What dating apps can teach us about Open Banking

Technology can connect people with endless options, while encouraging no commitment

“It’s just a numbers game. Before, I could go out to a bar and talk to one girl, but now I can sit at home on Tinder and talk to 15 girls…”

When Vanity Fair interviewed a series of twentysomethings for their article, “Tinder and the Dawn of the Dating Apocalypse”, the resounding sentiment was perfectly captured by that one quote. This “Tinder Phenomenon” can be explained by technology’s ability to connect people with endless options, while encouraging people to commit to, well, nobody.

In banking, digital is proving to be a similarly double-edged sword. On one hand, digital allows brands to be top-of-mind and to deeply engage with their customers. On the other hand, it fuses short attention spans with too many alternatives, creating what can only be described as non-committal consumerism.

Is banking monogamy dead?

Comparing banking to Tinder is fitting when you consider how Open Banking has commoditised financial services in Europe. It used to be that you chose a banking provider based on proximity, and that only financial institutions could sell financial products; but today, branchless fintechs, big tech, neobanks, and accounting platforms are all serious players, too. Dating apps are the free-market economy come to sex, and Open Banking is the free-market economy come to banking.

As people become more digitally-savvy about their banking, they’re also more comfortable shopping around based on price, rate, or features. The result? The average Brit shares their financial life with three financial institutions.

Are banks being traded in for a (younger) newer model?

Even so, unlike what many industry experts predict – that the challenger banks are going to snag the long-term customer relationship and leave incumbents in the dust – it’s more probable that customers are going to shift to multiple short-term relationships, instead.

What we’ve learned from dating apps, is that when there’s a surplus of options, the whole system shifts towards a “hook-up mentality”. Where historically 15, 20, even 30-year banking relationships were the norm, in coming years we’re more likely to see customers engaging with several providers simultaneously, on a needs-by-needs basis.

Soaring deal activity in the challenger banking space and a superior customer experience makes these entrants seem like formidable competitors, but an attractive UX without a sustainable revenue model doesn’t scream long-term potential.

Customers still wedded to high street… for now

Hurdles such as reluctance to switch accounts, low recognition, and lower brand trust are some of the harsher realities challengers are up against.

Take Monzo, arguably the biggest player in the challenger space and valued at £1 billion. The firm reported overall losses of £33.1 million last year, quadruple that of the previous year – luminous pink debit cards, and all. And though the bank hit an impressive one million current account holders, four in five of those customers don’t deposit their salaries with the bank. For now, it seems that customers are willing to field their options and stray, but not split from their primary bank altogether.

At the same time, customers hate contending with multiple financial apps, because too many options stress people out. Social theories have backed this up for decades, and yet the idea that choice is bad for our mental health flies in the face of what we’ve been told about Open Banking. How we choose to use our banking data confers on us freedom, agency, and empowerment. Except for when it also confers on us the personal responsibility of managing our own financial security. Choice no longer feels like a luxury, then.

Size matters, to an extent

So where is this all going to go? What happens after the democratisation of banking data? Will people ever commit to one provider? And who will they choose?

Incidentally, evolutionary psychology about dating may help predict the outcome of Open Banking – in part. That is, in many cases, the biggest contender with the deepest pockets will likely come out on top. As investments in digital channels and capabilities increase, the gap between what providers can offer their customers will widen.

We’re already seeing incumbents prove that they can afford to absorb trending business models, launching their own competitive digital-first propositions: Superdigital by Santander in Brazil, Azlo (the US) and Denizen (Spain and the US) by BBVA, Mettle by RBS in the UK, and others.

But in banking, like in modern dating, being big and rich isn’t good enough; being a provider isn’t good enough. Indeed, many of the big banks will fail precisely because they’re relying on the vestiges of power dynamics, throwing money at the problem instead of listening to their customers’ needs.

The firms who win the customer relationship must demonstrate that they’re long-term partner material, or risk being replaced. For bankers, that means prioritising:

• Compatibility

Achieving unparalleled customer fit with a specific segment or market, instead of an en mass strategy.

• Trust

Trust in terms of data confidentiality and cybersecurity, as well as transparency about fees are all make-or-break. Incumbents have a leg up on challengers in this department, and should continue to leverage their brand equity.

• Good will

A cultural shift is required in order to move beyond a transactional relationship. Banks must act in their customers’ best interest, and show that they’re invested in their customers’ financial health.

• Surprise and delight

Offering differentiated and superior products will keep customers satisfied for years to come.

May the best suitor win.

By Roxanne Voidonicolas, content marketing manager, Sensibill

*Dating theories expressed in this article do not reflect the official opinion of the author.