FinTech has metathesized throughout all banking discussions. This is our reality. Eye-straining technology will be the main way that we are able to manage our finances. FinTech has the classical Silicon Valley syndrome: FinTechies talk to each other. Occasionally, they deign to ask the rest of us what we think. I have tried to map our mutual problem set:
With Saudi Arabia following Bahrain, Malaysia, the UK and others into the world of open banking, I am curious. Is open banking something that the people at the top decided is good for us? Or do we seek it? In the UK, open banking “soared” to two million users last year during COVID. That is out of 49+ million account holders. Open Banking seems to be a panacea to a problem that most people don’t yet have. And, it leads to a question. Does open banking lead to the unbundling of financial services in the same way that technology has unbundled music and entertainment? Will it bring higher costs?
To me this is the first problem of customer engagement. We are being told that this is good, but not why.
The next problem of engagement is how do we want to manage our finances. This is very different. People much younger than me increasingly use apps like Simple, oh that is part of a bank now, or Loot, oh wait that went bankrupt. So even though budgeting and allocation apps are desired, they have not yet proven sustainable, they don’t make money. The app developer model is to be acquired by a single banking player. The latter, of course, is the antithesis of open banking as the app buying bank wants to own the customers.
So what do real people want? Not surprisingly, it doesn’t matter if they are stuck in LA’s traffic (imagining that the post COVID world looks similar to the pre COVID world) or surviving as a micro-entrepreneur in Chad, they want low cost payments, safe ways to save or invest, and easy access to funding. Dinar Standard tracks 225 Islamic FinTechs in its Global Islamic FinTech Report 2021. Payments, deposits & lending, and raising funds are the high volume, high momentum Islamic FinTechs. In this space, FinTechs led by telcos Kenya’s Safaricom’s M-Pesa have done well. So has America’s Zelle. Ooops, check out their partner page: You will find the who’s who of old tech and old finance.
If you look at Figure 1, the single most important words are engagement and stakeholder. Users, people, don’t want ‘disruption’. They want effective engagement that gives value to their stake in the financial system. DinarStandard divides the Islamic finance landscape into three categories with nine sub-categories:
Buried inside Wealth Management are the budgeting apps.
Excluded from the DinarStandard report about the USD 49 billion market are banks reinventing themselves in a “FinTech” style like Bahrain Islamic Bank, or banks reorienting their services via mobile technology like Iran’s QMB. You ask what is the point? These two banks are integrating technology in well established banking markets. They observed their customers and adapted their offering. They are integrating, not disrupting, itself an abused word. In markets where banking is less well organized, payments and alternative forms of online finance are important.
In summary talking down and talking past your customer will make you Loot. Engaging stakeholders will make you a valuable part of your stakeholder’s activities.
(This previously appeared in Islamic Finance News on April 14, 2021.)