From Too Big to Fail to Too Slow to Move
In the wake of digital banking licenses being issued, the rise of challenger banks is in full-swing. The start of 2015 saw a new breed of banking (unsurprisingly in digital format) enter the market. These challenger banks have relished in the cost savings unavailable to traditional banks: no legacy system costs, no need for structural buildings on the high street and no pre-conceived lack-luster following a financial crisis. However, they arose with questions: How can they attract customers away from traditional banks? Are they safe? What will happen to ATMs?
Customer inertia, inevitably, is believed to have become a topic of great discussion with regard to a digital shift in the banking sector. How can consumers become engaged, gain a sense of trust, and be reassured their money is safe without face-to-face engagement? This appears to be a situation resolved merely through this technology being seamless in its customer service integration, something simple on paper, but perhaps overambitious in reality. Atom, one such challenger bank has already stated their vision doesn’t include the opening of a physical branch, and undoubtedly the other industry players Monzo, Starling and Tandem hold a similar standpoint. With the large overheads incurred in physical structures, the power of dealing operationally through technology is far more appealing for these ‘banks’. However, this offering of convenience, flexibility and transparency bears an overwhelming prudence of insecurity for customers.
Whilst this sense of skepticism may surround consumers, is there any alternative and can we fight the role digital banks will play in the future? At OFF3R we have seen the success of Monzo and Tandem in their crowdfunding campaigns, reiterating the support for this disruption from society. Traditional banks were once in a recognition field of being ‘too big to fail’, but are they losing this accolade and instead shifting to a field of ‘too slow to move’? I believe so. Digital banks fall in line with the loss of love society has for cash. The convenience and simplicity of contactless payments has become an eased facility in our everyday lives, with over 74% of the UK claiming to regularly use smartphone to make payments in 2016. However, whilst the buzz of technology and challenger banks exudes the marketplace, government bodies remain cautious and protective, and it seems it’s going to be a while before these ‘power houses’ lose their ‘too big to fail’ stigma.
Ultimately, technology is by no means slowing down, and I think it’s going to fall to high street banks to pull the wool from their eyes, recognize this, and act fast. In doing so now they may still be in with a chance of survival, but leave it too much longer and the opportune moment for any form of partnership with these ‘challengers’ could be missed, and the 21st century high street may look a little bit different sooner than we’d imagine.
Lily Bridgwood – Partnerships Associate at OFF3R