After a great night at a restaurant with a group of friends, the last thing you want to worry about is money. Do you recognize the hassle of splitting bills, requesting money from your friends or the long wait before it is actually on your account? Today, there is a stream of apps enabling easy payments and other features, leading to new businesses overlapping the banking industry. As consumer behaviour and expectations are changing, organizations in all fields are required to change their offerings. Even the banking industry is experiencing this.
“Banks have a place in our online, ever-available, user-friendly and intuitive world. Yet they must find and claim their space quickly.” (Accenture)
Banks increasingly have to deal with competition from new entrants. As regulatory barriers appear to be low, these new entrants are exploiting digital innovations and in this way capture parts of the banking value chain (Busch & Moreno, 2014). Next to the bigger players such as Google and PayPal, (financial) start-ups are trying to disrupt banks with the development of smart apps. The status quo is an industry with banks that are not innovative and payment services that are innovative.
Since November 2015 the app bunq is available to consumers. Bunq is an IT start-up with a banking license and its motto is resocialising money, together. Bunq positions itself as a paying-app with a social element. IBAN is no longer needed, but instead you can use the contacts in your phone. It enables you to make payments real time, easily split the costs of a night out with your friends or keep track of the joint grocery bill. However, these options are not entirely new, as different apps and websites offer at least one of those. What makes bunq unique is the possibility to open a bank account. Different from other banks, bunq will not use the money of its customer accounts for other banking activities such as providing loans. By providing debit cards for a small price and paid business accounts they will make money. Everything else you do in the app is free.
The media describes bunq as a digital bank and the WhatsApp for banks. The switching costs for customers are reduced, as they do not need to switch immediately or entirely. You can use the bunq app for its additional service features, while staying with your current bank. Eventually, expanding the disruptive innovation should lead to conquering more customers from other banks. Nevertheless, Ali Niknam the founder of bunq predicts that one big bank for all purposes will be out-dated.
Banks are obviously aware of the competition and new offerings. Therefore they are also investing billions in the development of new technologies. For example, Twyp is a similar app offered by ING. In this way, conventional banks are trying to compete with the digital bank.
Busch, W. & Moreno, J.P. (2014) Banks’ New Competitors: Starbucks, Google, and Alibaba, Harvard Business Review