Next generation competition is coming not from your industry but your arena— a competitive landscape in which different players address the same customer needs or compete for the same customer resources (i.e. money, time and attention) as you.
In this series, we focus on shifts in human needs and look to the peripheries– exploring the competitive battles at the edge of culture, business and innovation.
Episode 1: Money.
It’s the beating heart of culture and commerce.
Technology platforms are muscling into banks’ main business - upending everything in finance, from saving to trading to making payments. Slow, fee-heavy ways of doing things are giving way to automated and AI-enabled services. And some of the most innovative mobile and online financial services are bringing millions into the formal financial system for the first time.
Money has taken on a different hue in recent times. Covid is pushing the middle class into poverty and it’s shining a light on the state of our finances.
Revolut, the British neo-bank, recently announced its India entry. Banks should take note. For many customers, digital is the primary interface with their bank. If banks are serious about customer-centricity, their digital experience should be defined not by what they offer but how well they enable customers to achieve the outcomes most important to them.
In a short span of time, Revolut has captured more than 15 million customers worldwide by offering a frictionless user experience -- via an easy-to-use app.
For instance, sign-ups take less than a minute. Lost your card? No need to panic or worry about calling customer service. The app enables customers to instantly block (and unblock) cards themselves at the flip of a switch. Want to transfer money globally without expensive mark-ups? Revolut lets you do this at the interbank exchange rate. Users can trade in stocks without paying a commission fee or having to set up a separate trading account. The company’s analytics dashboard helps users monitor their budget and adjust their spending habits if necessary.
Money, we were told, was a scarce and precious resource. To amass more, you had to work hard, save, spend and invest responsibly. It needed to be managed by “experts” or it would be eaten by inflation.
No longer. Young people working from home have been flocking to discount brokerages engaging in a frenzy of day-trading on their phones.
5 million: The number of clients placing millions of orders on Zerodha, a discount brokerage which contributes over 15% of all Indian retail trading volumes. The big draw is its flat fee per trade pricing model.
944,000: The number of active clients placing orders on HDFC Securities, the brokerage arm of India’s largest private sector bank.
Banks and older brokerages still charge fees based on the value of the trade. Their high profit margins subsidize other offerings such as research and advisory services. It’s an opaque business riddled with perverse incentives. As the zero commissions model gains popularity, this generation is more likely to trust an app than their banker or broker.
Social media is a magnifying glass for wealth. Think, Chamath’s IRR tweets. Elon’s Dogecoin memes. Stock tipping chat groups on Whatsapp. Exotic startups raising money at insane valuations through SPACs. The strange new set of acronyms: bitcoin, NFTs and cryptocurrency. Unsophisticated investors driven by FOMO and overnight fortunes.
From conservative, safe and transactional, is the future of finance meme-ified, game-ified and degenerate?
$2.5 trillion: The combined value of all cryptocurrencies crossed $2.5 trillion this month, surpassing the total value of all US dollars in circulation.
$1 billion: In cryptocurrency, donated by Vitalik Buterin, the 27-year-old founder of Ethereum, to support covid-19 relief work in India. Shortly after the donation was announced, the price of the meme-based cryptocurrency Shiba Inu crashed by almost 30%.
$272 million: The value of Dogecoin transactions in India on just one day (8 May) across platforms such as WazirX and Coinswitch Kuber.
When was the last time you opened your bank app to pay your kirana, friend or even your doctor?
70 million: The number of active users of Google Pay.
410 million: The number of mobile subscribers of Jio (That's more than the 301.5 million active SBI debit and credit cards in use).
Financial transactions are still largely in cash in the country—but the coronavirus pandemic is pushing Indians to go cashless. Fintechs start by being a dominant provider of a service that customers use daily - earning as little as 0.1% of each transaction. As opposed to the fees of 1 - 4% that credit and debit cards levy on merchants. But the bigger threat is that payment platforms become a gateway allowing tech platforms to attract more users.
Jio Money, the payments platform backed by Reliance, has linked up with Whatsapp. E-grocery in which JioMart excels, is expected to grow ten-fold within five years, in part by digitizing kiranas. Using data that payment transactions provide, Jio Money could potentially determine a borrower’s credit worthiness to sell them other financial products-- becoming the Indian equivalent of Alipay.
This version of the future could bring more people into the financial system, giving them the kinds of investments and services that used to be just for the rich. But there will still be risks. Online scams are on the rise— preying on people’s vulnerabilities, anxieties and desires. Digitisation could leave vulnerable people behind as not everyone is financially or digitally literate. And a whole new kind of cyber attack is emerging where digital operating models are effectively hijacked for rogue purposes.
Culture evolves. Customer expectations are moving faster than ever before.
Someone is already rethinking your category.