Super apps: a potential disruptor for modern banking
Although less common in Western countries, consumers in the Asian market have quickly adapted to using a single portal to access a suite of popular services, including messaging, social media, e-commerce, ride-hailing and more.
The integration of these functions is such, states KPMG, that “it is not unusual for a user in China to set up a date with a friend via instant messaging, make dinner reservations, book movie tickets, order a taxi and pay for every transaction along the way, all using one single app.”
A threat to banks
Despite the undoubted convenience for service users, there are, in fact, distinct disadvantages presented by super apps to banks and the finance sector. Namely:
- Banks are one step further removed from their customers. KPMG posits that banks may find their activities become purely perfunctory whilst super apps claim customer loyalty through experiential incentives.
- Following on from the first point, banks will have even less data on their customers than ever before; their siloed data infrastructure becomes vaguer.
- Owing to enhanced brand reputation and influence, super apps may gain greater financial and payment leverage over traditional authorities like banks.
Although it concedes that some may view the development of super apps to be primarily a China-based issue, KPMG emphasises that the same market conditions which led to their development in Asia could easily impact the West too:
“In part, the shift towards more all-encompassing apps is being driven by competition. Companies in almost every industry that do not want to become disintermediated by a super app are thinking about how they can become the West’s answer to WeChat and .”
Preparing for the change
Viewing the global transition to super apps to be a question of ‘when’ and not ‘if’, KPMG recommends that bank executives focus on four core areas of development:
- Develop partner ecosystems: Citing the end of industries based on verticals and giving ground to a market differentiated by the consumer’s experience, KPMG states that a bank’s long-term value will be determined by relationships it builds.
- Embrace open data: Super apps thrive on the basis that they have a free flow of information between entities. To compete, banks will need to explore open data architecture and APIs (Application Programming Interfaces) too.
- Unlocking the value of data: The importance of analytics algorithms to increase the value of information cannot be overstated.
- Establish a vision: With tech infrastructure accelerating unprecedentedly fast, banks could find themselves made redundant without carving a particular niche. Establishing what part the organisation wants to play in the new era of finance should be decidedly swiftly.
CMA warns UK and Irish banks over bank transaction histories
Specifically, the CMA named prominent challenger bank Monzo, the Bank of Ireland, NatWest Group, and Virgin Money as not providing customers with records of their bank transactions within the maximum outlined timescale (40 days after closing the account).
Such information is crucial not only for ensuring a smooth transition from one bank to another, but also to provide a foundation for credit applications in the future.
According to the Retail Banking Market Investigation Order 2017, 95% of bank and building society customers should receive their bank transaction histories in at least 10 days.
Reputation: A bank’s greatest asset?
Of the 150,000 customers affected, Monzo was by far the main contributor - 143,000 (95.3%) - with the other three dividing the remaining 7,000.
The extent to which the magnitude of its mistake is attributable to being a digital-only bank is not clear, although it may give some customers pause for thought. With a superior customer experience being among the bank’s greatest assets, continued reputational damage is something that it cannot afford to sustain.
Although the CMA’s action in this instance has been to issue each bank a warning and order the immediate dispatch of all outstanding information, it has warned that future breaches will carry heavier consequences. Measures could include legally enforceable compliance audits on a yearly basis.
Helping customers get a better deal
Condemning the banks for negligence that could negatively impact customers’ desires to take out loans or mortgages, Adam Land, CMA Senior Director of Remedies Business and Financial Analysis, promised that his organisation would remain vigilant to similar behaviour moving forward.
“Banks must comply with all the rules – that includes providing a full transaction history promptly.
“We will be watching closely to make sure these leading names stick to their word and don’t let their customers down again. The Bank of Ireland, Monzo, Natwest Group, and Virgin Money should be in no doubt that the CMA stands ready to take further action if these failures are repeated.
Image source: gov.uk