Inertia in a legacy industry
In 1898, the Commissioner of the US Patent Office said, “everything that can be invented has been invented.” Based on my experience, I often wonder if the Commissioner might have been anticipating the state of retail banking in the 21st century.
While technology has created great opportunities to make consumer financial management more powerful, affordable and down to earth, the core consumer banking business remains at its heart unchanged. Yes, banks have introduced apps and other digital capabilities–you can download data in Excel and play with your finances–but, in my view, there has been no fundamental change in the banking model and its value proposition to the average consumer.
“There has been no fundamental change in the banking model and its value proposition to the average consumer.”
Why is this? Let’s look at what has not changed:
- Institutions are still shackled by legacy platforms and fears of cannibalizing their current profit pools, which creates a formidable obstacle to fundamental innovation.
- Customers and their needs are not seen and addressed holistically but rather by product or line of business.
- Financial advice is not seen as a key component of the consumer value proposition, except for complex products or high net worth individuals. Data is mainly seen as a tool to drive better management decisions rather than better customer outcomes.
- Pricing lacks transparency and, to some extent, doesn’t produce “win-win” situations between the bank and its customers, but rather “zero-sum outcomes.”
- Digital is considered another channel, understating the central role that mobile banking will play in the future delivery and servicing of banking products.
How is it possible that even the biggest banking behemoths, with all their resources and expertise, cannot bring greater fundamental innovation to the industry? Do they lack the capabilities or resources? Of course not. The reason is that innovation, like many things in life, is not just about the ability to do things but also about the willingness and incentives to do so.
“Innovation…is not just about the ability to do things but also about the willingness and incentives to do so.”
After spending 7 years leading business development teams for a large financial services company, I got to understand all too well that the most exciting and innovative ideas were always too complex, too small or just in the way of some top executive’s agenda. The reality is that these big institutions are too shackled with legacy technologies, fears of self-inflicted cannibalization, internal power struggles and short-term investor expectations that bias the focus towards servicing the most profitable customer first and last.
Starting from scratch
I have come to truly believe that banking of the future can only be built from a clean slate and with the customer in mind. This is exactly what Varo is all about, layered with an experienced team and powerful business concept. Back in 2015, when I was first exposed to the concept of Varo it instantly clicked for me. A very simple and straightforward proposition. Leverage the best and latest of technology to deliver a “surprise and delight” digital experience, see and serve customers through a holistic lens, leverage the power of data availability and analytics to deliver proactive insights, and design a cost effective business model that allows to afford transparent and fair pricing
“I have come to truly believe that the banking of the future can only be built from a clean sheet of paper and with the customer in mind”
Joining Varo is for me is an incredible opportunity to seize the future and bring change to an industry that has a big impact on people’s lives. It is about making banking work for people and not the other way around.
The revolution in consumer banking is about to begin and hopefully will result in a much more helpful and down-to-earth proposition for the average consumer. Varo will be the first intelligent mobile banking* business, though certainly not the last, and I’m happy to be in on the ground floor.
Many industry leaders might not agree. Indeed, not long ago, the then-CEO of Microsoft said there was no chance that the iPhone would even gain any significant market share.
So join us in reimagining banking, by signing up for Early Access.
*Banking Services provided by The Bancorp Bank, Member FDIC