Banks, Apple is not your friend
Apple’s savings account pulled in $1bn of deposits and 240,000 accounts in four days. A seamless, integrated UX, combined with enviable consumer trust and a diverse means of monetizing the account (read high ARPU and therefore, CLTV) makes this a real competitor.
Backbase is on a mission to re-architect banking around the customer.
The competitive landscape for banks continues to shift. Most neobanks are not the threat they were once thought to be (cf Revolut CEO Nik Storonsky’s complaint to the FT about how cautious regulators are holding back his firm). Superapps, which were supposed to attract customers with non-financial services and then monetize them with financial products have largely not panned out (cf NASDAQ: GRAB).
Even the threat from big tech has evolved. Google canceled Plex, its savings account aggregation service, telling The Verge it would instead focus on “delivering digital enablement for banks and other financial services providers rather than us serving as the provider of these services.”
But Apple is different. Even after losses with the Apple Card, Apple doubled down with “Project Breakout” bringing more financial capabilities in-house. This has seen the Bay Area tech giant launch Apple Pay Later, its BNPL offering, and now its high-yield savings account for Apple Card holders.
While Apple may not be able to replicate this full offering globally, Apple has proven it can expand globally with 78 countries now accepting Apple Pay. Moreover, this creates a potential playbook for trusted tech brands around the world. The listing of India's Jio Financial hints at such a play.
The threat is clear. Trusted tech companies can use their existing customer relationship to acquire customers cheaply and seamlessly, provide them with a world class UX and monetize them throughout their ecosystem of offerings and, in the case of Apple, by financing the sale of their own products. All of which is built on top of Apple’s already massive consumer data profiles. Even if Apple doesn’t house deposits on their balance sheet like Starbucks, owning the customer engagement will give tech players an outsized influence on a bank’s customer acquisition and pricing power.
Banks need to think differently about how they compete against serious competitive threats like this. Some will compete on interest rate, as Steve Cocheo points out. But for those who don’t choose to chase yield-hunters higher, Apple’s savings account is an invitation to invest in what your customers will see and appreciate. It’s been said for years, but banks need to differentiate.
This may be through partnerships with lifestyle brands, the way Standard Chartered Bank worked with a telco and a popular travel app for its successful Mox offering. According to the SCMP’s Enoch Yiu,
“Mox Bank, co-owned by Standard Chartered Bank, is the biggest lender among the virtual banks, as it offered HK$5 billion in customer loans last year, seven times higher than in 2021. It also had the second-biggest client base with more than 400,000 customers and HK$8 billion in customer deposits, behind only ZA Bank.”
If not through partnerships, banks can also refresh the customer journeys their demographic cares most about. For example, BKS is one of Austria’s leading car and vehicle leasing banks, so they invested in tech to improve their lending journey. This resulted in a 90% reduction in application processing time, and a 75% reduction in the time to submit a loan application.
Differentiation may also come in the form of improving the branch experience. As Bain research on Chinese retail banks uncovered, “Despite lower usage, branch experiences are more likely to delight customers, and they have a higher chance of converting customers into promoters or detractors than mobile apps.”
Raising the level of the branch UX to that of the mobile experience can effectively combine the trusted personal touch of the branch staff with seamless processes. For banks serving cash-based merchants in their community, this could be a key differentiator.
Final word goes to Simon Taylor here. Commenting on the Apple savings account, he said, “regional and smaller banks need to invest in strategy with a capital S: Not more of the same, not shipping this year’s roadmap or getting a bit more efficient. They need a clear answer to the question ‘what gives you the right to survive and thrive?’ ”.