Everything that’s Wrong with Banking Apps Today

With greater mobile and internet penetration, banking is being disrupted every day by scores of startups changing the way financial transactions take place, from bill payments and money transfers to saving money and availing of credit. Meanwhile most banks find it hard to let go of the legacy of traditional banking practices and expensive infrastructures. This has also resulted in a great amount of fragmentation in Indian fintech, with each app trying to tie the user into its own ecosystem without inter-operability with other similar apps. For example, it’s not possible today to transfer money from a Freecharge wallet to a Paytm wallet.

What do we use banks for?

This includes visiting a bank branch, using internet and mobile banking apps and using payment instruments like credit cards and cheques.

• Transactions: Payments, ATM withdrawals, fund transfers, checking account balance and transaction history
• Financing: Information about and comparison between loan products, credit cards, repayments and statements, document submission
• Investments, Insurance and other products: Information about and comparison between investment instruments and insurance policies, document submission and KYC, transaction statements and performance reports
• Expense Tracking: Logging and categorising expenses, budgeting, expense history and analytics

What are the problems in Banking Applications?

1. Lack of Simplicity

Most banking applications today have complicated workflows, confusing and inconsistent navigation and require a handbook to understand and use the app.

Un-Intuitive UI and Complex workflows in Banking Applications

2. Lack of User Empathy

The banks optimize the applications for people sitting behind the bank counters rather than for financially illiterate users.

The menus are ill-designed and lack a clear hierarchy from the user point of view. Most websites still classify by products and services offered rather than by frequent use cases.

It still takes 50 taps and 5 screens to transfer money to my house help even though I do it every month.

3. Increased Cognitive Load

Infrequently used features promoted on home screens. For example like in the above screen shots, features like pin change, inward messages inbox, PPF account details, IT returns, direct tax customs, etc. are rarely used and don’t belong on the homescreen.

4. Need for Human Interaction

The banking applications and services are often so complex that the users find it more comforting to talk to a banking executive rather than dig for the feature inside the application. Banking should be simple enough to use, that the need of a help section or handbook should never arise.

Use Cases

Here are a few examples of these problems and how these gaps are being filled up by non-banks:

Funds Transfer and Payments

Here are some ways non-banking applications have simpler money transfer and payments interfaces and workflows than banking applications. Some banks have resorted to launching simpler secondary apps to compete with these. Examples: ICICI Pockets, HDFC has partnered with Chillr for payments.

Freecharge money transfer with chat, Mobikwik wallet to wallet transfers and Paytm payments through QR codes.

Expense Tracking

Traditional account statements don’t enable easy-recall with just the date of transaction, amount and obfuscated descriptions. Each merchant is assigned a category, yet even if that is shown, there are no analytics on monthly expenditure trends for each category.

Bank Statements- Physical, Web Application and Mobile

Walnut, an expense tracking app, records transactions from SMS notifications, logs their merchants and geo-locations, and auto-categorises the transactions along with the feature to split expenses in every transaction. It also gives detailed analytics based on spending patterns. Some apps (like Simple, N26 etc.) give out credit / debit cards that they track transactions on.

Traditional account statement on a banking app compared to transaction history and transaction details on walnut. Bank SMS’s are read to map expenditures + splitting bills

Savings

When a person decides to save some money, what are his / her concerns? The money is put aside either to make it multiply or for a fixed financial goal. The questions that help choose a savings instrument are:

• How Much: What is the savings goal and how much money is needed to meet that goal?
• By When: When is the money needed to fulfil the goal?
• Risk Appetite
• Desired Liquidity

Banks promote Fixed / Recurring Deposits, Gold, Bonds or Mutual Funds through their partnerships and subsidiaries, but fail to provide a comparison between these instruments, financial advice, monitoring of investments and market analysis.

Investment Apps — Betterment, Fisdom and FundsIndia. All pointing to clear growth indicators in each investment

Abstraction

Abstraction in Computer Science enables programmers to define how to use a program in a consistent way, while hiding its complexity from the user. For example, a sort program could take some words and sort them without the user being aware of the algorithm used. Now this sort program could be replaced with another algorithm with a consistent interface and the user wouldn’t know.

Similarly, there are a lot of common aspects to different investment instruments that can be abstracted out for easier usage:

• Growth history and trends
• Growth projections
• Effective CAGR after tax for different past periods
• Risk, Liquidity, Minimum Tenure, Penalties etc.

The savings instrument itself should be as transparent as possible to the user, while still showing details on demand. For example, the user should be able to compare his / her savings in an FD, gold and in different kinds of mutual funds in a single unified graph.

A savings goal can also be divided up between different instruments.

An analogy to this is how mutual funds simplify stocks, and how Scripbox simplifies mutual funds, we must simplify the complete universe of savings instruments.

Similarly, Acorns is an app which encourages micro-investing by rounding up purchases and investing the change in diversified portfolios. It abstracts the complexity of rebalancing the portfolio to mitigate risk, optimize returns and greatly diversifies the smallest of investments in equity and bonds.

Goal based investments

Investors save for goals, like children’s college education, a family holiday, a new car or simply building wealth. The instruments to investment in are decided based on the goals. For example, an emergency fund is invested in very short term low risk investments. The intermediate term fund (car, house etc.) can take more risk but only moderately. A long term wealth building portfolio can have more diversified savings including high-risk / high-growth equity and mutual funds.

Why do goal based investments?

• Easier to Save: One is motivated to save for a foreseeable goal, and bucketing your savings into goals helps to organize your money better.
• Performance: The target is not to achieve unrealistic growth or keep up with market benchmarks, rather it is to have X amount of money in hand in Y years.
• Behavioural Change: Impulsive decision-making and overreactions can be avoided.

Triggers and Prompts

An investor should be made aware of the performance of his / her various investments in comparison to one another. For example, if you plot the performance of a fixed deposit and a mutual fund on the same graph, when the market takes a dip and the mutual fund performs worse than the fixed deposit, a Prompt should be sent to inform the user and a Trigger can be set up to switch money from the mutual fund to the fixed deposit. Power users can set up multiple triggers to automatically manage their investments for higher returns and lower risk.

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