Terrible apps could hurt banks more than NPAs do. Here’s why.

Bank apps qualify in the honor's list of the worst internet experiences of our time

If you had to pick between jumping in front of a train or using your bank’s mobile app for all your transactions, would you prefer a passenger car or a goods train?

For two decades now, the promise of digital transformation has kept us transfixed.

First, our computers got faster. Then, they shrank and followed us to our palms and pockets. We grew up somewhere between 32-bit games to 4K content. The promise was that everything will soon be digital and hence, easier. That’s pretty much how it happened – there are apps for walking your dog and there are apps to order toilet paper or tune your guitar.

Except, banking chose to go the other way round.

Yes, the net-banking revolution came through and solved the problem of going to a bank for mundane things like getting our account statements. Yes, UPI changed the way payments work. But what about our cumulative banking experience? It arguably went from bad to worse. Despite every bank spending millions on their shiny new apps — or rather, because of it.

Don’t take my word for it. Just look at the data. Consumers would really do anything to not have to look at their banking apps. In India, the top-ranked apps in the Finance category on the Google Play Store have PhonePe, Paytm, and Google Pay at the top. Even Bajaj Finserv, Slice, Angel Broking, Jar, and Groww make the cut to the top 10 apps. The two banking apps that are present in the top 10 are SBI’s YONO and Bank of Baroda.

Conspicuous by absence are the apps of top private banks that claim to be the digital transformation stalwarts.

Fun fact: ICICI Bank’s flagship app is ranked lower (30) than a cryptocurrency app that supposedly teaches one how to invest in crypto (29). Meanwhile, Union Bank’s app is firmly at the 20th rank while Axis Bank doesn’t even make it to the top 40 finance apps in India.  

How UPI moved people away from their banks’ official apps

Not just this, look at the number of transactions in arguably the best FinTech product this country has seen - UPI. All banking apps have UPI inbuilt into them. None of the banking apps are among the top 5 UPI apps in the country. So, people really went out of their way to install an app to do something that existing apps on their phones allow them to do natively.

In fact, 95% of all transactions on the UPI ecosystem happen PhonePe, Google Pay, Cred, and Paytm. ICICI Bank ranks fifth in the top UPI apps by the total value of transactions but its total transactions are a measly 2% of the category leader PhonePe.

What does it say about trust if consumers prefer to trust a Google product with their financial data than their own bank? It deserves a doctoral thesis of its own but let’s leave that for later.

Here’s a nugget of data that I find particularly interesting. Banks like HDFC and ICICI claim that more than 90% of their customer transactions have moved online. Where? To net-banking portals and the apps, obviously.

One would assume that such massive shifts in consumer behavior and adoption of digital touchpoints would make banks jump with joy and go full throttle in building a digital experience that rewards customers. If you, like me, made that assumption, you’d have been proven wrong. Congratulations.

What’s wrong?

Every so often, I encounter a bank VP or two singing paeans about their digital journey. How far have they come? How amazing is this feature or that notification? And so it goes.

I nod along as is wise to do when one’s around bankers or lawyers. But, the question I really want to ask them is this - sure, this looks great. how much new revenue are you attributing to digital channels?

The answer, I guess, will not be as enthusiastic.

And this is exactly the root of the problem. Banks have forever made money on maximizing credit deployment while building a stable deposit book. They just take the margins like a good tax collector and forget you exist till the collection time rolls around next year.

However, there’s a new sheriff in town and that’s high-speed internet.

Consumers are now used to their Ubers arriving at the doorstep at midnight, their online food orders being delivered to them on the train and their investment apps being able to execute the most complicated trades without a fuss.

These consumers, especially millennials and GenZ, aren’t the most forgiving. They will take their business elsewhere, and they already are. Cue: Neo-banks.

As a result, most banks are now losing in the attention economy, getting beaten by digital credit apps, and have been pushed into a corner as a keeper of funds and nothing more. Most are finding out the hard way that the entry barriers and access asymmetry that built their fortress is now building fissures in their very foundations.

How did we end up here?

The problem with banking apps can be summarized easily.

Most of these apps were built for vanity not usability.

The average age of senior executives in the Indian financial sector is between 47 to 50 years of age (this number has increased from 42-47 just three years ago) while the average user of banking apps is aged between 25-35 years of age. This creates an expectations chasm where the experience, offerings as well as product flows are not in sync with what the user wants, at all.

Second, there’s the problem of outsourcing. Of course, banks are hardly the oasis of cutting-edge technology talent, but the sheer lack of technologists leads to projects like these apps and websites being outsourced to a mixed quality of vendors.

