How to Deliver Mobile Digital Bank Like Monzo, Only Better?
Disruption. That’s the buzzword for what technology has done to every sector of the economy – media, healthcare, transportation etc. And one area of big disruption is in financial services, specifically banking.
Today, most banks offer at least some online mobile banking app. While accounts may be set up at a brick and mortar facility, consumers can now access their accounts either from the convenience of their homes and their PC’s or on-the-go with tablets and phones. Most all of a bank’s services are available online, and through mobile banking, customers can make deposits, pay bills, transfer funds, and apply for loans. In fact, a study in June 2017, reported that 69 million Americans use online banking solutions regularly. And according to McKinsey, by 2018 banks in the mature European markets will receive half or more of their revenues from digital sales.
The next big disruption, however, is happening right now. Welcome digital banking.
Just What is Digital Banking?
In short, it is online banking with no connection to a traditional brick and mortar structure. The bank exists in cyberspace only, supported by software, and offers its customers the same types of services that traditional banks offer. These services are offered through custom app development that focuses on mobile digital banking.
While digital banking in 2017 is still in its infancy, there are a couple of major players that have paved the way and that have at least accustomed consumers to the concept of banking in an entirely digital environment. PayPal and Ally Bank are examples of two such major players. And the stage has been set for massive digital transformation in the banking industry as we move into 2018.
After all, 82% of millennial consumers say that they use mobile banking; and up to 60% of all smartphone users report trying at least some sort of online banking according to the latest PwC report.
What’s more important though, is that the modern consumer demands better digital banking experience in the first place. Accenture report has outlined the next specific trends:
- 78% of consumers are happy to share personal data with their bank, yet 66% of them will demand faster, easier services, and 73% will expect lower prices in return.
- Up to 59% of responders want tools to monitor their monthly budget with real-time adjustments based on their current spending patterns.
- 41% are interested in using entirely AI-generated advice for banking.
- Apart from the standard payment options, 61% would like to have low-cost P2P payment tools and 50% want to have direct access to their digital money (e.g. Bitcoin) through the banking app.
Infosys has explored the matter further and shared the next insights in their recent whitepaper:
- 48% of their survey respondents commented that digital-only banking has attracted them with the superior experience.
- Up to 64% of respondents feel completely confident to transact through digital-only banks.
- However, 49% of respondents mentioned security as their chief concern about adopting a digital banking solution for everyday use.
Keeping all of these points in mind, let’s move on to what attractive digital banking solutions are made of.
Basic Features of Mobile Digital Banks
The concept behind digital banking is to provide customers with banking experiences that are seamless, easy, secure, and divorced from the cost of traditional banking.
There are some digital bank features and functions that consumers demand and others that just make digital banking highly attractive. Here is a features list that most digital banking apps offer:
- Some form of government licensing which insures deposits up to a certain level. This provides the security that digital consumers insist upon. For example, Simple, a U.S. based digital bank is FDIC insured, so that consumers who establish savings accounts know that those savings are safe.
- Credit/debit cards – these are pre-paid at this point, linked to an account, such as that offered by Monzo, a UK-based digital bank. It just received its license in April and is now offering accounts linked to its “Hot Coral Cards” which can be used anywhere on the planet.
- Tracking Spending and Push Notifications – Most all digital bank features and functions provide for consolidated tracking of expenditures by category and immediate push notifications for every expenditure. NextN26.com, a Germany-based digital mobile app now moving into the U.S. market, provides such services, as do most all other digital banks.
- Cost Savings – This is one of the most attractive features of digital banks. Because there is very little overhead cost, fees for transactions are minimal and, over time these savings can really add up.
- Higher Interest Rates – Lower overhead costs mean higher interest on savings – again a huge attraction.
- Funds Transfers – Digital banking consumers want to be able to transfer funds in and out, and most digital banks provide for this activity.
- Money Management and Budgeting Tools – One of the lacking characteristics of traditional banks is that they do not provide personal finance assistance. The addition of budgeting tools, along with the monthly summary of expenses by categories sets apart the digital banking industry. On the Simple website, for example, is a story of how one individual used its management and budgeting tools to pay down $24,000 in debt in just months.
These are the most common features that most digital banks possess. But because they are relatively new in the entire digital finance industry, the field is wide open for new digital banking strategy innovation.
Who Finds Building a Digital-Banking Business Attractive?
As the industry continues to grow and as consumer comfort and trust continues to increase, digital banking promises to become a “go-to” banking solution for a variety of demographics:
- Busy career professionals on the go can utilize digital banking anywhere in the world.
- Digital nomads and location independent entrepreneurs looking for a versatile banking solution both for their business and personal finances.
- Small businesses can secure loans from some digital banks, as well as use them for all of the fiscal management tracking and budgeting.
- Nearly 50% of people in developing countries own a mobile phone but do not have access to traditional banks. Digital banks provide the means to make deposits, pay bills, and make purchases.
The complete answer, however, would be for almost anyone who is into fintech and who sees the possibilities that this new type of company promises.
It means that some legacy banking institutions are becoming digital banks too – establishing a bank that is completely separate from the original institution. It means that fintech innovators start from scratch with digital banking mobile app development that they can then market through strategic partnerships with other financial and e-commerce sectors.
These innovators understand the increasing demand of consumers for superior digital services, including their banking functions. They are tired of cumbersome banking experiences which can be tough and costly. They are tech-savvy, have grown up in a digital world, and trust digital solutions more than previous generations.
So, How to Build a Digital Banking App?
The journey begins by designing the user experience – it has to be truly digital and it has to provide the experiences that cannot be provided by legacy banking institutions. It will involve the development of new products, new processes and a completely new thought process of how people interact with their traditional banks.
Here are guidelines that should drive digital banking software development.
- Once the user experience has been defined, the functions of the bank can be identified. These are based upon the value that will be provided to the consumer.
- The mobile experience you want to give to the customer must guide the design. To do this, you must define your target audience very specifically. You cannot be all things to all people. And today’s banking consumer will probably utilize a number of fintech solutions for varying needs.
- You must think outside the box in terms of products offered. Instead of separate checking and savings accounts, for example, how about a combination? Legacy banks offer money-market savings accounts that allow only a few withdrawals/checks a month and require a minimum balance. Providing a combination product with a better interest rate, no minimum balance, and bill-pay function will be attractive to many.
- Build in money management tools. Consumers want to see the categories of their spending and how they can better manage that spending to stay within their budgets. Incorporating such things as strategies to pay down debt and increase savings provide value that consumers are looking for.
- Provide for people-to-people payments. This is one thing that millennials see as a huge value and something they cannot do with legacy banking institutions. This presents some major challenges in digital banking software development but is well worth the effort.
The Challenges in Creating a Digital Bank
In short, there are many. Here are just a few of the challenges to face:
Depending upon the country and even sometimes the region of a country, there will be government regulations with which a digital bank must comply in order to receive the licensing that consumers will trust.
No software development firm will be able to provide marketing expertise. That is up to you. Having a solid marketing plan, perhaps one that partners up with established enterprises that have the same target audience is critical. Like any new business, developing a customer base that continually grows means the difference between success and failure.
The Architecture Itself
Once a digital bank concept has been developed, each piece of the user experience will require expertise from a top team of developers and a project manager who is committed to consistent and regularly scheduled communication with the client. This is custom-developed software that is complex in all of its elements. And in meeting this challenge, it will be a wise move to contract with a fintech app development company with significant experience in fintech software on a global scale.
If you have your concept fine-tuned and are ready for the development step, let us know. We have a long history in fintech app development, previously worked with such leaders in digital banking as Tide, and would welcome a discussion with you.