A Simpler Future for Fintech

By John Papaevgeniou, Founder and CEO of Relational

Remember how technology was supposed to make life easier in the future? Today, most people struggle to keep up with multiple bank accounts, ever-expanding investment options, and endless security threats. The success of companies like Apple and Google shows that there is a real demand for simpler technology. The future of fintech will also be less complicated, and it will belong to the financial institutions that realize that first.

Embracing Multiple Accounts

High-net-worth individuals often have accounts at multiple banks, so simplifying that situation saves them valuable time. According to GOBankingRates, half of Americans have accounts at more than one bank. 19% of them use multiple accounts to separate their finances, which is important for small business owners. Another 6% of those with accounts at different banks have them because their high balances exceed deposit insurance limits. Travelex found that 46% of UK consumers under 36 had more than one bank account. That survey also revealed that 42% of all respondents were frustrated with administering their accounts from different interfaces. In the EU, PSD2 makes it possible to manage accounts at different banks from a single financial institution's app.

Virtual Accounts for Businesses

Large firms have an even greater need to simplify their accounts. For corporations with many accounts at the same bank, virtual accounts are a potential solution. Firms can easily create new virtual bank accounts for internal tracking purposes and instantly move funds between them. All of the virtual accounts map to a single real account, which simplifies regulatory compliance and reduces paperwork.

Overchoice Overload

The burden of too many choices is overwhelming to many consumers. By 2018, the number of ETFs had risen to 6,478 just 25 years after the first ETF launched. The resulting confusion causes many potential customers to give up. Iyengar, Jiang, and Huberman studied the effect of increasing the number of choices on participation in 401(k) retirement plans. 75% of employees participated when they had two options, but the participation rate fell to 60% for 59 choices. There is definitely demand for "Amazon's Choice" style investment recommendations. Robo-advisors may also be able to help clients who cannot afford to hire human financial advisors.

Simplifying Security

Security measures add significantly to the day-to-day complexity of using financial services. 42% of UK consumers surveyed by Travelex expressed frustration over dealing with different passwords and different providers. For many years, passwords have created problems. Consumers could spend time on complicated password managers or reuse simple passwords and spend time recovering from attacks. Fortunately, the Web Authentication (WebAuthn) specification became the web standard for simple and secure logins in 2019. WebAuthn provides a standardized way to let users log in via biometrics, dedicated security keys, and mobile devices. As time passes, passwords are likely to pass away in favor of these simpler login methods. WebAuthn is already supported by all major web browsers, Android, and Windows 10. Financial firms can begin implementing it today.

Tying It All Together

Simplicity is about giving your customers an easier way to deal with the explosion of choices. Most consumers are looking for one place to log in, manage multiple accounts, and get recommendations for financial products. They want a way to tie it all together. The good news for established banks is that 59% of consumers want their bank to provide this universal portal. However, that Travelex survey also revealed that 18% would prefer a technology company. There is a significant market for simplified banking, but financial institutions must get there before the tech giants.

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