In some cases, banks don’t even run the apps on their own servers. This coupled with a lack of in-house talent means that oversight is minimal, updates are slow to come by and nobody is really invested in the product except the accounts department that pays the bills for keeping it live.

Source: FSB

The third problem that banking apps often exhibit is that they try to be everything for everyone. In a private bank’s app, one can find as many as 350+ functionalities and use cases all meshed in together like toys in a box.

It’s how terrible food and terrible apps are both made - you put everything together and hope for the best. In some cases, there’s hardly any distinction between the screen space allotted to checking your account balance and buying sovereign gold bonds (the former is a key function while the latter is a highly focused investment instrument).

Before being super apps, it’d be helpful if banks focussed on making their apps usable.

Fourth, in more than a dozen apps that I tested, there was no or minimal navigation guidance or tutorial of any kind. For most functionalities, a pop-up comes that states the obvious and vanishes conspicuously. Even for a digital native, it’s almost as difficult to figure out how to access one’s PPF account as I assume it is for my father to not post private messages to his friends as his public status updates on Facebook.

The result is that most users never end up engaging with that 80% of features and functionalities and limit their use of these apps only to the most necessary things.

Fifth, the stereotypical experience of a public sector bank branch is mirrored in most banking apps. The apps don’t look, feel or sound pleasant. No attempt is made in the app design to appeal to the customer or retain them. There aren’t many prompts, notifications, or any gamification that could help keep the users in the app for longer than a few minutes.

In all, it seems like the world wouldn’t lose much if the banks stopped developing apps altogether and just integrated with Google Pay and the likes to enable key use cases.

But since that goes against the grain of being a financial (and now technology) leader, let’s briefly look at a roadmap for fixing this mess.

Fix because it is broken

1.    User research: You can’t develop a product that solves a problem without knowing who has the problem, how big is the problem, how they solve it currently, and what are their trade-offs in accepting a new solution.

First, banks need to hire more technology-first and millennial builders in their internal teams. At the same time, they should fund independent user research to deeply analyze how different cohorts of customers use their banking apps, payment apps, and their phones in general.

2.    Build only what’s necessary: The second logical step would be to build for the customers they most cherish and want to attract/retain. For instance, a new-age bank might want to give millennials credit cards while an established lender could want to cross-sell home loans to its premier cohort of customers.

This will determine both the workflow of the app and also help set benchmark metrics that have to be tracked and optimized. For instance, total downloads are too thin a number to claim success while transactions in volume and value for a specific use case from the chosen cohort could become the guiding light.

3.    Drop ambition, choose function: To be brief about this, the existing apps need to be dumped in a dumpster fire. There’s a need to start afresh - leave the heavy branding and display banners for billboards and build a clean, functional app.

An easy way to achieve this would be to mark out five key functionalities that the app is supposed to do well for 90% of its audience and only build those. Everything else can be left for internet banking to handle.

4.    Test with an intent to learn: When launching, banks should stay away from the lure of doing a big corporate launch and having the CEO and VPs say empty praise. Instead, app betas should be privately launched and gradually expanded with user feedback and optimizations incorporated in the final release build.

I’d personally target a metric that shows an increase in the velocity and frequency of the transactions and time spent on the app (not on loading screens but in exploring and trying out the different features)

5.    Stay the course: Ideally, banks should build modules for specific use-cases. These need to be light, purely functional, and extremely user-friendly without being intrusive or needlessly complex.

For instance, these modules could simply mimic business divisions such as term deposits, cards, investments, and so on. However, the modules should map to actual consumer flows rather than sitting in silos. For instance, having a fund transfer option when someone checks their balance is more relevant than separating those two out in various sectors of the app.

*For the rest of the banking needs, banks should just invest in a quality voice and chat assistant that directs users to the right section/flow in the net banking journey.

Bottom line: It would be a bit of an exaggeration to say that banks face an existential threat due to their terrible apps. But it’s much harder to justify why the keepers of public trust and money won’t respond in kind when their consumers have already adopted digital finance. The state of banking apps conveys a kind of apathy that’s not in the ethos of most bankers I know (including my own father).

Distributed and decentralized finance is here. One just hopes that banks catch up before they miss the bus.

Before some of our favorite banks started caring about their app experience, a lot of their younger customers would have likely opened cryptocurrency wallets and started developing web3 apps in an act of protest the complexity and friction in banking. This will further distance legacy banks from the ground zero of finance and innovation. An outcome that’s entirely avoidable.

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