Apple, neobanks and open banking: The future

This is an exciting time for fintech due to the rise of neobanks, rising client demands, and open banking. Peter-Jan Van de Venn, vice president of digital banking at Mobiquity, said. According to Van de Venn, Mobiquity mostly works with retail and SME banks, which makes sense. Because you need scale to automate, retail was where digitization first appeared. The next step is SME banking after that. According to Van de Venn, demand for wealth management is rising. Corporate banking lags behind retail, although it is making more ground.

Your example shouldn’t be another bank

Smart banks don’t base their digital strategy decisions on their competitors since that isn’t where the market is going, according to Van de Venn. They are focusing on Apple and Uber, which are far in advance.

According to Van de Venn, this is due to “experience relativity,” in which people’s best experiences across all industries become the standard for everyone else. Why can’t your bank provide a more user-friendly experience if your Uber app can warn you to be careful while opening your door since you’re in a bike lane?

Van de Venn stated, “Banks have to understand that they compete with other banks on more than just a product basis. They compete with these kinds of businesses on the basis of experience. Consumers anticipate the same digital experience from banks that they have come to know and love. Everybody’s life is so heavily influenced by digital.

In areas where neobanks have failed

Neobanks put banks in danger. Neobanks are less expensive because they aren’t constrained by outdated technology (and the same amount of regulation). This much is accurate.

But over the past ten years, something odd has happened. The idea of replacing the banks was discussed in 2015. That hasn’t occurred; in fact, the opposite has occurred.

Van de Venn remarked that “everyone said banks would be extinct in ten years.” “As we can see, banks are becoming more numerous. Many clients continue to use their bank.

At a recent conference, a speaker asked the audience if they had cancelled any bank accounts. Van de Venn was there. Few people did. How many people started Neobank accounts? Many raised their hands.

People frequently open one or more neobank accounts, but many do so for particular reasons. its long-standing bank continues to serve its primary business. When he doesn’t trust a retailer’s payment mechanism, Van de Venn utilizes virtual cards from Revolut. He finds it convenient, but the neobank does not.

Van de Venn believes that this casts a foreboding shadow over the neobanking sector. However, just 5% of the businesses using their model are profitable. Investors are beginning to wonder what will happen next.

How Apple excels at it and how neobanks may (perhaps) keep up

He advised looking to Apple, which is entering the finance industry but doing so differently than neobanks. Liability management, distributed access to customer services, and a bank’s technology stack are its three main pillars. Apple supplies the distribution, while Goldman Sachs handles the rest (for the time being).

Van de Venn said, “By combining the strengths of two firms, this is more promising. “Apple has a strong distribution network and a strong consumer base. Nowadays, it is simple to give a buy now, pay later option.

“Restaurants don’t need to do anything in order to accept Apple Pay. Automatic means. Therefore, Goldman Sachs is using its extraordinary distribution power here, which is the ideal combo.

Neobanks have a distinct edge over incumbents in that they can innovate more quickly. These people use legacy technology, and some of them also think in terms of legacy. Only when there is a strong economic justification should they imitate Revolut, and they should steer clear of alluring features that don’t generate income.

“There should be a business case, and you optimize between desirability, feasibility, and viability,” Van de Venn said. “In this way, a longer-term road map is created.

“I think some of those neobanks have been focusing on the desirability part too much, which is a greeting for consumers but for the bank itself and the business case, not for the longer term.”

Neobanks have to depart from their original model, he continued. Reduced subscription costs have increased. Withdrawing cash now has a cost. More lucrative lending and investment opportunities have joined those early, low-yield transaction-based products. Market shares of established players have hardly changed during this time.

Advancing open banking

Van de Venn is based in Europe and has firsthand knowledge with open banking. Good use cases include making payments on behalf of customers to third parties, having permissioned access to bank accounts so banks can share data with third parties, and combining data from many banks into a comprehensive picture of a customer’s financial situation.

Credit checks, according to Van de Venn, are an excellent application for granting access to outside parties. Transactional data access offers a deeper understanding of consumer behavior than credit checks.

Investing is another. The surplus invested tops up transaction quantities through Rabobank’s Peaks.

But open banking and data sharing continue to be viewed with a reasonable degree of skepticism. The main reason, according to Van de Venn, is that the option is all-or-nothing.

He said, “I would love to do that, but there is no granular access to data now. “That option is not yet available. Thus, that needs to develop.

Has open banking encouraged more rivalry? Van de Venn is hesitant. More value-added services have been provided, and more could be.

What will persuade more individuals to accept open banking? Does it involve additional education? There will be more, according to Van de Venn, but the main mover is simpler. Show them the benefits while recognizing the challenges, such as logging onto their accounts and reaffirming consent every three months.

Maybe in exchange for access to those accounts, a mortgage provider offers a lower rate. The borrower saves money, while the lender makes wiser decisions.

“Or if I use that payment initiation, for instance, to make a payment and I don’t have to pay transaction costs to buy something, then it would also benefit me,” Van de Venn said. But that’s not the situation right now.