Saving 2.0: Breaking Free from Tradition

In Belgium, the traditional savings account remains highly popular, boasting a total deposit of over 300 billion EUR. With approximately 11.5 million inhabitants, this averages to about 25,000 EUR per Belgian on their savings account. However, this is an average value; most Belgians do not have this amount on their saving account, which means some hold substantially larger amounts.

Nevertheless, the savings account has come under scrutiny in recent years due to several reasons:

For years, the interest accrued from savings accounts fails to keep up with inflation rates. Consequently, money on a savings account gradually loses its value.
Following the banking crisis, a lot of people could not access their funds for very long times, due to placing them at banks that came into financial troubles (e.g. people who deposited their savings at Kaupthing bank or Optima Bank). Although deposits are protected by a 100.000 EUR guarantee, this may prove insufficient for those with substantial savings.
The emergence of crypto-investment platforms (e.g. CoinBase or Binance) and online Fintech brokers (e.g. Robinhood, eToro or EasyBroker) has significantly lowered the barriers and costs associated with investing, presenting viable alternatives to traditional savings accounts.
The Belgian government recently introduced a short-term government bond to compete with banks' savings accounts, aiming to pressure banks to raise their interest rates, as they deemed a lack of competition resulted in unacceptably low interest rates.

Despite these drawbacks, the savings account remains a familiar, straightforward, and user-friendly banking product for stashing away money for future acquisitions or as a rainy-day reserve. Other alternatives, though potentially more beneficial, often prove too complex for the average individual, particularly those outside the finance sector.

However, to encourage a shift towards better financial products and services, banks should consider further innovations, facilitating easier and low-risk investments, as well as simplifying day-to-day personal liquidity management.

Following products could help with this:

Provide an easy, intuitive trading platform, not focusing on the more informed and aggressive trader (which most trading platforms target today), but rather on the occasional, low-risk investor. Check out Capilever’s blog "Tips and tricks for making investment tools more transparent in these high inflation times" (https://www.finextra.com/blogposting/24262/tips-and-tricks-for-making-investment-tools-more-transparent-in-these-high-inflation-times) for more info on what such a tool should and could do.
Provide a solution to balance short- and long-term liquidity imbalances. Check out blog "Liquidity management as a (banking) service" (https://www.finextra.com/blogposting/22102/liquidity-management-as-a-banking-service) for more info on this topic.
Enable easy access to short-term financing against your investment portfolio (i.e. Lombard loan) during liquidity shortages, reducing the need to maintain substantial funds in a savings account. Learn more about liquid asset-based lending’s potential benefits in retail banking via blogs "Liquid asset based lending - a clear retail banking market opportunity" (https://www.finextra.com/blogposting/17210/liquid-asset-based-lending---a-clear-retail-banking-market-opportunity) and "How liquid asset based lending brings benefits to both banks and their customers" (https://www.finextra.com/blogposting/17401/how-liquid-asset-based-lending-brings-benefits-to-both-banks-and-their-customers).

Those ideas build further on existing banking products and services, but we could think even more out of the box, like eliminating completely the notion of a saving account. Cfr. my blog "A bank account - A concept of the past" (https://www.finextra.com/blogposting/18567/a-bank-account---a-concept-of-the-past).

However, there are numerous innovative ideas that can enhance the existing savings account experience and help people manage their finances more effectively. Examples are:

Gamification: When it comes to modernizing savings accounts and making them more engaging, gamification is a powerful tool. By incorporating elements like badges and pleasant animations, savings accounts can transform into a more enjoyable and interactive experience for users. For a deeper understanding of how gamification can revolutionize financial services, I delved into this topic in my blog "Gamification - A good idea for a serious topic like financial services?" (https://www.finextra.com/blogposting/19896/gamification---a-good-idea-for-a-serious-topic-like-financial-services)
Saving goals: One of the key aspects of a satisfying savings experience is setting clear goals. Linking specific objectives to a savings account can transform the act of saving into a fulfilling customer journey. Understanding the motivations behind why people open savings accounts and aligning them with their goals is crucial. To explore how this can be achieved effectively, take a look at my blog "PFM, BFM, Financial Butler, Financial Cockpit, Account Aggregator… - Will the cumbersome administrative tasks on your financials finally be taken over by your financial institution?" (https://bankloch.blogspot.com/2020/02/pfm-bfm-financial-butler-financial.html).
Automating saving actions: Automation is key to simplifying the savings process. Automated saving actions, such as setting aside a fixed amount per month, automatically transferring excess funds from your current account to your savings, automatic rounding of expenses (and saving the rounding difference) or algorithm-based savings predictions (e.g. Plum and Chip), make saving hassle-free. These actions ensure that saving becomes a seamless part of one’s financial routine.
Saving simulators: Understanding the potential future outcomes of your savings can be empowering. Saving simulators are valuable tools that help individuals visualize their financial future based on the amount they save per month. These simulators, designed to be fun and graphical, can also incorporate various scenarios, including inflation and a growing savings amount over time. They provide a tangible representation of financial goals and motivate continued savings efforts.
Save Now, Buy Later (SNBL): SNBL programs offer an exciting twist to traditional savings. By enabling individuals to save for a specific item they intend to purchase, in collaboration with the SNBL provider and the merchant, this approach can offer certain incentives for achieving savings milestones. To delve more into SNBL explore my blog "Is SNBL more sustainable than BNPL?" (https://www.finextra.com/blogposting/22453/is-snbl-more-sustainable-than-bnpl)
Marketplaces: To provide users with a broader range of savings options, the concept of marketplaces can be introduced. These platforms give customers access to savings accounts from various third-party providers, enhancing choice and encouraging competition in the savings account landscape. For example, Raisin offers a platform that facilitates access to a variety of savings options.
Price-linked Saving Accounts (PLSA): Price-linked Saving Accounts (PLSA) introduce an element of chance and excitement into saving. In these accounts, interest payments are distributed as prizes based on luck, encouraging individuals to save regularly for the chance to win rewards. Several providers, like Save to Win, Walmart’s Prize Savings, Yotta Savings, or Big Prize Savings, offer PLSA options. Taking this concept further, Layup incorporates sports outcomes, allowing customers to win cash prizes and products from brands based on the results of sports games.

