A user expansion strategy for banks

If there’s one thing that the success of digital wallets has proven beyond a doubt, it’s that people are open to novel ways of interacting with their money. A digital wallet often provides a range of services that goes beyond basic financial transactions and may include authentication of wallet holder’s credentials, loyalty rewards management, a tight integration with e-commerce stores ,exclusive discounts on purchases and even generous cashback offers.

Compare that with the services that have been offered by the e-banking applications traditionally:- Viewing of account balances and transaction histories; paying of bills; transferring of funds between accounts; requesting credit card advances and Ordering checks etc,etc. All of this doesn’t sound too exciting, now does it?

Looking at the services offered by digital wallets and e-banking applications side by side it’s not hard to see why digital wallets have gained so much popularity in such a short period of time.

Where as digital wallets have focussed on making their services appeal to as wide an audience as possible, the e-banking applications have more or less been confined to their own ecosystem. An app for bank X will only be useful for the customers of that bank and while there’s nothing wrong in making life easier for your existing users the side effect of this tactic has been that it becomes hard to attract new customers which leaves the market wide open.

An e-banking application is perceived as nothing more than another bullet point in the bank’s list of features and benefits. Unless you are an existing customer an e-banking application fails to provide any compelling reason for you to try it.

And as it often happens a customer usually has more than one bank account. So if he’s used to Bank X’s app and Bank Y’s app feels “unintuitive” or worse misses a feature it would be promptly discarded. What happens in these situations is that you have Banks X,Y and Z and they have their apps that are all alike save tiny differences in the colour scheme or notification jingles.

We have a problem.

The problem statement

Banks have long enjoyed their standing as influential financial institutions. Sure there were these wallet thingummies popping up every now and then but the real money was still being handled by them. Some banks might even have looked at this whole digital wallets business rather amusingly and let the little ones play while they rested satisfied in the knowledge that their cake was safe in the refrigerator.

Imagine the shock then, when you wake up one morning, brush your teeth, pick up the newspaper and looking forward to read about a $100M investment in yet another wallet app , you proceed to the refrigerator only to discover that the cake has a slice missing. Early morning is not a good time for surprises. What with the loss of appetite and all that stuff.

What I’m trying to say is that the problem is that these wallet apps are no longer satisfied living in the shadows of the banks. They have grown a bit more ambitious. What we have on our hands is a mutiny of sorts. The order of things is being challenged. Wallets want to be the new banks!

We need a plan.

Somewhere beyond the sea

“The decrease of cross-selling opportunities is another concern for virtual banking (Talmor, 1995).”

In the sacred library of business books there’s a particularly imposing volume sitting peacefully on the third shelf radiating a golden light that the brainy enterprising fellows affectionately call the “Blue Oh!” aka the “Blue Ocean Strategy”. Although it’s a weighty tome full of useful information with evidence backing up the theory the gist of it is pretty simple to grasp.

Rather than fighting head on with competitors a business should think strategically and look for opportunities that makes the competition entirely irrelevant.

Now as it usually goes with theories they sound very good on paper. And while the general principle of the blue ocean strategy appears simple it’s hard to put into practice. It’s hard because because often one gets caught up focussing too much on what the competition does. The term innovation has a good ring to it but an innovative idea/act comes with a high risk of failure.

More often than not theorizing is retrospective. A multitude of business principles may be applied to a given situation. And a wrong application of a theory may have disastrous effects.

For example it would be pretty silly to try and explain the fall of an apple with the theory of gravity…

No wait let’s try it from a different angle.

What I mean to say is a theory can’t be applied to all situations. Blue ocean is not a magic pill. But if applied correctly,one step at a time one might stumble upon treasure.

For example in Nov, 2004 Nintendo DS, which would go on to become the best selling handheld console of all time ,with hardware sales exceeding 150M units and software sales going over 943M units, was marketed as an “experimental third pillar in Nintendo’s console lineup” . However the experiment proved successful and DS single handedly revitalized Nintendo and established it as a market leader between the years 2005-2012. I can bet that at that time even the idea of a dual screen touch cartridge based console must have sounded completely bananas.

“How is all this relevant to banking?”

Well look at it this way. Banks are the very foundation of commerce. They are the enablers of business. What we need is to consolidate the strengths of a bank: the reliability, the customer loyalty and address the weakness of lagging behind in banking services.

A user expansion strategy for banks

In a commercial ecosystem that is increasingly international and interconnected banks have been surprisingly local in their operations and offerings. And as a result we’ve had banks competing against one another on a set of features and benefits that have more or less been standardised.

We have a standard interest rate. A standard user onboarding process and standard set of services for every customer that has lead to a very substandard expansion. One bank is no different from the other.

It’s time that we look at the bigger picture. Global expansion is not just about opening bank branches across the countries. Instead it’s about making our services more attuned to the demands of international businesses. Any local branch in a country will ,if it survives the cut throat competition, at best be able to capture a small portion of the local business. However there’s much to gain if you target not only the residents but also the non residents.

The strategy of user expansion can be broken down into three points:-

  1. Banks need to capture markets that are beyond the reach of any one local branch.
  2. Banks need to make their offerings more more internationalised
  3. Banks need to understand the importance of complementary business partnerships.

How can the strategy be executed?

Now we’re asking the right questions! Let’s think in reverse here. When we talk about international markets what are the most common businesses that come to mind?

How about international airlines, video games and hotel reservations ?

Now all of these industries are huge — worth billions of dollars. All of them are linked together by the fact they operate internationally .All of them share a common problem of having segregated banks and deal with high operational costs of money movement. Can we make life easier for them? Let’s start with airlines.

Airlines industry is one of the biggest multinational businesses out there. And yet do we have banks that are tailored specifically for them?

