The new PSD2 regulation, which will force banks to open up their consumer financial information via open APIs, makes innovation within the banking landscape even more dynamic.
A striking player in this story is Tink, a fast-growing game changer. Tink products consist of Account Aggregation, Payment Initiation, Personal Finance Management and Product Recommendations. Tink’s APIs could pave the way for new high-tech services, ranging from credit checks to mortgage comparisons, even before PSD2 starts in 2019. Tink hopes to expand the API platform throughout Europe.
With the Tink app, users can, among other things, connect all their cards with current and savings accounts. In Sweden, they already have 500,000 users.
Steven Dupont (#WhatsNext) talked with Daniel Kjellén (CEO, Tink) about combining data and delivering value, the ideal banking-app, and about Tink’s partnership in Belgium with BNP Paribas Fortis.
Steven Dupont: 2012, you guys started. 2013, the Tink app. 2018, a trendsetter. What a ride. How did you experience all of this?
Daniel Kjellén: It’s been a journey of pushing the boundaries of Open and Data Driven Banking. We made a bunch of mistakes and we learned from them. I think all of the innovative stuff, pushing boundaries, comes from failure to some extent. To give you a basic example; we started off in 2012 with a beta version which was ‘desktop only’. About 15 people signed up a day, and nobody came back. It just didn’t work out. Mind you, it was a beautiful tool and you could make analyses and everything, but the user base was very very limited and – Sweden being a small market – it didn’t work out.
If you look at competitors like Mint in the US, they have an enormous market. We said – with six months left of money – ‘we need to do something dramatically different’, so we decided to go completely mobile, which wasn’t obvious at the time. “Let’s flip everything around”, instead of you having to do the analysis yourself, we’ll do it for you and then give you bitesize financial information that you can consume on the toilet or the bus.
By the next version we realized that ‘read only PFM’ (Personal Finance Management), as a use case, wasn’t important enough and that what we needed to do was, when you have all these accounts, you need to start interacting with them, and be able to make transfers.
Steven: Indeed, you should really be able to do something with it, not just read it.
Daniel: Exactly, so then we pushed it. When we went from just ‘paying bills’ and ‘viewing balances’, to actually give you tangible advice, you need to be able to act upon it. Instead of us saying things like “we see that you overspent in a certain category”, or “your mortgage is not ideal”, … there should be a button saying, ‘move my mortgage then’.
It needs to be “actionable” for it to be “relevant” enough. And I think that’s about the journey that we’ve been through. A journey to be more and more relevant.
We are a technology and product company at heart, but of course we want to make that technology as useful as possible, for as many people as possible.
Steven: Last year, after raising €14 million in funding from a consortium of traditional and online banks, you started licensing your technology to banks. In Belgium, we saw a partnership announced with BNP Paribas Fortis and earlier with ABN AMRO in the Netherlands.
Daniel: In 2015, when we started partnering up with our first bank, ABN AMRO, that was also a bit of a trial and error. It was a fantastic way for us to leverage this technology to more people, more users, being more useful.
And last year we launched our enterprise offering. Tink, now with 90 employees, is essentially a B2B company, that’s where we see that we bring the most value.
And we are in the process of scaling this throughout Europe. Two things have been extremely important for us, when we partner with banks: One, we want to see that they have the mindset, the willingness and the ability to go somewhere. And two, that we have the ability to deliver.
Steven: BNP Paribas Fortis has been an innovative company in recent years. For instance, by introducing GooglePay in Belgium.
Daniel: And that is what we saw in BNP Paribas Fortis. They have the ambition and it matched our capabilities. And of course, it’s one of the iconic brands on a European scale and we are really proud of being associated with them.
Tink is still growing and customers talk to each other. If people aren’t happy, it’s going to be a disaster. From our side, we only have eternal partnerships and we never had a breakup. We hope to be a long-term partner.
Steven: At the Slush convention in 2014, you talked about the average user retention of apps. Weather report apps got the highest user retention, and at the bottom of the list were the Budget Management apps. Banking and financial management was boring and your funding was almost exhausted. Looking at the success of Tink, it’s a good thing you didn’t start with a Weather app.
Daniel: Indeed. Either we got the PFM together or we needed to really think of what to do. Just like the Financial Times had its headline in 2013, ‘is banking going for its own Spotify moment?’, well we believe there will be a Spotify moment in banking. Where everything is replaced with something new and game changing. That is why we started in this business. Sometimes we joke and say ‘Tink is the worst business idea ever’, but it’s a decent execution of the idea and we are very proud of pushing boundaries and wanting to be in the forefront.
Steven: Then what are your thoughts about the possible Spotify moment for “banking apps”? Will there be a moment when only one consumer preferred app emerges and the banking apps become superfluous?
