Banks or FinTech: who will get the “Ring of Power”?

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Denis Kalemberg

By Denis Kalemberg, CEO

During recent years, the topic of marketplaces/ecosystems/super-apps based on either banks or FinTech companies has been on the radar and has often been mentioned at many financial events. Though, in my view, the ASEAN market has just now started forming its understanding of why these ecosystems are needed and how they are supposed to look like. The latest wave of digital banking development shows that the ASEAN market is ready to adopt a new type of financial services.

Super-app development in the ASEAN market

So, what’s been going on in the ASEAN financial market during the last few years? Super-apps have transcended to a region-wide trend. Currently, companies like Grab and GoJek are very close to becoming a super-app. However, we cannot compare them to the super-app known as WeChat, where you can even apply for a divorce. But, what we currently see within the ASEAN market is still not bad. Many have realised that buying movie tickets, paying taxes, receiving medical support, etc., through a banking application is actually very convenient. This leads to a question, why should a bank’s customer base look for this kind of functionality in a mobile banking application, and not directly from the supplier? The answer is quite clear: people are overwhelmed with information and want to waste as little time as possible to get what they want.

Any business is a solution to other people’s problems with their money. The reason is that having a particular set of input data allows firms to make a profit off it. The solution should also bear in mind that a set of core trends have to be taken into consideration:

  • consumer expectations in receiving an “ideal” experience when it comes to purchasing/using services in “two” clicks;
  • existing platforms should provide structural solutions for their customers;
  • solutions should fit into a user behavior model and take into account its lifecycle.

Minimal set of required criteria to develop a commercial ecosystem:

The way I see it, the following minimal set of criteria are a must to develop a thriving commercial ecosystem:

  • Large user base;
  • Payment functionality;
  • Excellent UX/UI;
  • API to third-party services (government and commercial platforms);
  • Built-in “engine” to work with big data;
  • Security of transactions.

The days when all an end-user wanted was a quick and cheap way to buy something is becoming a thing of the past. Today, the end-user is seeking an ideal interaction with an application when performing daily routine tasks irrespective of what they expect more–a quick financial transaction or proper product insurance tasks. A fundamental core value for the end user is to:

  • Reduce their decision-making time;
  • Interact with and manage a service in one place using one interface;
  • Have a quality solution.

Why should a consumer browse for something on the Internet, request an invoice, fill in their payment details and so on, when it can be done in 3 clicks? Today, we see that FinTech companies have an accommodating range of solutions to varying extents.

However, developing a super-app requires considerable investments, a highly skilled workforce, time and much more. Accordingly, we must be intensely aware of how to return those costs. Is it through a commission income from selling third-party services? Or is the final goal to “link” your users to the brand/interface/application, increase loyalty and transaction activity? Or, maybe there is no need to bother at all? Maybe your users like you the way you are already? All of these viewpoints can be heard during bank conferences.  Whose viewpoint is the correct one? Only time will tell.

Meanwhile, the B2B2C strategy when (for example) a bank offers payment services to clients from different ecosystems seems quite reasonable, as it does not require high costs. All a bank needs to do is to grant access to its API. The rest of the workload will fall on the shoulders of a super-app developer, like setting up a “storefront” and reporting to the end-user. However, in my view, in this case, the owner of the “storefront” is placed in a better position. They can tie a client to their brand, rotate their products on the shelf, or even change one particular service to another if the API is standardized.

Crucial bonus for race winners

But, what is the most crucial bonus? In the long run, it’s access to client activities within the ecosystem. To get the most of this information, a “seamless” way must be organised between client related tasks. For example, making a table reservation, ordering a taxi to the restaurant at an appropriate time and paying your bill with the ability to automatically divide it between friends.

In this context, the question of security for these types of financial transactions may cause a severe bottleneck. Logins, passwords, waiting for and inputting SMS-codes to different kinds of services within an ecosystem fit poorly into the “seamless” concept. In the absence of a specific security standard, client risks will increase disastrously. The correct and only solution to this challenge can be summed up into embedding a function of a cryptographic digital signature into a mobile application that will be used to confirm all of a user’s operations.

Potential future scenario:

And here it seems that we are getting to the most exciting part  for super-app future perspectives. As I mentioned previously, humans have a desire to make as little effort as possible in the achievement of their life goals. That’s why we always have this picture of a perfect outcome by pushing a button called “Do a good job!”. Any super-app has the potential to become this button. The more information we have on the life of a person, their buying habits, movements, communication, etc., that will go through the owner of this “digital pipe”, the more precise will be an analysis of their needs, potential problem predictions and our ability to offer suitable solutions. Thus, it is significantly vital to put a platform under an analytical “engine” in the ecosystem’s architecture. This “engine” will create a client’s “digital identity” and on its basis, predict human needs and ways to satisfy them.

If we can be inspired by an episode of “Black Mirror” we can imagine that based on data analysis: groceries, jobs and even a life partner will be chosen for us. All we need to do is to tap the “Confirm” button. It’s neither good nor bad. It’s just a direction in which our world is moving now. And the super-app, through which data flow, including millions of people’s activities, will become a sort of “Ring of Power”. This “Ring” will generate an enormous amount of profit and will give the power to manage its solutions. But who will be able to forge it? Will it be banks or FinTech companies? Will either one of them be able to do it? Only time will tell, and we will see.