Payments can represent a significant cost for airlines with the average credit card costs at 2% ….. Up to 4% of an airline’s revenue can require manual intervention to ensure it gets into the airline account

For a high volume business like the international airline industry if a bank were to tailor a very specific solution would it not result in immense profit?

Imagine a scenario where both the airlines and it’s customers are on the same multicurrency bank and they seamlessly move the money in each others account without dealing with transfer or currency exchange losses.

As an example If a person with an INR balance has to book a ticket in GBP with an airlines company what if he could initiate the payment from his multicurrency account to their multicurrency account ?

In this scenario there’s no card involved so there’s no card fees, there’s no international transfer so there’s no transfer fee and since both accounts are multicurrency the sender’s currency becomes irrelevant as long as the conversion can satisfy the bill.

Many a travel booking applications have cleverly integrated the costs of a trip into a single package by working together with people in the travel industry chain. We can also follow their path. By carefully selecting one end of the chain in the tourism industry we can capture a very large and painfully under served market.

Just as airlines, the hotel industry can also benefit from a multicurrency account. Getting the hotels and their guests on our banking platform further increases our market penetration.

Next consider the video games industry which is rapidly moving towards a completely digital experience. There is no other entrainment medium that brings together people form different cultures like the video games. For example a game like Monster Hunter (a collaborative multiplayer hunting game) which though decidedly Japanese in it’s influence and it’s design has a very dedicated fanbase in US and EU.

With streaming capabilities in the current generation of consoles we’re on the cusp of a netflix like moment for video games but is there any bank that is looking to capitalise on the cross cultural audience for a game like say Final Fantasy XIV or Phantasy Star Online 2?

Once more much like the airlines industry the video game developers have to content themselves with subpar payment options often losing large amounts in transactions and effort spent in consolidating payments across various games in various regions.

Imagine once more that a big game publisher like sega has a multicurrency account and takes payments from it’s users who are on the same banking network, at once cutting through the transactions and currency conversion losses.

Not as hard as it sounds

If you’re wondering “What are the chances that a passenger will have an account with the same bank as the airline company with which he’s travelling? “ And thinking that “the chances of a gamer having a multicurrency account in the same bank as the publisher are pretty slim.”

I’d say you’d be in the right. People have their own preferences in banks. But it’s important to remember that we’re not talking about bank accounts in a way that we are used to talk about them.

To make our plan successful we’ve got to think of a bank account as a digital wallet. A multicurrency digital wallet to be more precise. And it must have all the benefits that come with a digital wallet.

  • A quick user onboarding
  • Services that go beyond basic account management and money transfer.
  • And most importantly partnerships with business that can aid in distribution and diffusion of our banking platform.

Let’s say our banking platform partners with an airline industry which is a rich source of KYC data. Every time a customer books a ticket we give them an option to open a multicurrency account with us so that he saves more when he books the ticket next time. Maybe we can also add rewards and loyalty points to the mix to make the package a lot more appealing.

And with this we can have a continuous sales pipeline. By helping airlines save a little we gain a huge amount of lifelong potential customers.

In her paper Prof. Norazah Mohd Suki concludes that to increase the adoption of internet banking among the Malaysian consumers following conditions need to be met:

  • Enhanced salience of Internet banking to customers’ banking needs.
  • Greater compatibility of Internet banking to customers banking norms and lifestyle.
  • Less complex and easy to use system that does not require a lot of mental and physical efforts to accomplish banking task.
  • Opportunity for adopters to experiment with the system before making any long-term commitment.

Let’s examine these points one by one with respect to the banking platform that we’ve proposed:-

Salience of Internet banking to customers’ banking needs

International business market is neglected by banks . As a result they have to deal with exorbitant payment processing fees,inexplicable currency exchange rates and the pain of managing multiple bank accounts to consolidate their earnings. As the international trade rises due to increase in purchasing power of the people as well as an enhanced connectivity with the rest of the world the need of having a banking partner that supports a truly international market remains unfulfilled and they have to make do with temporary solutions.

Furthermore it’s not just the businesses but also the regular people who are trading internationally on a frequent basis. Whether as travellers or buyers or sellers it matters little. Add this to the fact the excitement that a common currency alternative like bitcoin brings out or the ease of use that a digital wallet offers and it’s not hard to see that the banking needs of people are changing.

Greater compatibility of Internet banking to customers banking norms and lifestyle.

Traditional internet banking activities that are limited to account management and money transfer are not adequate any more. Banking applications need to shift their focus to make their services more diverse. A banking app should be able to book a taxi, a flight or a hotel. It should integrate with the ecommerce websites that people buy from. It should make cross border payments less costly and look for opportunities to not only onboard international businesses but also their customers.

Less complex and easy to use system that does not require a lot of mental and physical efforts to accomplish banking task.

This is a very general point and is applicable to any kind of system not just a banking system. Simplicity sells and while we’re talking about cross industry collaboration it must not come at the cost of ease of use.

Opportunity for adopters to experiment with the system before making any long-term commitment.

Common sense. Decision to adopt a bank is not the one that would be taken lightly and as such there should be a sandbox where a simulation can be run to test out the system before going all in.


We often look at articles on the internet that talk about uberization of banking. It’s a fact that uber is a wildly successful business. It’s only natural that every body wants to imitate the tactics used by them and hope to gain the same success in the market. But I feel that banks can create a much bigger impact than uber has.

Instead of asking how we can be like uber, banks should ask how can we make uber our customer or better yet how can we get uber’s customers on our banking platform? Ubers and airbnbs have the potential to become excellent channel partners for banks.

Of course there’s real a possibility that there might be an uber bank or an airbnb bank if their needs are not fulfilled by the existing ones. I think it’s better to have them as partners than as competitors. Don’t you?

Banana Profitable!



  • On January 26, 2020