How our daily finance will change
Formerly the overview of our finances were pretty simple. We had our current account, our portfolio and our saving account at the same institution. Banks would be classical all-finance groups: They offered their clients a whole range of products, for all living conditions, from bank accounts to
insurance services. Still, the client would have to make some compromises: either the current account offered attractive conditions but the deposit- conditions were poor or the saving account offered good interest, yet demanded horrendous fees.
The increasing significance of the internet makes it easier for the client to compare banking products and choose the most suitable one. However, if the client ended up at three or four different banks, this still means more forms, more bank advisors, more access data and many filled files at home. The comparison of products may now be easier but the usage of it is still very inconvenient and paper-heavy. And out of nowhere FinTechs and InsurTechs arose from the ground. Young financial and insurance startups that offered alternative forms of investment, managed Robo-advisor portfolios, digitized insurances, or handled account transfers from one bank to another – all without using a piece of paper and are available around the clock.
Instead of huge all-finance groups, many small specialists have become popular, everyone offering one single product. The customer can use exactly the products best suited to his needs, whether classic money saver, gold lover or passionate stock manager – regardless of the offer of the banks. Yet, the customer still has to make his product selection at different digital providers himself, there is no all-encompassing platform. The consequence of that: Instead of many filing folders the user now has many colorful apps on his smartphone. This is the point we are standing at currently.
Now the financial economy has to make the next step. The first signs are noticeable.
The times of all-finance corporations are over, individual fighters without connecting to partners over. In the future there will be a financial ecosystem in which the suppliers create new products for the customers through cooperations. The best financial specialists will gather at large platforms, where they will be able to optimally manage their customers through a single channel. This can be a bigger, licenced FinTech or a bank with a correspondingly technologically upgraded connection. The customers are getting the access to a collection of the best banking products bundled in a digital format.
It is urgently necessary that the cooperation between banks and FinTechs move to a whole new level, away from competition and CopyCat fuss to a relationship on an equal level. This creates an interaction in which the one provider can no longer exist without the other. The ecosystem has a healing effect on the financial services market. Only the best product can make the value chain.
This can also be a product that we already use in another function, but not for financial services. It is the era of the new players. In the US customers are already able to transfer money via Facebook Messenger. In Great Britain and France payments can be made contactlessly with Iphones and Apple Watches. Who says that in near future rents can’t be paid via Snapchat?
The success of this development is not only dependant on FinTechs and banks but also on the will of the legislators to create the legal framework. One step in the right direction is the new “PSD2”- policy of the EU, which will be implemented as a law in Germany in 2018. As a result, banks are no longer the solo rulers of the account data but can pass them on at the behest of the customers to third parties like FinTechs – another milestone towards the complete cooperation.
If this ecosystem of different financial and legal organisations successfully co-operates, it can achieve what is the reality already in other countries: the best finances with just one click.
This article has been published first in german as a guest commentary at Frankfurter Allgemeine Zeitung.