What are the opportunities in messenger-based banking?

High street banks are pouring all their digital investments into self-made apps, but what about those which already hold customers’ attention?


With the majority of high street banks’ digital transformation well underway, customer engagement metrics centre firmly on the mobile apps they continue to iterate and not the branches being shut down. In January, HSBC revealed just 10 per cent of customer contact happens through its branches.

But driving customer engagement on a banking app isn’t easy. It’s a hurdle both incumbents and digital disruptors face on a daily basis. As Silvia Mensdorff-Pouilly, banking solutions head for Europe at FIS, points out: “Ninety-five per cent of the population globally just doesn’t want to think about banking.”

But what if banks didn’t only offer their services to customers through a closed-loop app? Messenger services is one communication channel a small, but growing, number of banks and fintechs are exploring. And the technology is already taking a number of forms. 

Banks can use messenger-based banking interactions to really trigger customers to think about the banking aspect of what they’re doing at that point.

French banking challenger Zelf integrates with the likes of Facebook-owned Messenger and WhatsApp, displaying “balance” and “send money” buttons at the bottom of the apps. Meanwhile, Israeli fintech PayKey embeds banks’ services into consumers’ keyboards, working a lot like a GIF (graphics interchange format) or emoji keyboard. 

Other players have introduced the two services side by side, as opposed to blending them. Japanese messenger service LINE, as well as Russian digital bank Tinkoff, have divided messenger and banking services between different tabs in their apps.

New space to challenge customers

Unlike banking apps, messenger services own much larger portions of people’s attention spans. Sheila Kagan, PayKey’s chief executive, estimates that “a user spends up to 30 minutes in a banking app each month versus up to three hours a day within mobile-messaging environments”.

According to Facebook, 100 billion WhatsApp messages were being sent each day by the third quarter of 2020. That’s equal to 69 million a minute. In the UK, regulator Ofcom’s data from 2019 found 49 per cent of the population use instant messaging communications weekly.

“Messenger-based banking gives you an opportunity to challenge the consumer,” says Mensdorff-Pouilly. “Banks can use messenger-based banking interactions to really trigger customers to think about the banking aspect of what they’re doing at that point.” If a customer used a keyword, such as “owe” or “broke”, banks could use this as an entry point to suggest how their services could help.

Currently, the technology isn’t enjoying huge investments from incumbent banks in the UK, beyond in-app chatbots designed to replace customer service call centres. Experts, instead, point further afield to Southeast Asia, Latin America and Spain as areas exploiting the potential of messenger-based banking innovation.

How the technology is being used

Despite still being in the embryonic stages of development, early movers in the messenger-based banking industry have already managed to collect insights on which services customers are using. PayKey, which licenses its technology to banks, including Standard Chartered Korea, lists payment transfers as the most used feature, shortly followed by account balance checks and then billing. 

LINE, which launched its digital bank LINE BK in Thailand, with the help of Kasikornbank in October 2020, now receives 20,000 personal loan applications a day. The Japanese messenger giant has persuaded two million of its Taiwanese users to interact with the integrated banking services so far. For approximately 30 per cent of its approved loan applicants, this is their first credit line from a financial institution.

Digital banking challenger Zelf, which is live in France and gearing up to launch in Spain, currently facilitates transactions between the £15 and £20 range. “Users are exchanging money through the same medium they discuss their gigs,” says Zelf’s chief executive Elliot Goykhman, pointing to the ease of paying invoices via messenger platforms. He suggests the technology offers a route into business customer demographics, as well as peer-to-peer spaces.

For Tinkoff, its messenger feature, launched through its banking app last year, serves as an indirect marketing channel. “I don’t think anyone at Tinkoff thinks we have the next WhatsApp,” says Neri Tollardo, the Russian neobank’s strategy director. “We see it as a viral mechanism through which customers can recommend products to each other.” Currently 1.3 million customers use Tinkoff’s messenger service, some 10 per cent of its overall customer base.

Weighing up the pros and cons

As Zelf’s offering proves, messenger-based banking isn’t necessarily a suitable solution for higher transaction-based services. “At some point, you have to step out of it and take it seriously,” says Mensdorff-Pouilly. “I can’t imagine, you know, agreeing to a mortgage on messenger-based banking.”

Connecting banking services with messenger apps also fuels concerns around customer privacy. Back in May 2020, Chinese messenger giant WeChat announced its intention to offer credit scoring to its 600 million users. It raised concerns over how users’ messages might be used. For example, if a user sends something “anti-state”, can WeChat use this to negatively impact a credit score?

More generally, the linkage between Big Tech platforms and banks sparks worries around trust. “If only Facebook manages it [independent of the banks], there would be a problem,” says Kagan. In July 2019, the US Big Tech paid a record $5 billion fine to settle privacy concerns. In the same breath, Kagan acknowledges “banks need to be in front of customers, regardless of the platform”.

Ultimately, it seems banks will have to weigh up the potential for increased profit against the likelihood of new data risks. As LINE BK’s chief executive Tana Pothikamjorn explains: “The potential of social banking is the ability to analyse financial and social activities in a symbiosis.” This, in turn, enables banks to get more personalised lending, investment and insurance products right in front of the customer. Privacy issues aside, the business case of messenger-based banking is compelling.