Outward VC, currently operating as INVC LLP*, have already invested in some revolutionary fintech start-ups. They’ve seen how customer-driven platform businesses allied to ubiquitous technology combined with an overhaul of regulation are changing the rules for personal finance, spending, saving and banking. It’s smarter uses of ever-more data touchpoints that’s driving this revolution.
As the expert panel pointed out, we’ve yet to reach a genuine tipping point. Despite the emergence of Open Banking and the popularity of many fintech services and challenger banks, there are still many millions of customers yet to embark on the journey into the kind of tailored, convenient services that are now on offer from fintechs and incumbent banks alike.
Technology has broken the rationale for bundling products and services in personal finance
Personal finance isn’t just about your mortgage, ISA, overdraft or credit card.
Increasingly we're seeing the emergence of combination of full-automate personal finance and human relationship managers.
We all know the cliché: ‘data is the new oil’.
A glance across the other trends that emerged in INVC’s Personal Finance panel lead us to the fifth trend.
New regulations have opened the door to ‘unbundled’ competitors. But a fragmented market is confusing to consumers and leaves little value for providers. The music industry provides clues to how this might change. There’s a clear evolution from big labels (financial incumbents), to multiple niche platforms (challengers and fintechs), through to broad one-stop-shops like Spotify or Apple Music.
The financial brands able to offer the smoothest aggregation of niche products in a trusted, convenient service will be the re-bundling winners.
Consumers are starting to see how all the different financial components fit together and want services that allow them to make smarter financial decisions in the round. Providers are seeing the potential here, too, and with the advent of Open Banking have the regulatory and technological tools to create all-round views for their customers.
This promises to become even more sticky when we start to analyse customer data faster and in more compelling ways.
At one end of the spectrum, there’s full-automated personal finance, guiding customers using rules-based systems for allocating risk and value. At the other end, there’s a fully tailored service that treats each customer as both a financial and emotional entity, using human relationship managers to optimise their outcomes.
But increasingly we’re seeing the emergence of new, hybrid models. These exploit the low cost and tight discipline of the automated model and ally it to a human component, ensuring the customers develop deep levels of trust and are able to meet their unique requirements. This poses big questions around skills, investment and customer targeting by the banks and fintechs.
But for the personal finance market, data is also the engine driving new products, platforms and customer experiences. The next frontier is the huge amount of non-conventional, less-structured, hard-to-capture data that currently exists outside of the personal finance models – and in many cases isn’t even in its orbit.
This will be particularly important for the currently underbanked, where better financial decision-making has to factor in the full range of financial interactions well outside the existing personal finance industry – from casual pay to hard choices about what most in the industry would consider unconscious spending.
This can be summed up as: the complete integration of finance into the wider lifestyle choices of customers. This comes from the bundles of tailored point solutions the industry is creating. It’s made clear from the holistic view of their financial existence that the platforms and Open Banking providers can offer.
The hybrid models emerging allow customers to tailor their finances to meet their wider needs without facing ‘computer says no’. And it’s all possible because of the granular data their technology generates.
Panel - hosted by Sanchit Dhote, Investment manager at INVC Fund. Featuring: Raman Bhatia, head of Digital Bank UK for HSBC, Lyndon Subroyen, Global Head of Digital for Investec, Diane Burridge, CEO of Moneyline, Ed Maslaveckas, CEO and co-founder of Bud, Ola Nordbye VC investor at Kinnevik.
Panel - hosted by Sanchit Dhote, Investment manager at INVC Fund. Featuring: Raman Bhatia, head of Digital Bank UK for HSBC, Lyndon Subroyen, Global Head of Digital for Investec, Diane Burridge, CEO of Moneyline, Ed Maslaveckas, CEO and co-founder of Bud, Ola Nordbye VC investor at Kinnevik.
*Currently in the legal process with the FCA and Companies House of changing the operating name from INVC Fund to Outward VC.
