Banks are control freaks. I’ve blogged about that often. I’ve also blogged often about how they need to move to be open and partnering. That’s not easy. It’s obviously easier to launch a brand new bank, fresh with no legacy and open to everything, isn’t it?
Not necessarily so.
The issue with launching a new bank is that it might begin with an open ecosystem view, selecting the best third parties to provide payments processing, customer onboarding, credit and loan products and such like. This is great. It’s what the Banking-as-a-Service dream is all about: selecting the best of thousands of potential partners to deliver a superior customer experience.
Until it goes wrong.
At the heart of banking is safe and secure payments, and this is why global transaction banking is such a major hoo-ha. What I’m seeing on an infrequent basis – and I mean not frequent – are the major new players having outages.
Monzo, Starling, Revolut and others dependent upon Global Processing Services (GPS) had a glitch in 2017, when GPS went down for a day or two. It was only for a short time , and has had no serious impact upon their growth. In fact, many applauded these new players for their concern and communication over the outage, and felt they handled it well.
Maybe it’s noteworthy that when a big bank like RBS or TSB has an outage, it can last for days or even months. As most of the big banks are not well engaged in social media and blogs, the communication is less effective, and the management team focus upon disaster recovery rather than reputational risk. An outage where you cannot make a payment over the weekend is not so bad; an outage where you cannot make a payment for a month or more is a disaster.
This is an important point: where a bank has a technology issue, it’s often internal and has to be dealt with as a legacy issue; where a FinTech has a technology partner issue, it’s external and dealing with open platforms that have to be resolved as fast as possible, as so many clients depend upon the service. For this reason alone, I would rather depend upon a company with 100 clients using its payments service than my own internal team dealing with one client. A good example is GPS, a 12-year old start-up that has a reputation to build and keep. For this reason, they are more focused than most, and any outage for their clients caused by their service is likely to be resolved far faster than an outage hitting a legacy structure of an incumbent bank. More on that here.
Nevertheless, it is the front line of finance. If customers cannot pay, they get really angry. This is the most visible issue and challenge any FinTech or financial player has to deal with. That’s why it intrigued me when FinTech challenger bank poster child Chime hit the wall last week.
If you don’t know Chime, it’s a neobank in America that’s gained headlines as it’s reached over five million users, up from three million in just five months. Yowza. Yet another FinTech unicorn, Chime is achieving amazing things in a market that is hard to break open.
And then a glitch hits.
All core services are available including real-time balances and transaction history. Our team is here responding to your messages and helping where we can. Please know we are deeply sorry for this service interruption and will continue to work around the clock.
— Chime (@Chime) October 19, 2019
It caused lots of disgruntlement …
@Chime what happen to the missing funds in my account? I was kicked out of my place because of the outage because of my card wasnt able to withdraw money or my direct deposit wouldnt come in on time
— Quiet Serenade (@SerenadeQuiet) October 21, 2019
And concerns about the security of the bank …
Chime’s recent loss of consumer availability is something to note. I hope there wasn’t a security breach of users information. However, a hacker could very well be the cause of disruption.
— OCTOBER’S VERY OWN • 10.24 (@_Rellic) October 21, 2019
Even though the outage had nothing to do with a hack or account security. The issue was their payments partner Galileo.
Galileo is also a new payments challenger, with stellar growth in 2018 based upon an Open API that supports a spectrum of prepaid products, and debit and credit solutions.
Although this was a short outage – a few days for some unfortunately – it did lead to hundreds of thousands of customers taking to twitter to say they couldn’t pay for gas or hadn’t received their direct deposits. Equally, Chime has been communicating regularly to say they’re working on it …
We’re still working around the clock to bring everything to 100%, we do have many available services live: card purchases, ATM withdrawals, phone support, enable transactions in app, etc. Please refer to our status page for more info: https://t.co/nUI7UBDjeM
— Chime (@Chime) October 19, 2019
All well and good, but not helpful when someone says use an alternative card to pay …
MOST people are broke and rely on the one card because they don't have access to a bank. If you weren't one of those dumbasses that doesn't understand everyone isn't you, you would know this.
— Lildwell6767 (@Lildwell67671) October 21, 2019
And, being America, it’s already led to a website being created to generate a class action lawsuit to sue Chime.
Just shows how vulnerable we all are to outages and issues with technology. However, I would still claim that using cloud native third party partners in a technology ecosystem is far better than trying to do everything yourself. After all, these guys did get it sorted in around 48 hours. That’s a little bit quicker than 48 days or more.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...