In the latest in our series of blogs on the BPC annual client conference, Oleg Patsiansky, head of digital banking at BPC shares some of his insights on the evolution of lifestyle ‘super apps’ in banking.
Traditional payment systems are long established, but in the same way that technology has evolved, so have customer expectations. Changes to digital banking are driven primarily by trends such as the rise of super apps moving into e-commerce transactions, while products such as buy-now-pay-later and wallets and cryptocurrencies can be added to the list.
One of the key challenges facing the banking industry is the new generation of clients who value experience over service and are increasingly non-exclusive, using multiple digital service providers. Consumers are choosing not to use banks not because they are not allowed to do so, but because they prefer big tech firms as a financial institution.
So how do banks combat this? According to Patsiansky, neobanking is one way forward with the number of players in this space increasing to around half of all digital start-ups founded between 2016 and 2017. Patsiansky uses these numbers to justify the assertion that new players have been disrupting the traditional banking space for years.
There is yet more evidence to support neobanks experiencing customer growth. According to some estimates European neobanks might have as many as 85 million customers by 2023, reaching over 20% of the population over the age of 14 - with similar predictions being made for the US, Singapore, Australia, India and Brazil.
However, Patsiansky warns that too much focus on customer acquisition alone will put these banks in challenging situations with limited product offerings and non-exclusive usage of services by customers, which will eventually lead to large numbers of inactive applications. This is amplified by the fact that most European citizens can have half a dozen different digital banking apps on their phones at any one time.
Circling back to the history of banking, Patsiansky observes that most digital banks and neobanks are emerging from Europe and North America. However, out of almost 250 digital banks worldwide only 13 are currently profitable according to Boston Consulting Group - and of these 13 the majority (10) are from Asia.
Patsiansky suggests this success is down to what they all have in common - their ability to leverage assets. Successful neobanks have high customer awareness and brand recognition, as well as an ecosystem advantage. There are also advantages around having a wider customer reach, with a broader base and platform, as they can leverage existing financial services with experience and advanced capabilities.
Patsiansky observes that these neobanks are able to scale very quickly and this is reflected in commercial offerings and branding with scalable and flexible technology that is used by tens of millions of customers every day.
The technology utilised features completely automated decision making, organisation and governance. More important, according to Patsiansky, is the ability of these banks to sustain their progress, meaning they are driven by a relevant pipeline of offerings, marketing and creative risk analytics with risk management and a clear path to profitability with product sequencing which balances income and cost.
He then moved on to discuss super apps, describing them as an app that combines mini apps inside one unified application and noting that some estimates suggest these super apps have higher average revenue per user (ARPU) than traditional, standalone applications.
They support easy or even non-existent onboarding because customer details are collected, stored and used continuously from all available channels, and may host up to one million mini apps.
According to Patsiansky, the relationship between banks and telcos is important to consider when discussing the development of super apps. The telcos start with communications, while banks start from the profitable stage of the process and use the telcos to increase their reach through the introduction of messaging and calls and navigation via a search engine, while providing financial and payment services.
The advantages of having two pathways to service delivery are clear and further enable third parties to communicate with banks and customers directly through the app with ease.
Patsiansky says the super app concept also transforms traditional applications as they have become the destination platform for consumers and merchants that aggregate a broad range of services. This creates a frictionless experience for customers with services available at a swipe of their finger.
He notes that BPC provides super apps and customer mobile banking apps that support onboarding and enrolment, card accounts that are constantly updated, payment transfers, and transactions with various types of applications in addition to other features.
Partnership and marketing support for partners that are willing to work with businesses - as well as combining customer-merchant-agent banking applications into one - are also offered.
These are just some of the reasons why super apps are a worthy investment, bridging the gap between digital and real life by bringing banking to phones in a frictionless way.
