When Neobanks and Fintechs emerged, some believed that banks would cease to exist altogether. Although the role of banks has changed over recent years, the truth is that they have been, and continue to be, fundamental since their emergence in Roman times: they are the trusted custodians of our funds, recognised and certified for this purpose.
However, as new players enter the financial sector, the role of banks has started to contract in the light of new financial services offerings that add value in ways that traditional banks do not. Nevertheless, there has been some kickback from the financial sector. Increased competition has brought on the development of higher-end financial products and forced major financial institutions to develop better digital products and customer experiences, matched by lower fees.
New experiences, designed to suit the customer and create value, are what push the financial sector forward. But they often end up having somehow to be affected by specific legislation. A concrete example of this is the European PSD2 directive. While in countries such as the UK, US and France, where services such as Microsoft Money enabled users to manage their own finances since the 2000s, this was not the case in Europe. Portugal was no exception, and banks faced many difficulties in initiating a collaboration process. It was only with the emergence of PSD2 that a way was created in the market for banks to collaborate with each other, as well as with third parties, provided there was consent from customers. This vision created the basis for taking advantage of the information held by banks and integrating some financial operations in ways that customers value. There is, however, still much to be done and many opportunities to be explored – both within the financial sector and also in conjunction with other industries.
A good practical example is the case of Revolut, which has changed my relationship with money. From the moment I was able to use it, it was no longer necessary to withdraw foreign currency subject to high fees in the UK. It is now possible to stand in a payment queue and get my money in the currency I want within seconds. If we look harder at Revolut’s positioning, we can see an entire ecosystem working towards solving user problems. For example, when I travel to another country, Revolut not only knows this but allows me to create insurance for myself and my household from the app, which will be in force for the duration of the trip. Over time, the app has also grown to allow me to subscribe to insurance for electronic devices or even buy access to a Lounge on my next trip, not to mention the whole cryptocurrency component.
What makes the user experience valuable is, precisely, platforms that address user challenges and present solutions to problems and, from this viewpoint, there is still a lot that can be done, in Portugal as elsewhere. It would be nice for users to see more banks occupying spaces other than banking, where relevant. Travel insurance in a banking app, device insurance and even credits in retailer apps are just a few examples where banks can add value for each of us in different ways. From the financial sector perspective, by expanding ecosystems to other sectors, firms can create revenue streams, increase their relevance to their customers and take advantage of new technologies. this is how banks can assume a place of relevance in the daily lives of their users, whatever the context.