In the latest episode of the Samsung interview series, Samsung's president and chief strategy officer, Young Sohn, is joined by Dr Roland Folz, CEO of Solarisbank and expert in modern banking, to discuss the megatrends that are driving these changes.
Banking is one of the oldest industries in the world. Its essence has remained more or less unchanged since the 14th century — with banks acting as mediators between those wishing to buy and sell.
In the last few decades, however, this static system began to change, as direct banks, discount brokers and, later, players such as neobanks quickly entered the market, creating new competition for old institutions.
The result has been a shift of power: rather than financial data being stored in the heads and books of bank advisors, technical advancements have given customers more control over their finances.
ATMs, for example, helped people access funds on their schedule, rather than their bank’s operating hours. The customer experience improved, but still, these changes were limited and directed by the banks themselves.
Today, we see a new transformation, driven not by the banks but by two megatrends: a dwindling number of cash transactions and the widespread adoption of digital technology.
In just a few years, customer behaviours and expectations have changed dramatically alongside mobile technology. Younger generations are accustomed to having constant access to information and the ease of virtual transactions in nearly every area of their lives. So why would banking be any different?
If someone can order everything from sandwiches to a minivan from their phones, it seems absurd to have to travel to a physical location to get money or apply for a loan.
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The transition from physical to digital is happening at different speeds in different countries, but the transformation is inevitable.
Disruption in the next wave of financial services
The next wave of banking is not just allowing customers to access their funds anywhere and anytime, but integrating banks into the purchasing process. This means, for example, getting credit on everyday purchases.
It’s called “contextual financing,” and it’s not entirely new — anyone who has financed a car is familiar with how it works. Pick out a vehicle, and the dealership will help you get a loan so you can buy it, then and there.
What is different today is that the size of the items being financed is getting lower and lower, which presents a challenge.
The long-term repayment rate that comes with purchasing cars means dealerships are sure to make a profit. But the payoff may not be as clear-cut for smaller ticket sizes — for example, car-sharing solutions that provide vehicles for just 30 minutes.
Profiting from multiple microtransactions is more difficult, especially with complicated banking regulations, so businesses have been far less likely to offer the seamless financing of a car for other goods and services.
Solarisbank, a German fintech which offers back end financial services to other companies and earlier this year raised a €60m funding round, is one of the companies making that an obstacle of the past.
It can facilitate these payments and enable any type of financial service — big or small — on a digital basis. And as a smaller, more agile tech company, it is quickly adapting and providing the solutions that can power more innovation in this industry.
It’s about a financial solution integrated in the consumer event.
Customer focus in banking-as-a-service
According to Folz, CEO of Solarisbank, the winners of this banking transformation will be those that put customer’s needs and desires at the centre of their business model.
When companies offer seamless, integrated, real-time solutions, profit will follow, he says. These need to be as fast and convenient as possible from a digital delivery perspective. That’s why banking-as-a-service is becoming an integral part of most digital offers, whether for ecommerce providers or car-sharing apps.
As Folz puts it: “It’s not about providing a banking solution to a good consumer solution, it’s about a financial solution integrated in the consumer event.”
A simple and uniform user experience is particularly important. Just a few years ago, if you bought something from an ecommerce site, you would be redirected to an external payment process with a different interface — often requiring new credentials and complicating the purchasing process.
Today, that nuisance is much less common. Still, it can be a challenge for financial service providers and ecommerce sites to keep up. They must adapt to provide the best user experience while meeting the safest data protection requirements.
That’s why partnerships with companies like Solarisbank, that make transactions seamless, easy and safe, are so exciting. Without keeping up with the latest in financing technology or regulations, companies can focus on the goods and services that make up the core of their business.
Solarisbank isn’t just helping to transform one of the oldest industries; it’s changing the consumer experience and meeting customers where they are in this on-demand economy. It’s a bellwether for innovation to come.
In the new episode of "The Next Wave," Folz and Sohn take a look at the trends driving the digital age and explore what emerging providers should look out for if they hope to survive in this market.