These innovative features and approaches aim to improve the traditional savings account, making it more engaging, goal-oriented, and rewarding for individuals. By infusing creativity and technology into the saving experience, we can motivate people to manage their finances more effectively and better achieve their financial goals.

Comments

Transforming the insurance sector to an Open API Ecosystem

1. Introduction "Open" has recently become a new buzzword in the financial services industry, i.e. open data, open APIs, Open Banking, Open Insurance …, but what does this new buzzword really mean? "Open" refers to the capability of companies to expose their services to the outside world, so that external partners or even competitors can use these services to bring added value to their customers. This trend is made possible by the technological evolution of open APIs (Application Programming Interfaces), which are the digital ports making this communication possible. Together companies, interconnected through open APIs, form a true API ecosystem , offering best-of-breed customer experience, by combining the digital services offered by multiple companies. In the technology sector this evolution has been ongoing for multiple years (think about the travelling sector, allowing you to book any hotel online). An excelle...

RPA - The miracle solution for incumbent banks to bridge the automation gap with neo-banks?

Hypes and marketing buzz words are strongly present in the IT landscape. Often these are existing concepts, which have evolved technologically and are then renamed to a new term, as if it were a brand new technology or concept. If you want to understand and assess these new trends, it is important to reduce the concepts to their essence and compare them with existing technologies , e.g. Integration (middleware) software ensures that 2 separate applications or components can be integrated in an easy way. Of course, there is a huge evolution in the protocols, volumes of exchanged data, scalability, performance…, but in essence the problem remains the same. Nonetheless, there have been multiple terms for integration software such as ETL, ESB, EAI, SOA, Service Mesh… Data storage software ensures that data is stored in such a way that data is not lost and that there is some kind guaranteed consistency, maximum availability and scalability, easy retrieval...

IoT - Revolution or Evolution in the Financial Services Industry

1. The IoT hype We have all heard about the "Internet of Things" (IoT) as this revolutionary new technology, which will radically change our lives. But is it really such a revolution and will it really have an impact on the Financial Services Industry? To refresh our memory, the Internet of Things (IoT) refers to any object , which is able to collect data and communicate and share this information (like condition, geolocation…) over the internet . This communication will often occur between 2 objects (i.e. not involving any human), which is often referred to as Machine-to-Machine (M2M) communication. Well known examples are home thermostats, home security systems, fitness and health monitors, wearables… This all seems futuristic, but smartphones, tablets and smartwatches can also be considered as IoT devices. More importantly, beside these futuristic visions of IoT, the smartphone will most likely continue to be the cent...

AI in Financial Services - A buzzword that is here to stay!

In a few of my most recent blogs I tried to demystify some of the buzzwords (like blockchain, Low- and No-Code platforms, RPA…), which are commonly used in the financial services industry. These buzzwords often entail interesting innovations, but contrary to their promise, they are not silver bullets solving any problem. Another such buzzword is AI (or also referred to as Machine Learning, Deep Learning, Enforced Learning… - the difference between those terms put aside). Again this term is also seriously hyped, creating unrealistic expectations, but contrary to many other buzzwords, this is something I truly believe will have a much larger impact on the financial services industry than many other buzzwords. This opinion is backed by a study of McKinsey and PWC indicating that 72% of company leaders consider that AI will be the most competitive advantage of the future and that this technology will be the most disruptive force in the decades to come. Deep Lea...

