While the majority of the big banks’ digital transformation is well underway, customer engagement metrics are firmly focused on the mobile apps they continue to iterate, not on closed branches. In January, HSBC revealed that only 10 percent of customer contact was through its branches.
But boosting customer engagement on a banking app isn’t easy. It’s an obstacle that incumbents and digital disruptors face on a daily basis. As Silvia Mensdorff-Pouilly, Head of Banking Solutions for Europe at FIS, points out: “Ninety-five percent of the world’s population just doesn’t want to think about banking.”
But what if banks don’t just offer their services to customers through a closed-loop app? Messaging services are a communication channel that a small but growing number of banks and fintechs are exploring. And technology is already taking many forms.
French banking challenger Zelf integrates with Facebook-owned Messenger and WhatsApp, displaying “balance” and “send money” buttons at the bottom of applications. Meanwhile, Israeli fintech PayKey is integrating banking services into consumer keyboards, functioning much like a GIF (graphical interchange format) or emoji keyboard.
Other players have introduced the two services side by side, instead of mixing them. Japanese messaging service LINE, along with Russian digital bank Tinkoff, have split messaging and banking services into different tabs of their apps.
New space to challenge customers
Unlike banking apps, messaging services hold a much larger share of people’s attention span. Sheila Kagan, Managing Director of PayKey, estimates that “a user spends up to 30 minutes in a banking app each month compared to up to three hours a day in mobile messaging environments.”
According to Facebook, 100 billion WhatsApp messages were sent every day in the third quarter of 2020. This equates to 69 million per minute. In the UK, data from the regulator Ofcom from 2019 revealed that 49% of the population uses instant messaging every week.
“Courier banking gives you the opportunity to challenge the consumer,” says Mensdorff-Pouilly. “Banks can use messaging-based banking interactions to really get customers to think about the banking aspect of what they’re doing at this point.” If a customer used a keyword, such as “must” or “broke,” banks could use that as an entry point to suggest how their services could help.
Currently, the technology does not benefit from huge investments from incumbent banks in the UK beyond in-app chatbots designed to replace customer service call centers. Experts, on the contrary, point further to Southeast Asia, Latin America and Spain as areas harnessing the potential of messenger-based banking innovation.
How the technology is used
Although they are still in the embryonic stages of development, the early players in the messaging-based banking industry have already succeeded in collecting information on the services used by customers. PayKey, which licenses its technology to banks including Standard Chartered Korea, lists payment transfers as the most used feature, closely followed by account balance checks and then billing.
LINE, which launched its LINE BK digital bank in Thailand, with help from Kasikornbank in October 2020, now receives 20,000 personal loan applications per day. The Japanese messaging giant has so far convinced two million of its Taiwanese users to interact with integrated banking services. For about 30% of its approved loan applicants, this is their first line of credit with a financial institution.
Digital bank challenger Zelf, who lives in France and is preparing to launch in Spain, currently facilitates transactions between £ 15 and £ 20. “Users exchange money the same way they discuss their concerts,” says Zelf CEO Elliot Goykhman, stressing the ease of paying bills through messaging platforms. He suggests that the technology offers a path to business customer demographics, as well as peer-to-peer spaces.
For Tinkoff, its messaging feature, launched through its banking app last year, serves as an indirect marketing channel. “I don’t think anyone at Tinkoff thinks we have the next WhatsApp,” says Neri Tollardo, strategy director for the Russian neobank. “We see it as a viral mechanism through which customers can recommend products to each other.” Currently, 1.3 million customers use Tinkoff’s messaging service, or about 10 percent of its overall customer base.
To weigh the pros and cons
As Zelf’s offering proves, messaging-based banking is not necessarily a suitable solution for more transaction-based services. “At some point, you have to get out of it and take it seriously,” says Mensdorff-Pouilly. “I can’t imagine, you know, taking a mortgage on courier banking.”
Connecting banking services to messaging apps is also fueling customer privacy concerns. In May 2020, Chinese messaging giant WeChat announced plans to offer a credit rating to its 600 million users. This raised concerns about how users’ messages might be used. For example, if a user submits something “anti-state”, can WeChat use it to negatively impact a credit score?
More generally, the link between Big Tech platforms and banks raises concerns around trust. “If only Facebook manages it [independent of the banks], there would be a problem, ”Kagan said. In July 2019, US Big Tech paid a record fine of $ 5 billion to address privacy concerns. In the same breath, Kagan acknowledges that “banks must be in front of the customers, whatever the platform”.
Ultimately, it looks like banks will have to weigh the potential for increased profits against the likelihood of new data risks. As LINE BK CEO Tana Pothikamjorn explains: “The potential of social banking is the ability to analyze financial and social activities in symbiosis. This, in turn, allows banks to get more personalized loan, investment and insurance products right in front of the customer. Privacy concerns aside, the business case for email banking is compelling.