Daniel: What we traditionally see in banking, with the digitalization, is primarily making existing relationships and processes more efficient. We still have our main bank, we still communicate with it. I still make payments; my bank still gets data … All on the same infrastructure, but it’s now being digitalized and more efficient.
I think Open Banking and true Data Driven Banking has the potential of being something completely new. It brings in transparency, and it gives the ability to people to have better deals. Today, there is a very small minority of people that have the perfect financial setup. The exact right pension, the correct mortgage, the best saving accounts, … maybe that’s 5% of the population.
What if 95% of the people had the perfect setup? And perfect doesn’t mean cheapest. It’s more ‘what I want as a customer’, either it is “I know all the details and I care about the last penny”, or maybe its “just fix it”. I want peace of mind. But right now, it’s a very universal product for everyone.
Steven: Young customers ‘inherit’ their bank from their parents. The parents are customers with a bank. They once opened an account for the children and often these children, even as adults, stay with that bank. A mortgage loan can sometimes change that. Your services will undoubtedly make consumers much more mobile and let them cherry-pick.
Daniel: And like we talked about before, for the moment, the best way to have new customers is to sit and wait for your current customers to mate and maybe in 18 years you’ll have new ones. When people have the ability to switch banks, or cherry-pick products, or they turn on the autopilot with BNP Paribas Fortis… that would be a transformation. You would see customers choose and move.
Steven: Interesting. We can see that the banks are increasingly expanding their mobile banking. Their bricks footprint is reduced and they focus on personal (remote) advice (by appointment) and added value. Some banks go for a banking app, others for app and web. And those apps have different features, depending on the type of mobile device they are running on (smartphone, tablet, …). So how do you see the banking app of the future?
Daniel: I think it would be a bank-agnostic one. If you look at the core capabilities that we discussed before, like the data part, and the infrastructure part, viewing balances, making payments, the insights, the advice and the product selling… none of that is really dependent of you being customer with one bank.
About the banking app of the future: I think it would be a bank-agnostic one.
We saw a trend where insights and budgeting features were put in separate apps a few years ago, but now most people realize that this is going to be core banking and we should “get this right”. It should not be put somewhere else, but there where people interact with it every day. So, we’ll have to get this holy grail together: combining the data and delivering the value.
I believe the individual adjustment is important because not every customer will have the same interest in knowledge or will want the same granularity of a device. Myself, I would want an autopilot. It would be my dream come true if you would offer me that. An autopilot that I could just turn on. It might cost slightly more but I would know that you make sure that “everything is working for me”.
Steven: That you always get the best choices…
Daniel: It doesn’t even need to be a ‘good’ choice, but a choice I can trust.
I would say that Apple, to some extent, is in that market. They make sure that if you invest in the Apple ecosystem, it always works out. It’s never the cheapest one and it will never be, but it’s a safe bet of quality.
And then you say: ‘I need an Apple Watch because it WILL connect’. Most probably there would be non-Apple products that would also connect with your iPhone, but you “choose for the convenience”.
It will be a very important parameter to get that adjustment right, from granularity to autopilot, and then I think it will be bank-agnostic.
Steven: You mentioned Apple. It’s a battle of the apps but just as well a battle of the ecosystems. ING Netherlands will focus on voice control. They already had their speech assistant INGE but are now going to enter into a partnership with Google Assistant, the digital assistant of technology company Google. It looks like ING account holders will be able to transfer money via Google Assistant by voice commands in the summer of 2018. Google will have to launch the Google Assistant in the Netherlands first.
Daniel: I don’t think these support the Swedish markets yet and I believe you kind of have to live with it to fully understand the potential of it. It’s a shame but I’m not there.
Steven: Amazon and Paypal are entering the banking arena, offering credit and debit cards, current accounts, small consumer and professional credits. In your opinion, a threat?
Daniel: I think that the large tech giants are simply interested in facilitating their core business, rather than banking being there new core business. But of course, when they become successful enough, even the outskirts of their core business might be the core business of someone else. I think that it seems unlikely they put up a regular bank. It’s rather that they want to give working capital to their resellers etc. And of course, they’re going to be able to cherry-pick and they may take away large profitability chunks.
What we see as a megatrend in the industry, is that data is going to be even more important. Having access to the correct data set and then using it to help people understand their finances. It’s for the bank to understand their customers and to do “data driven advice”, but it’s also paring this knowledge with products and make them relevant.
It’s for the bank to understand their customers and to do “data driven advice”, but it’s also paring this knowledge with products and make them relevant.
For example, when we do mortgage switching. We aggregate data from competitors, and then we say “the mortgages at bank X seem to be overprized”,… you aggregate that data, you make someone aware, you get a holistic picture, you understand the message, and then we give advice and pair you with another mortgage provider. “Boom, do it”. That would be the holy grail of data driven banking.
