Intel Report Digital Banking - Flipbook - Page 7
connect with, High says. Brand experts now are asking themselves: “How do we make
a consistently emotionally engaging experience?’’ she says.
Digital banks and platforms are challenging traditional banking in other ways, too.
Digital banks often target groups they view as being neglected by the mainstream
banking industry, such as consumers with low deposit balances or small businesses.
In Professor Clayton Christensen’s famous book, “The Innovator’s Dilemma: The
Revolutionary Book That Will Change the Way You Do Business,” he writes that startups target a piece of the market that’s been neglected by larger, incumbent companies.
Ironically, unprofitable customers make up the bulk of the startups’ target market, the
customers the incumbents don’t care about. The startups offer services that are better
and cheaper, attracting customers and growing until they really do take market share
from the incumbents, who sometimes don’t know what hit them.
In that same way, digital platforms often pick customers that incumbent banks ignore
because they’re not seen as profitable. The last 10 years of financial technology have
exemplified this model, over and over again. “It’s rare for such a strategic framework
to play out so many times and for me to live it each time,’’ says Arvind Purushotham,
“They’re not
attracting customers
because they’re
digital. They’re
attracting customers
because they provide
product capabilities
that everybody else
overlooked.”
managing director and global head of venture investing at Citi Ventures, a subsidiary of Citigroup that invests in startups. Citi Ventures currently has investments in
Ron Shevlin, director of
small-business focused fintechs BlueVine and Square, among others.
research at Cornerstone Advisors
Digital banks solve a pain point in the market, an overlooked need.
Banks tend to take small businesses and consumers for granted, says Bradley Leimer,
a former director of innovation for Santander Bank in the U.S. who consults financial
technology companies and funders as part of Unconventional Ventures. Helping lowand middle-income America save and invest isn’t a focus for most banks. Neither do
most banks help small businesses grow. “Business creation is really the way of wealth
in many cases; you’re not seeing banks really help people build out their own small
businesses,’’ he says.
That’s where some of the digital banks come in. The ones for small businesses cater
their products and services for that niche, like easy, digital invoicing and payments
management. Digital banks targeting low-income consumers cater their products to
their needs, like fee-free overdrafts and paychecks that arrive two days early.
Instead of focusing on the mass market, digital banks and platforms offer unique products for unique segments. “What customers want is a better product, not simply a
digital bank,” Shevlin says. “They’re not attracting customers because they’re digital.
They’re attracting customers because they provide product capabilities that everybody
else overlooked.”
The new banks offer clues to where the industry is headed in an age with fewer physical locations but more focus on niche branding. Paying attention to their offerings is
important to understanding the competitive landscape in the digital age.
Source: Lili