If we take a step back and look at what has been happening over the past 2-3 years we have reasons to rejoice. We were but claiming -if vehemently- that banking as we know it will vanish like the records industry at Bar Camp Banks organised by the Dave Birchs of the world and visited by the Chris Skinners and Brett Kings on their way to real meetings with real banks where they must have tried to sweeten the pill but warn of the same thing. We looked tin foiled and in need of medication to claim that, at a time when the only lipsticks being bought were a pale shade of pink and allowed customers of a bank the luxury of a (grossly estimated) expenses pie-chart at most. Look at us now with our fancy game changing Alternative Lending, Alternative Payments and Transfers and Alternative Currencies and yes, Alternative Banking Experiences.
To me ABE (we’ll never look anything like serious bankers and expensive consultants if we don’t acronym wherever possible) includes everything that was not a bank 10 years ago and yet reaches consumers. The awesome but few and far between Real Banks that Could (TM) such as mBank; the Neobanks such as Simple and Moven, the NearBanks such as the insurers and comparison sites entering the “will show you where your money is and help you move it with so much more ease you’ll think I am a bank” game and the Challenger Banks such as the 20-something about the hit the UK with a storm of mind-blowing, life altering new banking experiences.
In the past year we’ve talked about nothing but the FinTech gold rush. How much was spent, how much more there is laying around in itchy pockets, how many Incubators can we build to hatch the next best thing and so on. We all instinctively feel it is a bubble but not a classical one, one of distributed eggs in far too many uncommitted baskets. No one believes in anything with all their might and that’s clear in the numbers. While ABE-ers would be expected to score small like this heralded European Challenger – Monese, (with a record breaking score in this category being that of the Simple cash-out at 117M $) even some of the rails gather petty pennies with the new-kid-on-the-block Ripple bringing home a meager 28 M $ on the last round. Of course the counter examples are the famous (if disputable in sustainability) Lending Club and Square successes and the recent two 1-BN-ers TransferWise and Funding Circle but even their success is minimal when put in perspective.
I certainly don’t proclaim to understand investment cycles, valuation games or the markets but common sense and basic Maths make the contrast between these scores (and others I’ve left out as they are embarrassing to us all) in our industry and those of Whatsapps, and Slacks elsewhere in digital technology (I’m not even going to refer to the real disruptors’ scores such as Uber or AirBnB).
There’s a phrase in this article about the darling of the Tech world -Slack- that’s actually hopeful to banks but also explains the disparity: “Over the past couple months, their competitors have caught on. They’ve all started using casual copy and trying to bone up on design, but it’s a little like your uncle trying to do the macarena. It’s too little too late. Everyone has picked their robot sidekick. Slack has stolen the show.”
This is evidently not about banking but collaboration but if it had been it would be both hopeful and telling. If you replace “robot side kick” with “hip and trendy bank or neobank” and “Slack” with “mBank” or “Moven” it doesn’t hold true because extraordinary as they may be they are far from ubiquitous. Every bank has an opportunity to at the very least write better copy and do better on design -while waiting to wake up to new contextual business models- as we’re all more-or-less prisoners of our respective local banking relationships.
Communication, collaboration and many other aspects of our digital lives have a far more borderless, deeply human aspect than we can hope our relationship with money and banking to exhibit during our lifetime (at this rate).
Not even the most daring of ABE-ers ever claimed they can become the bank of choice for anyone in any economy in any corner of the world. This would be bizarre to anyone outside our industry (can you imagine Dropbox or Snapchat saying they only want to inflict their digital magic on Americans?) – if the relationship these Alternative Banking Experience providers are building is strictly digital why is it that they think in terms of geography? The answer to us in the industry, is local regulation or at least, the perceived hurdles of it. If banking is hurting indeed and these new propositions are the agreed universal answer, why is it that no big wig investor (since there are 4x more of them than there were a few years ago) sat enough lawyers and technologists down to infra-structurally solve for each local hurdle and allow the overall umbrella of exceptional experience to overarch geographies when it comes to the front-end experience?
To my mind, while alternative propositions of back-end parts of the experience are intrinsically embodying the overarching and their success is simply a matter of achievable scale and time to market for the winners (alternative lending, alternative payments and transfers and alternative currencies are all bigger propositions than all the neobanks put together at the end of the FinTech day) on the front-end to-consumer experience there is no consensus on what a winner looks like and no big wig is willing to bet a farm big enough to achieve that. If you don’t believe me just look at what percentage of the overall 12 (or 14 depending on who you ask) Bn $ investment in FinTech in the last year went to ABEers as compared to the investment in alternative rails.
Thinking about what money went into FinTech on the experience side and why there are no real unicorns yet is a demoralising exercise. This emperor of ours is rather naked. It’s one thing to complain about banks being slow, or marred with “no can’t do” or even dumb. That we can all cheerfully agree on, that we can excuse in a way. They can’t afford to do much or even dream big. But investors can. Should. Why is it that despite the noise they really do not?
My theory is that we all rushed to catch this wave – we went too fast and built too quickly without stopping collectively, as an industry to agree on what’s what. We have so much confusion in terms in banking today that if you sit 20 bankers from 20 banks down and ask them to write it down individually they may all define the process of lending or that of transfers identically the same but no two descriptions of a Banking Experience will be the same.
So here’s why I think this Gold Rush is really just a rush to apply gold leafs onto as many pieces of artsy copper jewellery as we can – we don’t know real value anymore and we’ve all invested in eggs in different baskets and we’re betting toy farms that consumers will take whatever we shyly funded as the Holy Grail of banking experiences and love us for it.
Is ABE going to be where bankers and investors meet in a muddy cage fight of courage in the following 2-3 years and battle it out till the ones with the strongest religion birth the Slacks? We can only hope so, we, the consumers waited long enough.