Banks, digital wallets, and the future of mobile payments

Today, mobile payments. Actually, digital wallets. This annotation is important because the analysis’ centers around VR Bank HessenLand und Volksbank Mittelhessen introducing their pilot for smartphone-based mobile payment. Due to a payment-commoditization (payment goes from product to feature, see also PayPal and Raisin: payment-commoditization and FinTech-platforms), there is general agreement that mobile payment is to be integrated into another product. Candidates are banking apps, shopping apps, payment apps, and digital wallet. I am pro-digital wallets as they are inherently useful (they are better than analog wallets which are already – very effectively – used for mobile payment), combine the other products’ features and can create better solutions than those (e. g. contain new “things” such as virtual keys or to purchase new things such as parking tickets). Also, I argued that banks’ mobile payment solutions (exclusive for their payment methods) might make sense to them (by shutting out other payment providers they are prioritizing theirs) but not to the customer. As they give customers only a narrow choice of payment methods they turn customers’ payment behavior from paying with a wallet (with multiple payment methods) into paying with payment cards from one specific bank. Additionally, what speaks against such closed

ING-DiBa, N26, revolut: fairly good incumbents and FinTech re-unbundling

According to Gründerszene, the Berlin-based solarisBank might raise a Series B. Whether this will indeed happen does not matter (the news is actually from October). What matters, however, is solarisBank’s position in the FinTech value chain. solarisBank is a banking platform which owns a banking license and offers financial services such as bank account management, credit card issuing or KYC (know your customer) services. In short, the bottom of the stack, the infrastructure of FinTech companies — as some would say — the boring stuff. In contrast, N26 and revolut are doing the exciting, customer-facing stuff; offering an easy to use, nice looking banking app. From a strategic perspective, however, the „boring“ stuff, is actually the sexy stuff (if banking can be sexy at all). This is not only because solarisBank per se is attractive (in many cases they are the backbone of FinTechs), but also because N26 and revolut are playing in an extremely difficult market. Slow customer acquisition and market saturation Whereas there are several difficult things about banking, the one I am referring to is customer acquisition. For instance, Scalable Capital, a robo advisor partnering with ING-DiBa, shows how difficult customer acquisition can be and, in turn,

revolut, N26, and the future of banking

revolut, the app-based bank from Britain, started their operations in Germany and Austria on September 27. From their profile on SEEDRS Revolut is targeting consumers and businesses that are dissatisfied with their banks and other financial services for three main reasons: (i) lack of product innovation (ii) the expense of spending money abroad and (iii) fees to transfer money overseas. — SEEDRS The narrative is clear (this is important as I will show later on) and is well summarized in revolut’s claim: “ Revolut — The only account for your global lifestyle”. Concretely this means that you get fee-free purchase and withdrawals for 120 currencies, free money transfers of up to £5,000 per month and you can keep up to 26 currencies in the app which you can exchange without fees. Furthermore, they focus on user-friendliness through insightful spending overview (financial forecasting is planned), immediate balance update, splitting-bills between revolut-users, P2P credits, in-app credit card (un)blocking, instant money transfers and an in-app customer support chat bot. In terms of products you can either use a real or virtual credit card and they also offer an insurance for smartphones. In addition to free services, they have a premium version (6,99€/month) though which you