Online Only Banks - Innovators from the Future of Finance
What is a bank in our view? Several offices with ATMs, serving varying degrees of smile in uniform, currency exchange board. Hollywood movies about financial scams suggest that there must be a vault for valuables with a huge safe door somewhere. Innovation in the form of an electronic queue has not yet reached all Russian banks.
In recent years, online account access funds and corresponding mobile applications are rapidly developing and overgrown with functionality. It is convenient for both the bank and the client. And how viable are banks that have no physical presence at all?
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First Direct was one of the first banks to implement the concept of service in 1989 through a 24-hour call center, in the absence of a branch network. Over the past 26 years there have been several striking examples - SFNB, First-e, Egg Bank, OCBC, all with varying degrees of success.
In early January, Chinese Tencent , one of the world's largest IT companies, launched its online-only private bank, WeBank. In China, most banks are state owned. Tencent shares rose 13% during the week. Analysts call this a new era of expansion into emerging markets. The Chinese Prime Minister described the situation as follows: "A small step for WeBank, one giant step for financial reform."
Let's try to analyze what changes may lead to such innovations.
1. Serious market transformation
Reducing the cost of rent and staff will increase investment in business development. Traditional banks will be more difficult to compete. This is true only in case of sufficient demand for such services, of course. And the demand seems to be. A recent study of young (from 18 to 39 years) American millionaires revealed that 37% of them are ready to solve financial issues on Facebook, and 28% on Twitter. For example, for the generation of "boomers" (1946-1964) this is completely irrelevant. On the other hand, the willingness to use modern communication channels and the willingness to give several million to a virtual bank are two big differences. Therefore, to attract and retain customers will require considerable effort. A partnership with a traditional bank with a reputable brand can be one of the ways out.
2. Cosmopolitan banks
“Online only” banks are more flexible. They will be able to quickly change the "place of residence" without stopping the business. This will allow you to choose a country with softer regulation in the financial sector. In addition, customers can potentially get a wider range of services. An example from another industry - gambling business. Online casino operators are registered in countries where such activities are allowed, but serve customers from all over the world. On the other hand, when large sums are at stake, a safe haven in the Caribbean is not the most secure haven.
3. New business opportunities
The development of “online only” banks will lead to the creation of new or rapid development of existing market niches at the junction of online and offline. For example, in the absence of its own ATM network, an independent operator will be in demand, servicing several such banks simultaneously.
4. Natural innovators
Being originally from the world of “digital”, these financial institutions are more open to innovation, and additional functionality will not be long in coming. In other words, if the bank decided to work only online, its management does not need to prove that the world market is slightly wider than " approximately for five computers ."
5. Technological risks and threats
Major computer hacks in recent years cast doubt on the industry’s readiness for such changes. In 2014, at least five American banks, including JPMorgan Chase, were already targeting hacker attacks. Even modern banking giants become victims of cybercriminals. So, innovators who plan to conduct business “only online” should pay special attention to countering hackers and fraudsters. The demand for computer security specialists and specialized software developers will only grow.
Image - Flickr / 401 (K) 2012
In recent years, online account access funds and corresponding mobile applications are rapidly developing and overgrown with functionality. It is convenient for both the bank and the client. And how viable are banks that have no physical presence at all?
')
First Direct was one of the first banks to implement the concept of service in 1989 through a 24-hour call center, in the absence of a branch network. Over the past 26 years there have been several striking examples - SFNB, First-e, Egg Bank, OCBC, all with varying degrees of success.
In early January, Chinese Tencent , one of the world's largest IT companies, launched its online-only private bank, WeBank. In China, most banks are state owned. Tencent shares rose 13% during the week. Analysts call this a new era of expansion into emerging markets. The Chinese Prime Minister described the situation as follows: "A small step for WeBank, one giant step for financial reform."
Let's try to analyze what changes may lead to such innovations.
1. Serious market transformation
Reducing the cost of rent and staff will increase investment in business development. Traditional banks will be more difficult to compete. This is true only in case of sufficient demand for such services, of course. And the demand seems to be. A recent study of young (from 18 to 39 years) American millionaires revealed that 37% of them are ready to solve financial issues on Facebook, and 28% on Twitter. For example, for the generation of "boomers" (1946-1964) this is completely irrelevant. On the other hand, the willingness to use modern communication channels and the willingness to give several million to a virtual bank are two big differences. Therefore, to attract and retain customers will require considerable effort. A partnership with a traditional bank with a reputable brand can be one of the ways out.
2. Cosmopolitan banks
“Online only” banks are more flexible. They will be able to quickly change the "place of residence" without stopping the business. This will allow you to choose a country with softer regulation in the financial sector. In addition, customers can potentially get a wider range of services. An example from another industry - gambling business. Online casino operators are registered in countries where such activities are allowed, but serve customers from all over the world. On the other hand, when large sums are at stake, a safe haven in the Caribbean is not the most secure haven.
3. New business opportunities
The development of “online only” banks will lead to the creation of new or rapid development of existing market niches at the junction of online and offline. For example, in the absence of its own ATM network, an independent operator will be in demand, servicing several such banks simultaneously.
4. Natural innovators
Being originally from the world of “digital”, these financial institutions are more open to innovation, and additional functionality will not be long in coming. In other words, if the bank decided to work only online, its management does not need to prove that the world market is slightly wider than " approximately for five computers ."
5. Technological risks and threats
Major computer hacks in recent years cast doubt on the industry’s readiness for such changes. In 2014, at least five American banks, including JPMorgan Chase, were already targeting hacker attacks. Even modern banking giants become victims of cybercriminals. So, innovators who plan to conduct business “only online” should pay special attention to countering hackers and fraudsters. The demand for computer security specialists and specialized software developers will only grow.
Image - Flickr / 401 (K) 2012
Source: https://habr.com/ru/post/376053/
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