Now that Canadian banks have gone mobile, personalized money management may be the next frontier they tackle in digital technology.

Following his keynote at the Bank-IT conference in Toronto on Tuesday, consultant Tim Empringham said mobile is no longer a competitive differentiator among Canadian banks because all of them already offer it.

Instead, personalized financial management could be the next wave of digital disruption in financial services, said Empringham, an innovation and leadership consultant who was, until recently, head of technology consulting and solutions at BMO Financial Group for five years.

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Empringham cautioned against a “tech-driven business strategy without an understanding of what people need in (the banking) market.”

To provide personalized money management services to each customer, banks (using analytics) will have to tap into the enormous amounts of data they regularly compile on individual clients, such as their income, debt level, financial transactions and overall spending habits. Since no other major bank is offering this service yet, the first one to do so will likely gain a competitive advantage, Empringham said.

“I’ve seen some interesting things around helping people understand their money. Most banking customers, or a large proportion of them, have $20 left in their account on the Thursday before payday and don’t have any idea why. So that might be a true differentiator.”

Simple startup

Canadian banks are just starting to offer real-time mobile apps for financial tracking and budgeting, such as the MySpend app launched in April by TD Financial.

Empringham pointed out, however, that those services are being provided free of charge south of the border by American startup Simple. Users get a bank account from Simple partner Bancorp, a Visa brand debit card and a mobile app (iOS or Android) to track their spending, set financial goals, pay bills, deposit cheques and manage their budget – without paying any transaction fees whatsoever.

Simple users can also integrate their accounts with PayPal and Mint. The only fees charged are for ATM use outside of Simple’s network of partner machines and all foreign ATM usage outside of U.S. borders.

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Fintech startup Simple offers users a Visa debit card (above), Bancorp account and mobile money management app without charging any transaction fees.

Banks around the world are under pressure from fintech startups like Simple, Square, and Apple Pay, which offer customers added convenience but don’t face the same privacy, security, and data sovereignty constraints as banks.

According to a PwC report released in March, most of Canada’s large financial institutions are opting to partner with fintech startups to stay relevant with younger customers and innovate quickly. In turn, the startups can leverage the brand recognition, loyalty, and trust built up by Canadian banks among consumers over several decades.

Dangers of tech-first banking?

Although Empringham agreed banks must innovate, he cautioned against a model where technology drives the financial services business instead of the other way around.

“In the absence of a really strong business strategy, many of the tech leaders in the (banking) space are trying to step forward and lead the business. You end up with a tech-driven business strategy without an understanding of what people need in this market,” he said.

“Certainly, they don’t understand the nuances of what’s really important within a specific customer experience. They understand what’s neat, what’s shiny, how to deploy faster and the art of the possible. But they don’t necessarily understand which parts of ‘the possible’ actually matter and create value.”

To avoid falling into the trap of technology for technology’s sake, he said, banks must encourage all their business and operational units (including IT) to collaborate and communicate so the vision and priorities set by the C-suite align with what customers actually want and need. That alignment must be checked on a monthly basis against measurable, data-based targets set for each unit, he said.

“Technology can influence the (bank’s) capabilities and business strategy but it can’t drive it all the way to the top of the stack. It has to align with the priorities of the bank in order to make sense.”

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