A couple of weeks ago André M. Bajorat asked here the question what Open Banking is. This was my answer:
“Ideally for me Open Banking is a central place, where you can handle all financial affairs. So almost like a virtual shopping center, where the customers can choose the financial service, which is suitable for their needs. Today, customers no longer want to have an own app, log-in or portal for every different thing. Only what is simple, user-friendly, convenient and offers a comprehensive range of services will have a chance of survival in the future”.
When we think about the future of banking and payment, we often talk about benefits and added value and problems that need to be solved.
But what exactly are the biggest problems for end customers in the financial and insurance sectors today?
From the customer’s perspective, I see seven major requirements:
1. How much money do I have left and who will help me with saving?
No savings, no margin. No margin, no responsible decisions. Good provision or good investment means first of all to have money left over. Who can help me to have more left at the end of the month? Who can help me save money without having to buy products?
Acorns in the USA or Peak in the Netherlands have a “penny hoarder” model where small amounts from my account are invested in ETFs every month. Smart, but is this the best solution for me? Are the fees justified? How easily can I get to the money if my washing machine or car breaks down? Clinc in Germany has tried a model where the money first goes into a savings account and is then invested. Apps like YNAB (You Need a Budget) or Spendee help me to plan and track expenses.
But could it be any easier? And directly into my bank account? N26 has fantastic expense tracking. But what if it doesn’t receive my salary at all, but still the savings bank?
2. Who gives me orientation?
Most people experience their personal finances as fragmented. Monetary issues feel complex and inscrutable. Especially Millenials and people in part-time or self-employment feel insecure and are worried about their financial future.
In the good old days, before there were Fintechs and Insurtechs, my bank consultant knew me. He knew whether I was married, what the children were doing, how long my mortgage would run and what I had left per month. He analyzed my life and recommended suitable products. Expensive products, but still.
Today I have accounts at several banks. My car insurance with insurance A, the third-party liability with B and the household insurance with C. Who gives me an overview? Open banking apps like Finanzguru or Numbrs merge my accounts. Online-agents like Clark or WeFox promise me all insurance policies at a glance.
The problem is that everyone looks only at their product class. Agents recommend insurance companies, depots recommend stocks and funds, construction financiers sell construction loans. Especially with complex challenges such as retirement provisions and investments I need her/him again: a personal advisor. Who will explain to me whether I need shares, a fund, a Robo Advisor, a house, a pile of gold, time deposits, Riester, Rürup, a company pension scheme…
3. Which products are really good?
The major comparison portals list 200 different liability insurance policies alone. As a customer without enthusiasm for insurance terms and conditions, how should I find my way around and make good decisions? You can’t just try out an insurance or pension product for two weeks and send it back like I do with a drill or a sweater.
Comparison has made products cheaper – but fragmented the market. Who knows what is the best insurance for me and is not paid out of commissions?
4. Who keeps me up to date?
N26 or Clark have shown how easy onboarding can be. Why are changes still so complicated? Who closes my old account and transfers the remaining money?
Who makes sure that I stay up to date? Is my third-party liability still in order? If I get married, have a child or start my own business: who will tell me what I need to change, what I need new? A term life insurance or rather an occupational disability insurance? Another household contents insurance for the baby carriage? Rürup instead of Riester for pension provision?
5. Who makes buying ETFs easy?
Most experts recommend ETFs for retirement provision. Simple ETFs on widely diversified funds such as the MSCI World. Actually a simple product, but the access is often still too complicated.
Robo Advisor simply can. Scalable, Vantik, FinMarie and others offer modern UX, easy implementation and a response that doesn’t look like technology shop.
For pure ETFs, the user experience unfortunately still looks like e-commerce in the early 2000s: over-complex, overloaded, opaque with security issues regarding derivatives, the choice of a trading location and a trading bank. How should I handle this when I open my first depot? Why is this so much more difficult than buying a fridge online?
“Why is this so much more difficult than buying a fridge online?”
6. How can I act sustainably?
Fridays for Future, bio, regional: Sustainability and ethical behavior are important factors in consumer decisions today.
If I invest money, can I do it sustainably? How can I recognize sustainable investments? What are the “right” standards? SRI, Eurosif, GSIA, PRI, EFAMA?
And what exactly are sustainable insurance policies? Has anyone ever thought that through?
7. Who motivates me and takes away my fears?
Most customers find finances boring and unsexy. Dry, complicated, you can do a lot of things wrong. Who turns money into a lifestyle theme, like headspace did it for meditation or FitBit fro walking?
Who motivates and changes my mindset as fitness apps do? Madame Moneypenny is a good example. Who helps me with the implementation? Who makes retirement planning as attractive as learning vocabulary with Babbel or reading non-fiction with Blinkist?