Moven inks deal with TD Bank – For PFM?

Moven inks deal with TD Bank – For PFM?
The rumors have been swirling for some time now that Moven was going to sign up a Canadian bank. This was announced today and I read about it in The Globe and Mail. Curiously, the article is titled, “TD Bank helps its customers pinch pennies with new app.” What does this mean exactly for Moven and TD? Is TD going to start a digital only bank/account or are they merely going to add PFM capabilities? It’s not clear to me if this will require the opening of a new account or not. I’m also not clear on if this will be a separate app or if it will be integrated into the existing TD apps. It is however quite clear that TD is honing in on PFM capabilities.
“We’ve been interested in [personal financial management], but adoption is very low.” – Rizwan Khalfan, SVP and Chief Digital Officer, TD Bank Group
The Canadian banking scene is super conservative, so this is no doubt an interesting move. This deal can provide great opportunities and also comes with some challenges. Great opportunities:
  • Banks absolutely need to try new things. Kudos to TD for taking a leap here in an effort to innovate and try something new. Their recent mobile wallet announcement is another great example.
  • Canadian consumers could benefit from new, exciting and useful mobile tools. The Canadian mobile landscape has been pretty quiet, with the most recent “innovation” being the launch of mobile remote deposit capture by some of the banks. There have been interesting mobile payments announcements (e.g. RBC and Bionym), but not much as it relates to classic banking.
  • Consumers need help managing their money and turn to their bank for advice. Our US consumer survey and Canadian consumer survey point quite clearly to this. Americans and Canadians prefer to use bank provided tools to manage their personal finances.
Possible challenges:
  • Adding features to TD’s simplistic mobile app could present technical and user experience challenges. Moven has a keen focus on the user experience. The existing TD smartphone app – well, not so much. TD’s Canadian tablet app is slow and buggy. We could not even install this app on our Android test tablets due to compatibility issues. This leads me to believe that TD will either completely overhaul their app or release Moven as a separate app/account.
  • Most PFM endeavours have not been very successful when it comes to customer adoption. Will Moven and TD manage to figure out how to get customers on board and actively using PFM? This is going to be extremely challenging. Celent has done all kinds of research on PFM and will be publishing a fresh report on this topic in the new year. The report will encourage banks to take a completely different approach to PFM – stay tuned for our insights on this topic.
  • The viability of a digital only bank is questionable. Can Canada or the United States sustain a digital only bank? Is there a future for the neobanks? See the following blog post for our viewpoint on this. The Canadian bank switch rate is quite low overall, though it is quite high (13% in 2013) for the 18-25 year old segment. Neobanks have a place, though they will have difficulty being successful in the near term.
Overall, I think this is a great announcement. I love the fact that TD is going to try something new here, and attempt to shake up the market a bit. I’m looking forward to seeing how this one plays out.

The challenges of the new neo bank

The challenges of the new neo bank
Since the launch of neo-banks like Moven, Simple, and GoBank, financial institutions in the US have been avidly monitoring their popularity. Some have written them off as non-starters; others have praised them as disruptors. In recent months, however, the neo-bank model has hit a few stumbling blocks that call into question the promise of the digital-only model, and gives credence to the sceptics. GoBank recently announced that it was going to stop allowing account opening via the mobile device. Users will now have to purchase an account opening “kit” from a store, adding significant friction to the process. Simple has experienced a number of issues related to payment scheduling, the “safe-to-spend feature,” and service outages or delays. Moven received $8 million to begin moving their app overseas in an effort to garner higher adoption. The promise of these new start-ups was a drastic improvement on customer experience, ditching traditionally stale financial services with improved digital offerings, social media integration, and a familiar/casual communication style. Yet these recent issues serve as a reality check for the neo-bank model—when your value proposition is customer experience, technical issues look 10x worse. It´s far from clear what will happen to these new market players, but Celent envisions a couple of different paths over the next few years.
  • Neo-banks are acquired and rolled into larger digital channels offerings: I wrote earlier this year about banks acquiring technology companies, thereby acting more like tech companies than traditional banks. The neo-bank model and acquisition of innovation are not that dissimilar, and BBVA´s acquisition of Simple is the conflation of both strategies. Through acquisition, BBVA is able to jump the steps of creating a culture for digital channels innovation, establishing a customer base (albeit small), and aligning internal resources required to launch a new service. There aren´t many neo-banks, but digital channels start-ups are numerous. This could be the way forward for institutions that are struggling with adapting the existing operating model to digital financial services.
  • Traditional institutions begin offering their own neo-bank, digital-only services: Fundamentally, there`s nothing truly disruptive about a neo-bank. There´s no secret algorithm, intellectual property, or disruptive idea at work, and many banks are more than capable of offering similar levels of service. Indeed some of them have already begun offering digital services through a separate digital brand. Examples globally include NAB´s UBank, ASB BankDirect, Banamex´s Blink, Hello Bank by BNP Paribas, and Customer Bancorp’s new mobile brand. With new brands, and often new platforms, these banks are testing the digital model. This should satisfy a growing number of digitally driven consumers, as well as provide a clear path for banks looking to move accounts to more digitally-focused services.
  • Neo-banks never become viable stand-alone business models, but they influence the way banks think about digital channels: Currently, most neo-banks aren´t banks–they rely on other institutions to handle the deposits, making them simple prepaid services with additional functionality. The reliance on third-parties is becoming a bottleneck for delivering the value neo-banks have come to represent. Without diversified financial offerings that encompass the entire financial need of the consumer, these “prepaid” services are pressed to create enough value to validate adoption. This is a major question when assessing viability.
There´s even a fourth scenario that could play out over a longer period of time: neo-banks become the primary way digital natives interact with financial institutions as they mature into adulthood. No matter which scenario plays out, neo-banks have undoubtedly moved the conversation around user experience and digital channels forward in a way that would not have happened otherwise. They are setting the bar high, with the big question being whether they will be able to gather the adoption needed to make their services sustainable. What do you think? Will the concept of neo-banks have a place within traditional banking?