to trust. If a currency or a nation lost the trust in their behavior and later on in their currency, the currency is under pressure but if everyone supports and beliefs in a currency everybody will accept such a payment. Currently there are more than 1’000 crypto-currencies on the market. Have a look on it and decide which one will survive!
1 Legrange, Brendan, Global consumer credit trends, presentation held at Lang Di Fintech conference in Shanghai, 16.7.2017.
2 Legrange, Brendan, Global consumer credit trends, presentation held at Lang Di Fintech conference in Shanghai, 16.7.2017.
3 Antonopoulous, Andreas M., The Internet of Money, (Merkle Bloom LLC, 2016), p.19.
4 Antonopoulous, Andreas M., The Internet of Money, (Merkle Bloom LLC, 2016), p.21.