Today, the humble automated teller machine, otherwise referred to as an ATM celebrated its half-century birthday. Clearly, the banking industry has been around for a long time and in the past few years has seen nearly exponential technological progress, both with internal operations and for banking customers.
Despite this forward momentum, the banking industry hasn’t made in-roads as substantial as others adopting technology. Relative stagnation derived from dependencies on established models of operation are common in finance and the large size of major banks means red-tape is necessary before new variables are introduced into their complex ecosystems. As a result, their internal workings rarely reflect agile workflows with heavily risk-averse behaviour in regards to technology. As a compromise, tech leaders within banking prefer to exist within legacy systems which are stable but archaic and as such lack a decent experience for end users.
In the background, small startups are looking to disrupt the scene in any way they can. New entrants into the field are paving the way for new experiences that are more user-centred. One example is Monzo, formerly Mondo, famous for raising £1m in 96 seconds. They thrive on giving users immediate, data-heavy analysis of their spending, as well as delivering functionalities that have long been lacking in existing banking apps, for example splitting payments amongst friends. Disruptive is certainly one way to describe the actions of similar incumbents.
Within the next year we’ll see the implementation of the EU’s Payment Services Directive 2 (PSD2) - an open API for third-party app developers to access data provided by banks participating in the scheme. For customers this is an exciting time as it’ll mean more banking apps can flourish under success-hungry startups looking to differentiate themselves from the established giants who have traditionally dominated the industry. Another side effect of PSD2 will be the opportunity to shake up the banking business model. With an opportunity for the division of labour, app developers can focus on their expertise of creating a solid app experience with the prospect of fewer issues and happier users; in parallel, the banks will be able to focus on providing financial expertise to their customers with reduced overhead on technology and more focus on customer service.
An expected consequences of this arrangement is a shift to a marketplace business model with apps catering to specific jobs. The potential for many apps with different functions for different banks and a cross-section of customers could certainly exist and thrive; above all creating a Darwinian competitive arena where the best banking user experiences survive - not a bad deal for end users, even if the initial contact will be fraught with choice and experimentation. Of course, it won’t be easy for the startups - an immediate challenge in this space is seeking the necessity of trust. After all, banking is an inherently personal activity and the big names in banking have built their names, some over a hundred years, to encourage customers to impart with their hard earned cash.
Thus, if these institutions are replaced with barely-known third-parties, we may see a very cautious adoption curve by users. At the same time, we can’t underestimate the modern appetite for immediacy and the instant culture of broadband and mobile data. Nevertheless, there is hope for this cumbersome industry; if banking execs can see the opportunity to exchange expertise with new players, we might exist in times with better features for users, generating profits, and driving the future of UX in banking.
