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Banking Briefing: Interest rates, big banks, and Revolut’s bumpy road to super-app-dom

  • The Central Bank raised its benchmark interest rate by half a percentage point. But with more fintech competition than ever, can major banks afford to respond the way they have in the past?
  • Meanwhile, Revolut’s super app strategy is hitting some bumps. What does that mean for the firm?
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Banking Briefing: Interest rates, big banks, and Revolut’s bumpy road to super-app-dom

In March, Bank of America was the first financial institution to be certified by J.D. Power for financial health support.

J.D. Power’s financial health support program basically measures customer experience in terms of building financial health.

I spoke with Ashley Ross, head of client experience at Bank of America, who gave some more details about what the bank has been doing to improve customer experience.

Combining digital with in-person aspects

“In-person support is really important for the development of the client relationship, and for delivering more personalized advice on financial health. 

There are a lot of things that are great for digital in terms of transactions, interactions, and banking activities, but clients and customers really do appreciate and need that personalized advice when they want it. And we want to provide them with those options. So even if a client may not need personalized branch or phone support, it's still very important that they know it's there and that we have their backs should they need assistance.”

Offering financial literacy resources

“In terms of support, it’s not just about in-person support, but even just the educational content that we provide to help clients with their financial health. 

Better money habits, for example, is this really great platform that has a lot of free financial education, content and tools for people at all life stages that can help them towards their goals. And consumers accessed that information 7.6 million times in 2021. So these are good ways for us to support clients in terms of having people available to speak to them, but also educational content that they can access as well.”

Communicating consistently

“One of the things that we’ve learned the last couple of years from a client experience perspective is that communication is key. 

And during the pandemic, we learned that you really can't over-communicate, especially at a time when clients are facing hardship or need additional support and guidance. So we ramped up our proactive communication to clients at the start of the pandemic, and have really taken that lesson and learned to ensure we're ‘over-communicating’ with our clients and figuring out the ways that we can support them."

I’ll admit there’s a bit of a market-y feel to this spiel, but the point I’m making is this: How much does all this really matter?

It’s not that these things aren’t important. It’s more that consumers are becoming aware of their finances and have more options to choose from when it comes to who they trust with their money. More financial literacy content may be enough to get their attention, but it may not be enough to keep them.

Here’s why I’m mentioning this:

On Wednesday, the Central Bank raised its benchmark interest rate by half a percentage point. But analysts are skeptical about whether big banks will let depositors get any benefits from this. 

“The biggest banks in particular are sitting on a mountain of deposits. The last thing in the world they’re going to do is raise what they’re paying on those deposits. The big dominant banking franchises that have branches and ATMs from coast to coast, they’re not going to be pressured to increase their rates,” Greg McBride, chief financial analyst at Bankrate.com, told CNBC.

I know it’s not good to assume, but I’m guessing that if they had to choose, most consumers would opt for the better interest rates in their deposit accounts over more financial literacy content. 

Major banks’ next steps following the increased rates could be what determines in consumers’ eyes whether they’re all talk, mostly talk, or just a bit of talk.

On Revolut’s bumpy road to super-app-dom

Late last month, Revolut announced it was exploring both decentralized cryptocurrency wallets and mortgages as part of its strategy to reach super app status. 

It also opened new remittance corridors for U.S. users, which allow for cross-border payments in 30 minutes or less.

"It's amazing, because no one in the world can do it. If you check WorldRemit or [Wise] or Western Union, not a single one of them has this capability of instantaneous fee-free money transfer," said CEO Nik Storonsky in an interview with Reuters.

But Revolut continues to face some pretty bulky obstacles in its path. For one, only a few days ago, Revolut’s head of crypto left less than half a year into the role. This news comes just as the challenger bank has been preparing further expansion into crypto products. 

Who knows? Maybe that announcement doesn’t mean anything too big. But whatever the case, it doesn’t look good – sort of like having your pilot resign mid-takeoff. 

Then there are the bank license bumps. As part of its plans to become the next super app, Revolut wants to get its hands on the right banking licenses. The firm already has a Lithuanian banking license, which has given it a pathway into the EU markets. But to truly be able to expand, Revolut needs to find a way to get both US and UK banking licenses. That’s proven to be a challenge.

While there’s not much to report just yet following Revolut’s application for a US banking license in March, its progress towards a UK license seems to be in the weeds.

UK regulators are concerned about Revolut’s crypto efforts. Its crypto-trading product has been especially scrutinized – particularly for its practices surrounding transaction monitoring. 

Another thing is that as of right now, Revolut falls under an ‘e-money’ category in the UK. That means it’s less supervised than a bank and both cheaper and less complicated to run.

While that might have made things easier for the company in a lot of ways, it also means that it now needs to prove that its methods are trustworthy enough in terms of compliance and fraud detection.

And of course, there’s the competition — Revolut is not the only company aiming to become a super app. Amazon and Ikea are just a couple of the giant firms itching to offer their own branded financial services. 

Even with its record growth, can Revolut actually compete with these players?

What we’re reading

Can the Fed’s plans actually make a difference in a damaged financial system? (Time)

Bankers associations from all over the US are all for marijuana banking reform (Marijuana Moment)

Swedish lender SEB is moving into banking as a service with its first new customer now on board. The service lets companies offer financial services under their own name without becoming banks (Bloomberg)

Should banks dive into the subscription economy? (protocol)

With no banking license in its hands, Revolut’s not quite in super app territory just yet (Bloomberg)

Stripe’s new product Financial Connections lets the company’s customers pull banking data automatically (TechCrunch)

Bank of England’s decision to increase base rate to 1% puts consumers with living cost challenges in a difficult situation (Money Facts)

UK challenger banks may not be too great at checking financial crime risks. UK regulators are taking notice (TechHQ)

Challenger bank Bunq is buying group expenses app Tricount (TechCrunch)

Goldman Sachs is going all in on making Marcus a top digital bank (The Financial Brand)

How do digital banking and financial inclusion cross paths? New Deloitte research dives into the topic (Yahoo! Finance)

Starling doubles its valuation and plans to make more acquisitions going forward (FT)

Zopa spills more deets on its journey as a bank (Sifted)

New challenger bank Cogni moves into crypto realms (TechCrunch)

The CFPB plans to treat fintechs the way it treats banks (eMarketer)

Goldman Sachs is offering its first bitcoin-backed loan (Bloomberg)

What we’re writing

Data Snack: US fintech lenders down 30% on average in Q1 2022 

What’s Happening in Payments Ep. 6: Quontic’s payment ring, Visa’s move into NFTs, and the new Square Stand POS system

As Feds increase fintech scrutiny, experts outline a BNPL regulatory framework

‘It’s about keeping your feet on the ground:’ A day in the life of Kristen Anderson, the CEO and co-founder of Catch

Crypto-backed mortgages are here and more options are on the way

Rewarding shoppers with brand ownership: Bumped expands with a new browser extension

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