Techfin might be a more appropriate name for the rise of challengers in the UK’s financial services. “This isn’t banking as you know it” immediately greets the eye on Monzo’s website.
Elsewhere, bud, the aggregator app, went so far as to claim not to be a fintech at all: “We're not a bank. We are a tech company based in Hackney. That means we do things a little differently.”
Challenger banks are driving a tech-first approach in an attempt to move away from the traditional perceptions of the banking sector to provide more convenience while not compromising on security; a combination that attracts users in their millions. And it's no new business model.
“It’s largely perception and PR, but it’s worked. I can see why the digital challengers have aligned themselves with the tech giants,” says Andy Cory, head of identity management services at KCOM, the digital transformation company.
“Banking is traditionally very slow to adopt new tech and thinking,” he says. “Banks carry a great deal of momentum and changing their IT direction is like repointing a supertanker.”
That reluctance to change partly comes from the risk averse nature of banks. Cory is quick to point out recent IT projects rushed for the sake of customer convenience over security.
And it shouldn’t come as a surprise that the tech giants can skip around the convenience versus security debate, he says. If banks need robust security to protect customer savings, tech companies protect an altogether ‘easier’ currency - online identity - and that’s before any mention of the tech giants' natural advantage of newer and more flexible core technologies.
Both industries, tech and banking, do however share one common currency which they value above all else: consumer trust.
The 2018 Edelman Global Trust Barometer found that technology was the most trustworthy sector at 75%, and financial services the least at 54%.
“The brand awareness campaigns of the tech giants have been inherent in ensuring that consumers trust these huge corporations while also severely distrusting fat cat boards,” says Cory.
“It’s an interesting contrast, and it comes down to marketing and public image. It's still in the public eye - the grey suited fat cat bankers of 2008, condemned by media and on the receiving end of political slamming. But what’s really different from them and Bill Gates, Tim Cook and Mark Zuckerberg and boards?
“Is it because of anonymity and a perceived lack of accountability? Possibly.”
Tech giants have utilised their own media platforms to great effect to distribute and literally put a face to their boards, running privacy campaigns and owning channels.
Challengers have very active blogs, communities, and staff interviews. Many incumbents have followed likewise.
Made all the more relevant by the encouragement of the Open Banking initative, identity management within onboarding and verification is set to become a key battleground between technology and financial services.
And the currency on which the tech giants will thrive in that contest, identity, plays a huge part.
“Facebook and Google already know who I am, why go through a tedious sign up process?” says Cory, explaining the monopoly on convenience enjoyed by the tech giants. “Verifying through social media accounts does seem like a slick answer, is it good enough for fintech? Shortly, it will be for high value transactions.”
For that to happen, Cory believes that consumer buy-in is fundamental and it is the part of technology to provide more convenience without compromising security, a good example being Apple’s facial recognition all but doing away with PINs.
Even if consumers are not quite ready to sign in with their Google or Apple account just yet, bringing social media and a user's online behaviour and identity into the fold of multi-factor authentication is sure to be a key pivot point that will shape the future of fintech and banking.