An overview of 1-year blogging

Last week I published my 60th post on my blog called Bankloch (a reference to "Banking" and my family name). The past year, I have published a blog on a weekly basis, providing my humble personal vision on the topics of Fintech, IT software delivery and mobility. This blogging has mainly been a personal enrichment , as it forced me to dive deep into a number of different topics, not only in researching for content, but also in trying to identify trends, innovations and patterns into these topics. Furthermore it allowed me to have several very interesting conversations and discussions with passionate colleagues in the financial industry and to get more insights into the wonderful world of blogging and more general of digital marketing, exploring subjects and tools like: Search Engine Optimization (SEO) LinkedIn post optimization Google Search Console Google AdWorks Google Blogger Thinker360 Finextra … Clearly it is not easy to get the necessary ...

The UPI Phenomenon: From Zero to 10 Billion

If there is one Indian innovation that has grabbed global headlines , it is undoubtedly the instant payment system UPI (Unified Payments Interface) . In August 2023, monthly UPI transactions exceeded an astounding 10 billion, marking a remarkable milestone for India’s payments ecosystem. No wonder that UPI has not only revolutionized transactions in India but has also gained international recognition for its remarkable growth. Launched in 2016 by the National Payments Corporation of India (NPCI) in collaboration with 21 member banks, UPI quickly became popular among consumers and businesses. In just a few years, it achieved remarkable milestones : By August 2023, UPI recorded an unprecedented 10.58 billion transactions , with an impressive 50% year-on-year growth. This volume represented approximately 190 billion euros . In July 2023, the UPI network connected 473 different banks . UPI is projected to achieve a staggering 1 ...

A bank account - A concept of the past

Almost every recent article written about banking starts with the statement that the banking industry is being disrupted by new competitors, new innovations and new technologies. Although this statement is definitely true, the extend of the disruption can still be debated. Even the most innovative neo-banks still work with bank (current, saving, term and investment) accounts, cards (credit and debit), traditional credits, existing payment infrastructure… The user experience surrounding the origination and servicing of these products has dramatically improved (and will continue to evolve), but the underlying banking products are not really disrupted. You could argue that banking products are so intertwined with society and our way of thinking about finance, that they can’t be disrupted, but looking at those products you cannot ignore that they are far from an optimal solution in our current digital world. Let’s consider cards for example. Isn’t ...

Low- and No-code platforms - Will IT developers soon be out of a job?

“ The future of coding is no coding at all ” - Chris Wanstrath (CEO at GitHub). Mid May I posted a blog on RPA (Robotic Process Automation - https://bankloch.blogspot.com/2020/05/rpa-miracle-solution-for-incumbent.html ) on how this technology, promises the world to companies. A very similar story is found with low- and no-code platforms, which also promise that business people, with limited to no knowledge of IT, can create complex business applications. These platforms originate , just as RPA tools, from the growing demand for IT developments , while IT cannot keep up with the available capacity. As a result, an enormous gap between IT teams and business demands is created, which is often filled by shadow-IT departments, which extend the IT workforce and create business tools in Excel, Access, WordPress… Unfortunately these tools built in shadow-IT departments arrive very soon at their limits, as they don’t support the required non-functional requirements (like h...

From app to super-app to personal assistant

In July of this year, KBC bank (the 2nd largest bank in Belgium) surprised many people, including many of us working in the banking industry, with their announcement that they bought the rights to broadcast the highlights of soccer matches in Belgium via their mobile app (a service called "Goal alert"). The days following this announcement the news was filled with experts, some of them categorizing it as a brilliant move, others claiming that KBC should better focus on its core mission. Independent of whether it is a good or bad strategic decision (the future will tell), it is clearly part of a much larger strategy of KBC to convert their banking app into a super-app (all-in-one app) . Today you can already buy mobility tickets and cinema tickets and use other third-party services (like Monizze, eBox, PayPal…) within the KBC app. Furthermore, end of last year, KBC announced opening up their app also to non-customers allowing them to also use these thi...

Peer-to-peer payments - A crucial component towards a cashless society

The Corona crisis has led to an exponential decrease in the usage of cash , due to the associated hygienic problems and the enormous rise of eCommerce. While in commercial transactions cash is disappearing rapidly, it is however still commonly used for informal money exchanges , like between friends, family, colleagues…, but also those payments are becoming more and more digital, thanks to peer-to-peer payment (P2P) solutions . These solutions drastically improve the user experience (removing friction) for both the person initiating the payment (= the payer) and the person receiving the payment (= the recipient), compared to a simple initiation of a wire transfer in a banking app. Before clarifying where those solutions bring most value, it is important to first identify the typical use cases , where peer-to-peer payments are most common, as the P2P payment solutions need to optimally accommodate these use cases: Family giving a cash gif...

Bankloch

Search This Blog