Neo Bank for the Millennials - Part 2

In my previous post I discussed about how banking stack is undergoing a massive transformation and also explained how can Neo Banks earn consumer loyalty by delivering on key elemental values across the 4 categories of needs. In this post I am going to dwell deeper into how Neo banks can deliver on these elemental values.

While Neo Banks can aim to attack all aspects of banking, it would be prudent to go deep into 1 or 2 aspects of banking where there are consumer problems worth solving for.

Neo Banks is less about providing a fancy user interface on app and more about how it can solve some of the pressing problems consumers have their banks through a deeply researched user experience. Some of the areas worth exploring and deep diving are discretionary spending, savings & investments, lending and customer support. My personal preference would be building compelling products around discretionary spending.

Before we do deeper into some of the above mentioned areas, I also want to call out a key thing that is more like a basic expectation - Can I trust a Neo Bank?

Can I trust a Neo bank?

Before all the other aspects that shall discuss, Neo Banks have to ensure that users trust their brand. This is just table stakes and the most important elemental value of all since banking involves money.

But what does trust really mean here? There are various aspects of banking service that come under this broad value - Trust:

Safety - It should instill the confidence among users that their money is safe with the bank. This is the most important factor for users to to continue or even switch a bank. The case of depositors' money stuck in failing banks like Yes Bank, PMC bank is well known. Neo banks must ensure that users trust them with their money. This aspect must be reiterated through all the consumer touch points to ensure users relate the Neo Bank with safety of their money. Various approaches could be used - Trust markers, regular email communications about things that have been done to increase safety, celebrity endorements etc. are a few to name.

Privacy & Security - Users are increasingly becoming wary of issues pertaining to privacy breach and security leaks. This becomes very important in case of a bank where two important things are involved - User's financial information as well as his/her hard-earned savings. Like safety aspect, Neo banks should ensure that privacy of users' information and security of transactions is a top most priority and same is further reiterated through regular communication with the customers.

Many Neo banks like Monzo, Finin call out clearly about their efforts on providing a safe and secured banking experience.

Transparency - How many of you were extremely angry with your banks in past for the hidden fees or late payment charges or mis-selling of a financial product by the bank? Neo Banks can surely step up the game here by being transparent about it and perhaps also be proactive in communicating to the user. How about you informing me a day in advance about credit card payment dues? Send me a notification if my action would potentially help me save some sort of fees or penalties. Cred does a good job of exposing credit card charges and fees incurred as well as payment due date reminders. The option to auto pay ensures that there are no late payment charges

Why is opening a bank account an unpleasant experience?

How many of you had to go to a bank with a bunch of photocopies of proofs, passport photo and other documents to open an account? What about address verification, guarantor details? While the salaried working class from reputed companies may not have faced this but the entire process of account opening in a bank is not a pleasant experience. Through India Stack the entire documentation and verification for opening a bank account can now be done digitally. Neo bank can further makes this entire process digitally intuitive and seamless

User Onboarding - The user onboarding process should be extremely seamless and quick. User should be able to either link their existing bank account or open new bank account digitally without the need of going to a branch. With eKYC through Aadhaar, one can open the bank account instantly. Banking Apps specifically should have an intuitive as well as informative onboarding process. They need to draw the inspiration from non-banking apps to understand how a good onboarding helps improve new user sign-ups. Some of the apps with good user onboarding flows are Headspace, Slack and Strava. Slack explains the value proposition through the onboarding flow

Headspace onboarding flow focuses on making user meditate the right way

Tiktok practically has no onboarding flow and takes user directly to content and train it while user is consuming video!

I think the onboarding flow of a Neo bank should explain -

• What all a user can do with this bank?
• What is this bank offering better than current incumbent bank?
• Why a user should trust this bank?

Can Neo bank help me manage my spends?

Spend Analyzer - A simple breakdown of spends in various broad categories. It can also go beyond just categorizing the spends - How about it tells me more details of the spends so that I don't go back to that website or app to know more about what was the purchase all about. Many times in past I went back to Amazon or Flipkart to check what was the purchase that I made after reading my credit card statement. It could potentially be done by reading users' SMSes. The privacy concern here need to be dealt with.

Crowd Intelligence - It should also let me know if I am spending too much compared to demographic cluster that I belong to. It will nice if I am told - "Deepak, you are spending 15% more on dining than the average spends. If you save and invest this monthly, it will result in 4.5L over next 3 years. Save Now!". It knows my investment goals. So it can additionally predict and warn me if spends will not let me fulfill my goals. Collective intelligence can possibly open many more wonderful user experiences!

