High 5! The five fintech stories we’re following this week

5 trends we're tracking in finance

Big banks can bust a move

We get so caught up in innovative fintech startups that we sometimes lose perspective when a larger institution does something to shake things up. Gidon Belmaker had an interesting look into how ING inspires fresh thinking in its ranks and how it brings these ideas to fruition in new products and services. Through employee-targeted contests and an in-house incubator, the bank acquired 650,000 new customers in the first half of 2016.

With outside help from technology and UX firms, big banks are also working on rolling out personalized banking experiences. “The banks are locked in on an ‘old model’ mindset,” said Pau Velando, general manager of Strands, a company that offers digital money management software to financial institutions. “They think more in terms of banking and less in terms of providing value added services to their customers.”

USAA today has its own customer advocates. Hadas Tayeb focused on a particular disability advocate at the financial services firm who designed a new machine reader for check deposits for the visually impaired. In general, USAA has recently upgraded its check technology. Checks may be dead over the long term but that hasn’t stopped the firm from providing services that people need and are asking for today.

Millennials enjoying more financial tools

If it can get out from under its debt load, the largest generation is going to have a lot of financial platforms to help it save and invest for the future. Student loan refinancer, CommonBond is betting on that scenario. With a recent round of funding, expanded debt facility, and acquisition, the firm has created what its calling a 401(k) for student debt, which essentially turns debt repayment into an employee perk.

N26, the European digital bank, recently received a German and European banking license and Josh Liggett describes how the startup is stepping things up with increased focus on the customer and product offerings.

““We tried to be very transparent, and tried to change fundamentally the cost structure behind everything,” said CEO Valentin Stalf. “Our customers understand that the model has to be sustainable, transparent, and fair. We tried to respond honestly and transparently, and we focus on the core value proposition of simplifying your financial life.”

Finance connects to the world around it

No longer content to remain in its predefined in-store and internet boxes, payments is trying to bust out. Expect to see payments in almost anything that’s connected. Soon, your jewelry, your fridge, and your car will be able to pay for things on the Internet of Things. Here are 5 innovative IoT payment products.

Automation in the financial industry is also taking curious forms. Softbank robot Pepper is set to sell insurance at 80 stores in Japan. Meiji Yasuda Life Insurance Co will be deploying 100 Pepper robots across 80 branches in Japan to help out on the sales floor by 2017.

Financial services for the rest of the world

Financial services conform to the environments in which they serve. Different technology and pricing environments produce substantially different solutions. Take Africa, for instance. There, fintech isn’t disrupting the banks. It’s creating them. Mexico also has its own financial ecosystem that’s showing signs of embracing new technologies. China will soon kick off the second round of awarding licenses for private banks. Five private banks had opened for business in 2015. Some of the aspirants said if they receive the banking license, they would concentrate on providing financial services to technology companies.

Fintech meets big data…er, big survey data, that is

There was a lot of research published this week about banking, banking customers, and financial ecosystems. Worth checking out are these various pieces:


With focus on customer, N26 builds a digital bank

The Rubik’s cube, once used as a test for investment banking applicants, now serves as inspiration for one of the fastest growing digital banks.

N26, formerly known as Number26, gets its name from the 26 smaller cubes that make up a Rubik’s cube. Without a strategy, solving the cube is nearly impossible; but a simple explanation and strategy makes the task much easier. Extending the metaphor to fintech, N26 wants to give consumers a simple way to navigate banking, and has been working on creating the bank of the future since its debut at TechCrunch’s Startup Battlefield in 2014. Embracing the unbundling of the value chain in financial institutions, N26 presented itself in the role of a digital customer service hub surrounded by third party financial services.

Since then, N26 has changed both in size and form. Strategic partnerships with TransferWise, MasterCard, and Vaamo give customers forex, mobile payment, and investment capabilities, respectively. Investors, including Peter Thiel, have poured over $50 million into the German based company. N26 has grown to over 200k users, and on July 21st, announced it had obtained a German and European Union banking license.

Although N26 may not look the same, the firm’s values have stayed on point, with an ethos revolving around millennial ideals: customer service, transparency, and trust.

The core of N26’s philosophy centers on putting customers first, since caring about customers naturally leads to building trust and transparency. Valentin Stalf, CEO and founder of N26, feels that a bank needs to understand what customers want and need, and only then create financial products. “What is going to make the bank of the future valuable, I think, is not the size of the balance sheet and the risk weighted assets, but the value driven by the relationship with the customer,” he remarked. “Banks have reduced value proposition to being the cheapest, and in the end the user experience was really shitty.”

Embracing the message of putting customers first has led to a digital product that tries to make finance as simple as possible.

It takes four minutes to sign up for a N26 account on a mobile phone. Abnormal transactions are brought to the user’s attention, making the ability to spot fraud easier. And when it comes to using the platform, one click interactions are featured, including the ability to report a credit card missing with the click of a button.

To Stalf, the clarity and ease in which customers interact with a financial product is the foundation of trust and honesty. “Transparency doesn’t mean you show everything at every moment, but show people the right thing at the right time, creating a trusted brand,” said Stalf.

Although trust is important to any company, a digital bank utilizing third party financial tools needs to acquire trust in more than one way. Not everyone has the time and understanding to find the best financial tools on the market, so N26 needs customers to trust that partnerships they’ve made are with the best companies possible. “If TransferWise is connected with us, we’ve done the preselection that it’s a good offer,” he remarked. “That’s what we have to build our brand around: winning customer trust and putting great products forward.”

Not everything has gone as planned. On June 6th, 2016, several hundred customer accounts were canceled after frequent ATM withdrawals led to higher than anticipated fees for N26. Through a press release, N26 explained its decision to shutter the accounts, and announced a new fair use policy outlining usage guidelines for its customers.

N26 has since changed the manner customers withdraw and deposit funds, utilizing in-store retail networks to facilitate account activity. Customers can now go into one of eight thousand retail locations across Germany to withdraw money,and deposit cash into QR-marked envelopes.

Users are still limited to five free ATM withdrawals a month. Stalf understands that problems arise when building a business, and how a company responds to an issue may be more important than the issue itself.

“We tried to be very transparent, and tried to change fundamentally the cost structure behind everything,” concluded Stalf. “Our customers understand that the model has to be sustainable, transparent, and fair. We tried to respond honestly and transparently, and we focus on the core value proposition of simplifying your financial life.”

Being honest and transparent seems to have worked, as user activity and signups increased in the period following the cancellations, according to N26’s CEO.

N26 may be building a bank of the future, but it still has a long road ahead towards its goal of disrupting the banking world. If N26 can grow its customer base, while keeping costs low and including more services catering to a larger audience, it could have a chance of becoming more than a niche bank. Whatever happens, digital upstarts are providing an interesting example for the bank of the future.