Recently I have made myself a customer of Yolo, the second neobank in Vietnam. Neobanks are banks that exist without physical branches. Customers open bank accounts, transfer money, setup savings and interact with the banks entirely via mobile app. The first neobank was Timo. Both Timo and Yolo were set up by Vpbank, a local commercial bank. To me, this is a much needed move to shake up the banking industry and potentially benefit customers in the long run. However, I think the direction Yolo is going is not a right one.
Neobanks have two main cost advantages over traditional banks. Firstly, they don’t maintain physical branches but rather provide their services chiefly via mobile or web applications. Not having physical branches means not having to pay for rent or employ a large number of staffs to run those branches. That expense usually occupies a large portion of a traditional bank’s operating cost. Moreover, branches open only during office hours. Busy customers can’t do their banking chores on Sunday when they have time but rather have to wait until Monday. On the contrary, mobile-powered banks run around the clock. Secondly, neobanks are often built around modern software systems that allow them to innovate faster at a much lower cost. Technology has changed very much since banks started to adopt core banking system. However, banks are weighed down by legacy systems deployed a decade ago. Changes are hard to made and often incur hefty fee charged by consulting firms since system modifications may involve drafting up contracts, quoting new prices and negotiating with software vendors. As a customer, I remember being very much annoyed when Viettin bank prevented customers to transfer money for a day so that they can upgrade their system. Neobanks, on the other hand, being new and having their customer experiences rely only on their app, build their capability around technology. They may build their architecture into modular services which allow them to upgrade the system part by part. And investing in technology as the core of the business mean having in-house software team ready to continuously deliver new features. All those cost saving of neobanks can be channeled to customers in forms of lower transaction and maintenance fee.
Neobanks in other developed countries are gaining customers, which pressures incumbents to innovate to compete. To name a few, Monzo and Revolut are doing well in Europe and looking to expand their customer base. That’s why I’m hopeful to see Yolo challenge incumbent banks. However, I’m not confident about where the bank is heading. Microsoft CEO Nadella says in his book Hit Refresh that a company wanting to innovate need to have the right concept, capabilities and culture. Yet, concept is where I think Yogo may get it wrong. Yolo is presenting its application as a bundle of all life style services, on which users are encouraged to do everything from booking a flight to listening to music. In other words, a super app. This concept conflicts with a banking service’s security requirements and the bank lacks capabilities to carry it to fruitfulness. A banking application usually requires the highest level of security, which results in an user’s login session expiring really quick. Everytime I open Yolo’s app, I need to enter my username and password to login again, which is good for a banking app, since that keeps my money safer. However, let imagine wanting to listen to music on Yolo, enter password. Or read news, enter password… In this age of instant gratification that is a red flag. Not to mention that Yolo and it’s partners capability to deliver news, music, flight booking is far behind that of Zing, Booking… About half the time I open Yolo’s partner app I couldn’t bring myself to wait for the blank page to finish loading.
Having said that the bank need a better concept to better leverage its strength, I think that concept should be built about the bank’s nature of financial management. Yolo can deliver superior user experience by helping users manage their money better. If I use Yolo’s mastercard or QRPay to pay at a restaurant or shop for groceries, I want all those expenses categorized and presented as montly report in the app. At the end of each month, I would know that how much was spent on food, how much was on movies and how much of all those were unnecessary expenses. Besides the Yolo app can act as a smart adviser that let me know how much more I need to save befor fulfilling my goal of sleeping under stars in the Sahara desert. Or Yolo can look to app such as GoHenry for inspiration. GoHenry provides a way for parents to give their childrens pocket money in increasingly cashless societies. It is both practical and educational as parents may use it as away to teach their kids the value of money.
To sum up, Yolo shouldn’t be trying to a super app like what Zalo or Grab is trying to do. Rather Yolo should be a smarter bank. Good thing is, Yolo is a more serious investment in digital-only banking. Unlike Timo, with Yolo, VPBank shows its willingness to cannibalize itself before others can. But in order to really make a difference, Yolo should rethink its strategy around its core capabilities. Failure to do so may mean becoming a casualty in the super apps’ war.
Top managers at Yolo, like Mr. director Shameek Bhargava, should be using their own app to experience the problem for themselves.