Steven: Contrary to the Scandinavian countries, the change appetite among Belgian consumers is not so large. Contactless payments are growing slow, mobile banking is on the rise but still encounters prejudices about security etc. Privacy is also a hot topic.
How do you see the sharing of consumer data evolve in a privacy-sensitive and conservative market?
Daniel: So, I see a few articles these days (Accenture Study, UK) that people wouldn’t trust anyone else with their bank details. I think that makes a lot of sense. Finances our often a sensitive topic.
“You need to deserve trust over time”. It’s not something you get in a snap, like ‘they’re a cool start-up so they deserve my trust’. It doesn’t work that way.
We had this discussion in 2013 in Sweden, there was no positive article for the first 1,5 year about Tink. It was all about privacy and security concerns, … and you can’t say ‘just trust me’, you need to be professional every day. And when you do that, and you deliver value and you don’t let anyone down… it will work. For some people it takes a week, or a month, and for some people it takes 4 years to say that they have a trusting feeling.
And I think that Tink could be a household name. Besides all the big banks. I’m just saying it’s not undoable and that it’s not always going to be ‘only banks’, … it will take some time.
Steven: Of course, consumers know when they use social media, they leave a lot of privacy behind. And yet they choose to stay on social media. When people see the usability and convenience like apps such as Tink, they will go for it as it’s not the same kind of privacy we throw on social media and it’s not the privacy inside our home.
Daniel: Tink is being very cautious about this and we would never ever give data to anyone about you unless you explicitly tell us to do so. And the only case we do it is when we give you better providers and better solutions.
New API platform
Steven: About your new API platform. Giving third-party developers access to consumer account information from hundreds of Scandinavian banks and financial institutions. This means that the same technology that Tink previously gave to banking partners is now open to any company that wants to access the account details of a particular consumer (with consumer consent).
Daniel: There has been a fantastic response. The platform is live and we had about 200 developers signing up the first 3 days. And remember, it’s a very narrow use case. We are opening up the entire post-PSD2 experience that everyone had expected to happen in September 2019 at the earliest. And then by having 300 different APIs for all the different banks in the Nordics, we just opened that up and put things like data categorization on top of that, … yeah, it created some buzz.
It’s essentially the same technology that we deliver to large banks, like BNP Paribas Fortis. But for us it’s also another way to serve another part of the market where we see a lot of innovation. It’s a part of the market where we have our own heritage being a fintech ourselves, thriving in innovation. And we see very fast learnings, like a lot of best practices coming out. I expect it will take a few months rather than a few years for new products to be built on this new platform.
” I expect it will take a few months rather than a few years for new products to be built on this new platform. ”
Steven: Anything else new you can shine a little light on?
Daniel: At the consumer side of Tink, it’s about adding more products and about being more tangible. Less like non-actionable insights, and more actionable insights, so that the users can act on the bite sized information we provide.
Steven: To what extent will new technology such as Tink’s change society? E.g. on customer behaviour, on financial education of consumers? How do we handle our money? What benefits do you see for the consumer? More insights?
Daniel: I actually think they will have a lot less insights, because I think that finances have been constructed in a way that is extremely complicated for people to understand. I worked in an investment bank for a couple of years and I have a degree in economics but I still don’t think I’m qualified enough to make investment decisions for myself. I can’t tell the monkey from the genius. And if I can’t, maybe 95% of the people are in the same bracket. When I walk into a bank, I’ll have a choice out of 800 funds and then obviously, I need to get educated a bit.
When finances get data-driven, they can be simplified and the best solution provided for my investments. I’d be happy to pay a fee for that service.
Steven: When I talk to people about solutions that Tink provides, and when I say they could change their mortgage with a push to the button, they’re sometimes in shock knowing what a hassle it usually is to change a mortgage.
Daniel: If there is 30 pages of contracts to go thru, and I have to GO to the branch office, to have negotiations, then of course people have to spend time and think it’s not going to work. And that is why we need to simplify. There is a large potential for simplifying. That doesn’t mean taking out margins, but simplifying!
And then I think people will get less educated. Actually, I think they ‘should be less educated’ because it’s not a general truth that people should have all financial knowledge. Hundreds of years ago people where experts in for example “how do I smell if water is OK to drink”. And then that knowledge vanished, water became just OK.
Steven: Would you like to add something yourself, for our readers?
Daniel Kjellén: Yes, that we are super proud that BNP Paribas Fortis partnered with us and that they saw that we have the ability to deliver something and that BNP Paribas Fortis has so many ambitious goals to bring to their customers.
And of course, this partnership is part of our internationalization. Once you reach an agreement with iconic banks like them, it’s something we are truly proud of and it means allot to us.
Steven Dupont: Thank you for this interview, and good luck.
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