Financial IT speaks to Michal Kissos Hertzog, CEO at Digital Bank Pepper.
Can you please provide an overview of Pepper (Banking)?
Pepper is a 100% mobile bank that rips up the rulebook of banking. Created by the 117-year-old Bank Leumi, Israel’s leading bank, Pepper enables customers to manage their finances entirely via their smartphone. Our aim is to help bring people closer to their personal finances, by delivering personalised insights and optimised services for individual users through intuitive design. Ultimately, this helps consumers make better financial decisions.
What makes Pepper (Banking) unique among its competitors?
From a functional perspective, Pepper is completely free. There are no current account fees and you only pay for the banking services that you choose to use. We also provide our customers with banking services that can be fully accessed from a mobile; from opening an account in less than eight minutes using video call technology to making payments and getting a loan.
From a service perspective, we are customer obsessed. Our offering includes proactive suggestions to help customers actively manage their spending and saving, as well as personal information services such as: if you wish to take out a loan in order to cover the overdraft in your account, Pepper will compare the interest on the requested loan with the interest on your overdraft.
Pepper is different from other international fintechs because it was born out of a traditional bank. Bank Leumi, unlike other traditional banks, disrupted the market by creating Pepper rather than waiting to be disrupted - like the approach many UK incumbents have done with the rise of fintechs like Monzo, Starling and Revolut. However, despite leaning on the financial knowledge and trust of a 117-year-old bank, Pepper operates separately from Bank Leumi and is based on completely new IT systems. We are unhindered by legacy systems and have a tech-first approach thanks to our digital core, meaning we can adapt to evolving customer demands, technology innovation and regulation changes quickly and effectively.
What are the issues and challenges the banking industry facing?
A big challenge for the banking industry is for players to stop thinking like banks. The profit and loss business model is dead, meaning banks must shift towards a model that focuses on their customers. One way they can do this is by using data effectively to offer great services built with the customer in mind. Banking should be as fun as Facebook and as easy as WhatsApp, so it’s clear that banks need to change their approach to not only offer the convenient, engaging services their customers expect and are receiving from fintech competitors, but also be looking at what experiences tech giants are offering.
Another challenge the banking industry is facing is digitalisation - and by that I don’t mean implementing a digital layer, but the transformation of a business’ core. Our research found that only 44% of decision-makers at retail banks believe they’d have to change their business model to go ‘fully digital’. There’s a huge opportunity for banks to adapt and build a new business model based on collaboration with outside players. However, without a digital core, collaboration to become ‘customer obsessed’ is impossible. Banks are too ‘proud’ to adopt technology that is not their own but they must recognise the importance of collaboration to meet growing customers’ digital demands, else they risk becoming irrelevant.
What is the market demand for banking services in the present time?
Consumer demand is currently all about personalisation and access to services on-demand. Our recent Change in Banking report reveals that, for the third (36%) of Brits that bank digitally, convenience is a key reason. What’s more, almost half (44%) of customers banking with digital-only banks do so because it’s more efficient, allowing them to manage their finances anywhere, anytime, free from restriction of branch opening times. The rise of digital apps and customer-obsessed tech companies mean consumers expect the same level and quality of service in all walks of life - including banking.
How will the appointment of new Prime Minister Boris Johnson impact fintech companies?
The fintechs should be largely unaffected by the appointment of Boris Johnson as the UK’s new Prime Minister. Current political uncertainty across the world means that no one can predict future events, so finance players have had to implement a flexible, adaptable, scalable digital core to allow them to react to whatever the market throws at them.
Financial players that move away from a profit and loss business to a model which focuses on their customers will continue to succeed in any market and revenue will follow.
What is next for Pepper (Banking)?
One of our biggest aims is to take our market innovation further – imagine a world where you go into your regular coffee shop and Pepper drops money into your account as a thank you for being their customer – that’s the customer service we are looking to offer in the very near future. Watch this space!