FinTech

Big Banks Fight Back: Are Better Banking Apps Threatening FinTechs?

For years FinTech companies have made the pitch to consumers that their products were better, easier, and more efficient than their legacy competitors. This assessment was more or less true, as many big banks were not only bogged down by the expense of running their various branches but were also slow to adopt technologies that customers started to find useful. While certainly short of a mass exodus, more and more users began turning to personal finance apps and online banks to find the conveniences they craved.

Now it seems that banks may have seen that shift and made efforts to recover. Chris Welch of The Verge recently penned an opinion piece about how applications from major banks and credit card companies have grown leaps and bounds compared to only a year ago. In fact, as he explains, this has caused him to abandon some of the FinTech services he had previously embraced. So what’s changed about these apps and could the banks now threaten to beat startups at their own game?

In his article Welch points to a number of features that have made big banking apps more convenient to use. Among them is the use of Touch ID for iPhone, two-step verification for additional security, and even the introduction of NFC-equipped ATMs. Additionally he points to major customer service upgrades such as the ability to respond to fraudulent transaction concerns via SMS instead of having to call an 800 number in order to obtain approvals. 

Meanwhile he argues that FinTech companies have, to a certain point, rested on their laurels without realizing how much the competition has caught up. Specifically he cites a quote from Square CEO Jack Dorsey where he said, “It’s crazy to think about, but people just want a more modern interface to their finances. Something that’s simple and straightforward and modern really wins.” While Dorsey’s assessment is likely accurate, the insinuation that his company alone is currently offering such an experience is naive to say the least.

To further back up his claim that banking apps have improved on the whole, Welch points out that applications for several major institutions including Bank of America, Capital One, and Citi maintain an App Store rating of at least 4.5 stars. He did also find that Wells Fargo’s app was down to only 2.5 stars in the App Store but that could very well have more to do with recent scandals than actual functionality. To that point it may actually be more impressive that the other banks still rank so highly at a time when you might expect the entire industry to take a hit.

Overall Welch does make a compelling case. However he does fail to account for other benefits that FinTechs and online banks can offer that others can’t, such as better rates (both when borrowing and investing). Additionally, no matter how many features the individual banking apps may offer, it’s very unlikely that they’ll ever match the convenience of personal finance applications that support multiple accounts on one platform. So perhaps FinTechs should be on notice and do their best to re-up their game but the big guys still have plenty of room for improvement as well.

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