The race of the digital banking age is heating up and shows little signs of abating. From a growth perspective, the global digital banking market was valued at approximately $6.6 billion last year and is expected to generate around $8.5 billion by the year 2025. This high-growth market has attracted new entrants in the shape of Fintech startups and interest by the incumbents in the financial and technology sectors, the big banks and tech firms. With the size of the market set to increase along with the diversity in services to the average consumer, an expert’s opinion is necessary to unpick this rapidly changing and disruptive landscape.
DisruptionBanking interviewed Sonia Wedrychowicz for that opinion, and the title of ‘expert’ is certainly well-deserved. Recognized for ingeniously co-creating one of the first digital banks in Asia, digibank, Sonia and her team was able to create a bank in less than 7 months. Read what she had to say about her experience, how Fintechs can stand out in the crowd and more.
You built the digital bank, digibank, in just 6 months. What were the biggest challenges you faced and how did you overcome them?
When you are creating something that is completely disruptive and new you are facing lots of challenges every day as nothing is delivered the old way anymore and the method of project/teamwork is significantly more subject to constant fluctuation. Agility today is key.
Therefore, the biggest challenge to overcome is to change people’s mindsets into basically believing that the impossible is possible. Once you have the people with an open mindset that are seeing opportunity in every problem – no challenge cannot be overcome.
Financial institutions invest 50c on the $ into digital banking today, what mistakes do they make despite this rate of investment?
One of the common mistakes companies make these days is believing that digital transformation is about technology spending. It is not.
Digital transformation is about people -our customers and our employees. By focusing our employees to start looking at our products through the customer’s eyes we make them more engaged. Suddenly everything they do has customer well-being and satisfaction at the centre of design and implementation. People start focusing on jobs to be done i.e. what customers really need from us. Customers and employees become involved in the co-creation of solutions with clients and get much more emotionally engaged in the work they do.
In the shift to a more personalized banking experience, how do Fintechs and digital banks stand out?
Fintechs and digital banks are delivering their value proposition using digital channels and hence have access to unlimited analytics regarding their customer behaviour. That is so much more information compared to what we know about our customers using branches or contact centres! We usually listened to less than 1% of customer calls – mostly for quality and compliance reasons. We, therefore, didn’t even know what customers were asking for and what our customer representatives people answered.
“we can provide solutions that are fully personalized and individualized”
But by delivering value through virtual channels we can analyze each and every move of our customers – we know when and how they log into our systems, how much time they spend on every page, what functionality they use and which they don’t. We also can see where on the platform they are getting stuck and spending too much time. So, it’s all great information that can lead to creating a segment for the size of one. Indeed, thanks especially to the advanced analytics available we can provide solutions that are fully personalized and individualized – down to the single unique customer.
How do you see the ‘battle’ between Fintech startups, Big Tech and Financial Institutions playing out in the future?
I truly believe that the small Fintech companies that are focusing on unique and fragmented pieces of customer experience and value are not a threat to the banks at all. By providing complementary solutions they will integrate with banking applications very soon hence enhancing the overall customer experience. I also don’t believe in the future of those companies that are providing basic banking services such as FX or payments for free. They can gather millions of customers very quickly by burning the money on free service and advertising even faster.
Their valuations are then largely inflated by the number of clients using their services only because they are cheaper. The moment such companies start charging fees in order to show profitability their customer case and user base will be gone, along with their valuations crashing as it is impossible to create loyalty on short-term price incentives. Once a better offer is made to the public, consumers can switch at the click of a button and then begins the race to the bottom that ill-capitalized Fintechs won’t match in the long-term.
“valuations are then largely inflated by the number of clients using their services only because they are cheaper”
Where I see a true threat are the Big Tech companies – Alibaba and WeChat have already proven the viability of their business models by basically taking over the major unity of the daily consumer banking traffic from the traditional banks into their platforms. The recent news about Google and Facebook entering deeper into the payments and banking space only confirm my conviction. Their competitive advantage versus the likes of Revolut and Transferwise lies in a very sound profitable business model and a loyal customer base which will be offered financial services that complete their daily and even financial life journeys, all under single Big Tech platforms.
Looking back, which aspect of digibank would you have spent less time on to achieve an even higher rate of growth or efficiency?
If I had the chance to do it again, I would skip constantly getting all our thinking, solutions and designs accepted with senior management. I would rather spend that time working with the customers – experimenting, A/B testing and constantly iterating our value propositions.
I truly believe that the customers will always give us the best answers by showing us their reactions to our solutions. And the analytics will provide us with objective and unambiguous information on the direction. Therefore, senior management needs to accept the fact that they don’t “know it all” anymore and that their subjective opinions have limited value in today’s data and analytics-driven world.
Sonia Wedrychowicz is a thought leader in Digital Banking and Technology Transformation, with 25 years of experience in financial services and technology. She has worked in major banking organizations – Citibank, Standard Chartered, DBS and JPMorgan Chase in Europe, Asia and the US in transactional and consumer banking. Known for her passion, high energy and commitment to people, she has managed change, led innovation and restructured businesses, putting them on a path of growth triggered by technology.
In addition to her professional career, Sonia is a Power Profile on LinkedIn and a renowned keynote speaker at over 50 conferences around the world. She has been Adjunct Professor at the National University of Singapore and delivered lectures to students at the MIT, Stanford University, Warsaw School of Economics and Singapore Management University.
Sonia holds a Master’s degree in Foreign Trade from Warsaw School of Economics and a BA in European Business Studies from Brunel University in London. She is married, with two children aged 15 and 20. Sonia is a passionate traveller, cook and a kickboxer with a black belt in American kickboxing.
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