A growing sense of mistrust towards traditional banks after the 2008 financial crisis gave rise to many new fin-techs. These new fin-techs were focusing on new financial services, including crowdfunding, mobile payment solutions and financial platform, which traditional banks were not offering to large extent at that time (Darolles, 2016). Personalized solutions to financial matters offered by these fin-techs were in stark contrast with the traditional finite services and products offered by traditional banks. Technological advantages and new regulation reduce the entry barriers to the financial sector, which give fin-techs access to technological solutions at much lower cost as traditional players often have a disadvantage due to their technological architecture (Darolles, 2016). Millennials in particular have lost their interest in financial matters, as traditional banking is considered too functional (Tuk, 2018). Fin-techs focus on this generation with new interactive solutions where customers are actively involved in solutions for financial matters.
Traditionally, banks were the only institutions that had direct access to customer financial data. With the introduction of new European financial regulation (PSD2) last month, the way how we interact with our banks may fundamentally change. The most fundamental change of the new PSD2 regulation is that banks are obliged to share financial data with third parties if a customer wants to share them (Manthorpe, 2018). In this way, third-parties, like fin-techs, can access the bank account of a bank customer through an API and provide services on the basis of this data. APIs have been used for years, but last decade’s technological developments allow banks to operate a new form of API management. Financial account data resulted from open APIs is used by the newcomers and therefore challenge traditional banks. For traditional banks the new PSD2 regulation have large strategic implementation as they may lose the customer interaction and just become infrastructure providers while others leverage on more profitable financial services. So, long-term success of traditional banks depends on how they respond. To a large extent, traditional banks are now collaborating with fin-techs that provide these third-party services. INGs answer to these developments is the application Yolt, a smart money management application, leveraging on the developments of PSD2 and open banking.
How does Yolt work?
Yolt mines customer data across different accounts of different banks and provides them in a single overview to manage all financial matters (Schiffers, 2017). Integrating accounts from different bank accounts provides Yolt with an extensive dataset from which the application can analyze financial behavior. In this way, data analysis can predict balances and provide tips on budgeting and savings, which will give customers more insight into their finance (Tuk, 2018). This does not stop here, as Yolt offers a special marketplace for partners. For example, utility service providers can collaborate as a partner with Yolt and offer comparing services on the basis of financial data of the customers (Tuk, 2018). So, if your energy bill may be reduced by switching energy provider, Yolt will automatically notify the customer. Furthermore, customers can actively be involved when one of their contracts ends. Again, Yolt will automatically notify the customer and may offer substitutes to the current contract.
After one year of developing the application internally at ING, Yolt was released to the public in the summer of 2017 in the United Kingdom (Schiffers, 2017). In January 2018, the introduction month of the new PSD2 regulation, Yolt had 100.000 users (Schiffers, 2017). As PSD2 will mandate banks to share financial data, competition about financial data will be fierce as Yolt will not only compete with traditional banks but also big tech companies like Google and Apple who both have their interest in managing finance. From a customer’s perspective, using an open banking initiative like Yolt puts the customer back in control and possession of their own financial data and can decide themselves how they want to participate in analyzing their data. The traditional financial ecosystem limits customers in awareness and access to better opportunities, which is one of the reasons that bank customers do not change quickly the bank that their parents also had. Transparency did shake up many industries, like how Trivago did shake up the travel industry, Yolt may shake up the financial sector by providing the most fitting financial product to the customer (Tuk, 2018). This may disadvantage the parent company ING, as Yolt will offer also products and services from competitors. So, from Yolt/ING’s perspective the Yolt platform is a way to leverage new regulation that will strategically impact a traditional bank like ING. In this way, ING can test new ideas concerning open banking and PSD2 in the UK market. This market is particularly important as the UK government is one of the frontrunners in the EU in terms of open banking (Manthorpe, 2017). In collaboration with the eight largest banks in the UK, Open Banking Limited a non-profit organization, has already been set up to streamline and standardize the processes to facilitate an open banking ecosystem (Manthorpe, 2017). Learning from the UK launch, ING could leverage open banking in other markets as well. Furthermore, ING can test new revenue possibilities as Yolt will receive a commission on the contract concluded through the platform.
In summary, Yolt will bring value to both the consumer as well as ING, by providing insights into financial data and related products and services as well as providing insights how to best practically apply the possibilities of the new regulation.
Darolles, S. (2016). The rise of fintechs and their regulation. Financial Stability Review, 20(4), 85-92. Retrieved from https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-20_2016-04.pdf
Manthorpe, R. (2018). To change how you use money, Open Banking must break banks. Wired.co.uk. Retrieved 17 February 2018, from http://www.wired.co.uk/article/psd2-future-of-banking
Schiffers, M. (2018). Yolt verkent voor ING de wereld van fintech. Fd.nl. Retrieved 17 February 2018, from https://fd.nl/ondernemen/1230113/yolt-verkent-voor-ing-de-wereld-van-fintech
Tuk, Y. (2018). Fintech Yolt over eigen groei en komst PSD2: ‘Niet direct open Europa’. Emerce.nl. Retrieved 17 February 2018, from https://www.emerce.nl/achtergrond/fintech-yolt-groei-impact-psd2-direct-open-europa