It’s a great time to build new ways to make and take payments. Online shopping is booming and analysts predict there’ll be more smartphones than people on the planet by 2016. Customers hurt by the financial crisis are ready to ditch the banking old guard.
So it’s with interest we hear about an intriguing new mobile banking service. The name? Instabank. The country of origin and activity? The company is still in private beta and will test its model in Russia but also hopes to expand to the US, the UK and China.
Instabank is similar to Simple (a new online banking service in the US) but with a mobile-first and Facebook twist. Customers download the Instabank iPhone app, sign up using Facebook and – once they’ve provided the usual signature and ID – are issued with a special MasterCard debit card.
They can then make the most of a dizzying range of online banking services. According to press material and the company’s website, these will include:
- A re-imagined banking statement: transactions – either online or offline – appear as instant notifications in the app’s activity stream
- Make payments to Facebook friends even if they’re not using Instabank (for free)
- Make payments wirelessly to nearby businesses
- Tag individual purchases with comments, a location via Foursquare or a photo
The app will also automatically sort expenses into categories, and provides overview charts, a goal-setting function and a keyword search function (“ticket”, “Starbucks”, etc). Friends can be invited to help save towards goals or split costs.
How does Instabank work – and who’s behind it?
The company is still at invite-only stage, still only in Russia and isn’t ready to talk about some of its new services – how exactly the Facebook payments will work, for example.
Here’s what we do know: Like Simple, Instabank doesn’t actually hold customers’ funds itself – those are held with VPB, one of its two partner banks in Russia. The Instabank card can be used for free at both VPB and Masterbank ATMs.
As for security, the app must be unlocked with a PIN code, customers can select a close friend or parent to help verify their identity if needed and all data is encrypted.
Kravtsov (right) has worked as a software engineer for Google (his AngelList profile says he developed Voice Search for Android) and at IBM’s Haifa Research Lab.
Potemkin and Feofanov co-own mobile banking app developer iDa Mobile, which has offices in London, Prague and Moscow and has worked with at least 10 banks including TCS Bank, Home Credit Bank, UniCredit Bank and Nomos-Bank.
Instabank is also connected to potential partner banks through its investors. In October 2012, Instabank closed a seed-stage investment deal with Life.SREDA, the new venture capital fund of Financial Group Life (which represents eight Russian banks).
Is this an improvement on old-style banking?
Instabank is not a replacement to traditional banks. It is – for those with smartphones and Facebook accounts – a very new way of doing business with them.
Others are testing the water with Facebook banking. This month, Australia’s Commonwealth Bank released a version of its popular banking app Kaching for Facebook. Citibank – one of the largest banks in the US – asked its Facebook fans if they’d be ready for social banking in a post last year.
All of these players will need to overcome enormous potential privacy and security concerns. How will customers feel about mixing their personal finances with social interactions on Facebook? For Instabank, will customers be willing to go for a solution that isn’t branded to look like part of an established bank?
For now, it’s a sign of changing expectations among banks and their customers. It took 20 years for EFTPOS payments to really take off. We’re betting it won’t take nearly that long for the next generation of payment and banking solutions to go mainstream.