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The number of financial startups is skyrocketing. Why do financial startups outplay banks? I believe it happens because startups are simple and clear.
Many banks have their mobile banks (not to be confused with mobile versions of internet banks). Some of them are pretty good. However, in general they pursue the model “bank first”, where bank is primary and mobile is just an aspect of “multichannel distribution” of a financial institution (a trend of the last 2-3 years). Moreover, it often turns out to be incomplete bank – some key functions are only available through other channels.



The most recent trends in modern banking industry are online-oriented services, social networks as scoring instruments and gamification of traditional banking activities.
The latest established banks are originally designed for those who “live” online. For instance, Dutch Knab (financial group Aegon), Austrian Zuno (Raiffeisen Bank International) that operates in Austria, the Czech Republic and Slovakia, and German Fidor. In addition, focusing on online, this business-model has a number of specific features: the emphasis is put on relations instead of products, scoring systems are used instead of social networks, and game logic and ripple effect replace rational thinking. Typically services are purely functional and are based on rational motivation of users, while latest online projects are often involving a fashion trend for gamification, e.g., for each goal the service adds extra interest on the balance.
Fidor bank which is focused on social networks, from which it can get information on customer’s risk profile and offer the most suitable product to this client. For instance, the bank cares about the number of customer’s friends and how he can influence them with his account. Gamification is also in place, for example, you are asked to identify savings goals and when you have achieved them the bank “gifts” you an interest for “conquest”, just like in a game.
Some banks are online because it is cheaper than offline, but they still attract classic (“not virtual”) customers, while others are tailor-made for those “living” online. These customers are used to convenience of iPhone usability, to their social environment and content on Facebook, and they need banks at the junction of these two requirements.
Simple and PingIt are pursuing the “mobile first” model: there is a mobile phone with installed application allowing performance of certain financial operations. If something cannot be performed, one can use “supporting” service channels. The target groups of these projects are smartphone and Facebook users. They are used to storing their contacts in a phone and in a friend list in social networks, so they do not want to go to a bank and keep in mind account numbers of people to whom they need to transfer money. The bank analyzes information about the customer location at the time of mobile transaction, processes this information and provides better analytical data on spending and the most personalized offer.
Beside well known Simple, which is an absolute leader in the industry, there is probably less functional but more commercially successful application PingIt. This is a startup of the British Barclays bank. Although this bank has a pretty good mobile bank, the independent project with a separate team managed to amaze and sweep the market. What makes this application unique? It is tailor-made for those “living” constantly online. These people are used to convenience of iPhone usability, to their social environment and content on Facebook, and they need banks at the junction of these two requirements. To start using the app you do not need to be Barclays’ customer, you can simply download it from AppStore. You do not have to remember account numbers and passport details of your friends in order to make a transfer; you can just select a person from your friends list on Facebook or from your contacts on the phone.
Another famous U.S. based startup, Moven is an innovator in the banking sector that “declined” the paper and plastic technologies. “Daily non-card bank” is an exclusively new model of bank, which applies social, mobile and gamification technologies. The bank is the first to fully implement a new scoring system based on the analysis of social information from social networks. Moven combines the best aspects of both financial services provider and customer-focused technical start-up. It integrates mobile, online engagement, social media and gamification into a new kind of customer service. Moven uses social marketing in social networks: users can increase their credit score and receive other benefits by referring friends to sign up for accounts. Moreover, the gaming aspect includes rewards and incentives for good financial behavior, for example, for reaching savings goals, for paying off outstanding bills, for using your Moven App to pay for a taxi or for making donations. Moven doesn’t issue plastic cards for its customers, and instead it utilizies the NFC (Near-Field Communication) capability of a phone to act as a payment device.
It’s obvious that mobile banking services provided by “offline-banks” will always struggle against electronic services with similar functions, e-wallets. The general hypothesis of the relationship between e-wallets and m-banks is that while large offline banks don’t want to actively develop online channels, this niche shall be filled by online services, which will later challenge those banks in real life as well.
One of the most notable startups in this area, “Simple”, has recently celebrated its first birthday after launch. The current Simple’s indicators are: 250k pending invites, 40k clients, more than $1 in performed transactions, $100M in deposits, 2M real card transactions and 72 employees. Also, in Q2 Simple m-bank introduced new features, such as target-oriented accounts and mobile check deposit feature.
Several important announcements concerning e-payments were made at traditional developer conference Google I/O in SA . First of all, Google gave up the idea of delivering their e-wallet offline. NFC Google Wallet card shall not exist; the project’s vice president gave his notice. Secondly, e-wallet users will be able to send money using just an email. Thirdly, the company announced a new API for instantaneous online purchases via mobile. And finally, any loyalty cards can now be connected to Google Wallet. Gmail users are currently receiving invites to Google Wallet.
Lemon Wallet, a serious competitor of Google Wallet and Apple Passbook, updated its mobile app and is ready to push PayPal.   Lemon Wallet mobile app can store photos and data about all of user’s cards: both payment cards (banking, loyalty, etc.) as well as other (Social Security cards, driver’s license, etc.). It can also display current balance and remainders on registered receipts and registered bank cards. A new American financial startup came into existence. It’s intended for students, and their motto is: ‘Socially responsible banking’. It features quality integration with social networks and services like tripadvisor.
It’s worth to pay attention that one of the biggest and most active players in financial sphere has come not from the financial sector. Every tenth purchase in the U.S. coffeehouse chain Starbucks is made with Starbucks mobile app, which is available for smartphones on Android and iOS . On average Starbucks customers conduct 3 million mobile transactions per week. Over the past year the number of mobile payments in Starbucks has increased over six times. Starbucks released mobile payment app in 2011. In the summer of 2012 the retail chain started accepting payments via mobile credit card terminals Square. Starbucks has recently issued another excellent quarterly report for investors and analytics. Howard Schultz wrote the new record figures down to menu diversification and mobile market segment, which allows it to attract younger generation, enables customers to invent new meals, pay-by-app and place preorders, thus, reducing queues.

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