Spend Buckets - Help me control my expenses by creating "Spend Buckets". Salary gets credited to each of these buckets (eg: rent, salaries, dining, movies, shopping) and the expenses are linked to available money in respective buckets. Global Neo Banks like Monzo provide this feature with additional benefit of getting your salary a day in advance!

Split Pay - Can it be smarter and predict if a particular expense seemed more than usual for a single person? Imagine you made a payment for a dinner at a restaurant with your friends. The app can trigger a notification to split the bill and collect money from the friends. One such startup in this space is godutchpay. It helps you track pending payments, send payment message and also create groups for common spends

Cross-selling services - It can also provide cross-sell opportunities - Insurance / protection covers for selected spends:

• "I have bought a mobile phone" - Cross-sell me a screen protection cover!
• "I dine out regularly" - Nudge me to buy a dining membership like Zomato Gold or Dineout Passport.
• "I travel every quarter" - Inform me if there is an upcoming travel sale to book tickets

Reminders - The bank knows my spends as well as the source of spend. It can create smart reminders that ensure I don't miss bill payments. I have myself faced missed payment scenarios many time in past. I have enabled many recurring payments via HDFC Bill Pay as it solves a genuine problem for folks like me :)

Can the Neo bank help me save and earn more?

A lot of millenials use some or other form of tool to manage their investments and savings ranging from doing it on excel to specific mutual fund apps to taking help from a financial planner. Many of us also rely on advice from our parents and relatives. There is an opportunity for the Neo bank to provide a simple and intuitive interface to track, manage and invest. The key here is the ability to pull out info from different systems - Mutual funds, Stocks, Provident Fund, Bonds, PMS, Real Estate, FDs, NPS, NSCs and many more and show the investment profile of the user in a simple and intuitive manner.

Keeping the manual task here low is important so that complete view is available with minimum intervention from the user.

"I have used many apps but struggle to get a consolidated view of my savings and the analysis."

Additionally user could be rewarded for updating all these details manually. However it is important for making available all this info at one place as that is the real reward of delight. It will spawn a whole lot of cross-selling features without being pushy and can bring in additional revenue for the Neo bank

Goal Based Saving - Make users save based on goals - Marriage, Holiday Trip, Buy A Car etc. Depending upon goal's duration, a right combination of investment options should be recommended to the user. Once user chooses and enables it, then, it should seamlessly invest for these goals every month without any further intervention required by the user. Startups like Scripbox , Sqrrl are in this space

Smart Investing - Nudge user to move to buying direct mutual funds and save extra. Companies like ETMoney, Paytm Money and mane more had this as the core marketing pitch for quite sometime. Save taxes through investments in NPS, PPF, NSC and ELSS. Not many folks know that they can saves additional tax as well as steady income for retirement through such investments

Smart Switching - Recommend alternate funds if my mutual fund is performing worse than the category benchmark. A one tap option can help a user move savings from under-performing to a better performing mutual fund

Liquid Funds - Surplus funds in my bank account can be moved to ultra short term liquid funds and earn better interest. A few startups work in this space. Easyplan is one such and is part of ycombinator winter batch 2020. Established ones like paytmmoney, etmoney and phonepe also provide this as an option

Spare Change Savings - Spare change savings! An interesting concept prevalent in west and now spawned a few startups here in India - Spenny, Sqrrl. For every transaction that you do, the transaction value is rounded off to nearest multiple and the spare change is invested in a fund. It doesn't pinch your pocket and the power of compounding will show you the real benefit after a few years. Sounds good right!

Income Tax Filing - Every salaried person goes through this annual ritual of filing the income tax returns. Before the likes of cleartax and other tax filing apps that came into market, it was 'taxing' to sit with a Chartered Accountant and submitting the documents to complete the tax filing process. Neo Banks can either partner with tax filing companies or build it in-house and provide a seamless and quick tax filing experience with an option to consult CAs (Robo Tax Advisors?) for clarifications

Can my bank reward me and make me feel special?

The All-In-One-Card - I always wonder why are debit and credit two separate cards? Why can't it be a just one card? IndusInd launched one such card (2 emv chips, 2 magentic strips in one card) but I guess it did not take off well.

