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Disrupting an Old Industry by Knowing Todays Customer

August 15, 2016

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Disruption is a word that gets bandied about a lot these days.

The driving force behind these changes has been the introduction of new technologies that eliminate the prior trade-offs in performance, accessibility, simplicity, efficiency, or cost.

So when it comes to banking, how do you flip one of the oldest industries in the world on its head? An industry that has seen little fundamental change since the advent of the double entry ledger and is arguably rife with compromises and tradeoffs.

The answer is elegantly simple, yet has been overlooked by virtually every player in the industry: You attack the gaps in customer understanding and mutual relevance.

The credit card: a history lesson in disruption

History has shown that one of the best ways to disrupt an industry is to know your customer.

Take the success of the credit card. It was designed for and rolled out to “Middle America” -- the middle-class who couldn’t pay cash for everything that they wanted. The upper class were not, at that point, of huge concern. If they wanted something, they could just buy it. The goal was to get more customers and it worked. Now, the credit card is ubiquitous.

The visionaries behind credit cards achieved something that I think almost every major banking institution has failed at in the past 60 years: knowing their customer. (If you want more on how the credit card platform came to be, I encourage you to read The Inner Lives of Markets).

Attacking the gap

Today, the key target demographic is the millennial -- tech savvy 20- and 30-somethings who, generally speaking, are just getting started in the finance game. As a result, individually, a millennial is often not the big bank’s ideal customer, despite the size of the total demographic.

This feeling of poor fit is largely mutual. This group has grown up with the Internet, embraced the smartphone, and now expects a mobile experience. An experience that is convenient, fast and personalized. They are typically spending more than three hours on their phone each day, so the expectation and demand for mobile convenience is prevalent. Even one of my VP’s has been getting his underwear delivered for years just to save the hassle of going shopping in a brick and mortar store.

On top of this, thanks to the global financial crisis of 2008, the banks have generally lost their trust. For millennials:

  • 71% would prefer to go to the dentist than listen to banks

  • 1 in 3 would switch banks in the next 90 days

  • 33% think banks aren’t needed at all

  • 68% think paying for things will be different in 5 years


Now combine this generation’s demand for mobile convenience and the newfound distrust of big banks with the industry’s apathy toward the less-than-ideal individual customer economics, and you have a disruption sweet spot.

The sweet spot

Varo is in the position to redefine one of the world’s oldest industries by redesigning the banking experience from the ground up.

They are serving the customers traditional banks aren’t targeting and simply just don’t really understand yet, and they’re doing this by listening to what they want

By integrating fundamental banking features with the savings behaviors of personal finance apps like Mint, adding personalization with the implementation of bots, and making everything accessible on mobile, Varo has hit the disruption sweet spot.

Jeff Bezos, CEO of Amazon, put it simply: “Above all else, align with customers. Win when they win. Win only when they win.” This is almost like an unspoken credo at Varo, and it is going to shake the industry.


About Michael Sikorsky

Michael Sikorsky (@mjsikorsky) is the CEO and co-founder of Robots and Pencils, a mobile strategy and app development company. Launched in 2009, Robots and Pencils has since created more than 250 apps used by 77 million people worldwide and was named the 34th fastest growing technology company in North America by Deloitte.

Header Image Credit: Nicolai Berntsen
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