Neo banks can really innovate here and come out with a combined card with good merchant based offers -

• Single debit + credit card
• Can be remotely controlled through the Neo Bank Mobile App
• Cashback / Rewards automatically invested for a specific existing / new goal
• Zero forex markup
• No hidden fees and charges
• Instant credit availability based on spends and investments history - No paperwork, application forms, salary slips and all!
• Offers from merchants identified based on collective analysis of merchant spends by Neo Bank's customers
• A metal card? Not sure what value will it add but could be a status symbol to flaunt?

Cheaper Lending Rates - Banks know my credit history as well as my repayment history for all my loans. Through salary account they also know my income (and the increments). It can provide me competitive interest rates on a loan. Neo Banks can step up the game here by harnessing the data from my account, spends, savings and a host of other signals to provide me a machine learning computed interest rate for any kind of loan needs that I may have

Invite Only Bank - This is tried and tested method. Xiaomi excelled at it. So did Oneplus in its early days. It was a roaring success. Popular email client Superhuman continues to grow well with good product and exclusivity marketing through this approach.

Neo Banks could use this approach. Besides the fact of creating artificial supply shortage and associated vanity of getting the invite, this method also enables self selection. Only those users who are really interested in trying it out will eagerly wait and apply for it. Startup communities, early jobbers are in general considered to be early adopters and they come with higher disposable incomes. Given the buzz around Neo Banks, I am sure the invites when opened will be gone in few minutes!

Can the Neo bank provide a superior customer support?

Powerful Self Help Tool - Given that Neo banks are going to be digital only, they should ensure that the self serve section is powerful and intuitive so that all user queries are resolved satisfactorily without the need to call the customer support. No one wants to go through the arduous task of dialing the number, going through the IVR maze and then finally, after waiting for few godforsaken 20 minutes, you speak to an actual human. If the self serve with chat capability can solve my query then I don't have any need to call the support. I find Swiggy's chat based self help interface quite intuitive and empowered and I rarely had to reach out to customer support. I also love the fact that Amazon provides you an option to connect to an agent instantly without any IVR (though it does ensures that you try out their self help tool first)

Can the Neo bank provide me a sense of community belonging?

Can Neo Banks create a sense of community among its customers through various initiatives? Cred's business model is around building a trusted community of high credit score individuals and enable opportunities for them. Neo Banks could cross-pollinate ideas from other sectors -

Meet Ups - Regular meet-ups and invite-only exclusive events for customers to network, share and help each other

Discussion Forums - Online forum to discuss on ideas, clarify doubts and perhaps co-create the bank by collaborating with community members! Xiaomi created a loyal fan base through not only selling good quality phones and other hardware products but also making customers be a part of the software and hardware development. The Mi community is quite active. Another popular Latin American Neo Bank startup - NuBank has an active community of its users

Partnering for Social Cause - Neo Bank can partner with various charitable organisations and collaborate with its customer base in supporting these organisations. Donations from community members can be matched by Neo Bank in certain percentage. Members also get the benefit of tax exemptions on the donated amount. Besides this, members will get a feeling of belonging to a community and for a good cause. It also makes Neo Bank focus on the zenith of elemental value pyramid i.e. Self-transcendence.

API Economy - Slack grew exponentially on the back of a solid product and an equally popular developer ecosystem. Android and iOS popularity is due to availability of plethora of apps in different categories in their ecosystem. Amazon, Microsoft, Google, Salesforce, Shopify and many other companies have a strong developer community building applications over existing products via APIs

This API economy has spawned a whole lot of successful companies and also acted as a defensible moat. Here is the standard strategy: Build & Launch APIs -> Run Hackathons & Dev Meets -> Get Apps / Features Quickly and Cost Effectively -> Repeat.

I think it is a brilliant way to co-create the Neo Bank by partnering with other startups and developer community in build these features

As observed from above suggested features, Neo Banks can potentially touch multiple Functional and Emotional Value Elements beyond the ones that are associated with banking - Quality, Saves Time, Reduces Anxiety, Simplifies and Heirloom. It additionally can also play a bigger role in Life changing value element as well as self-transcendence through a community / co-creation driven business model.

This is just an outsider perspective of a hopeful future Neo bank customer! Most of the Indian Neo banks are still in development phases and early beta is expected sometime in April / May. Happy to try out them all!

I hope this article will be useful read for curious cats like me as well as founders and product managers of Neo Banks. Do share your feedback / questions in the comments.