For decades, consumers have gravitated towards high-street banks for all of their financial needs. From opening their first current account to remortgaging their home, the majority of us tended to use the same select group of lenders.
But the financial crisis of 2008 shattered the unwavering trust consumers once held in high-street banks, which coupled with the development of new technology, sparked a transformation in the UK’s retail banking landscape.
Emergent brands such as Monzo and Revolut have been at the forefront of this transformation. They have developed a cult-like status, complete with flashy cards and a bold social media presence, despite the fact that they only recently started offering current accounts.
New brands powered by old-timers
In the past week, RBS announced it is launching a brand new digital-only bank called Bó, while Goldman Sachs rolled out its digital-only savings account, Marcus, to the UK. For the first time since the financial crisis, high-street names have been prompted to innovate and develop entirely new propositions, powered by the latest technology and free from legacy IT issues.
But unlike the first generation of digital-only challenger banks, they already have access to a large customer base and instantly recognisable parent brands, which they can harness to monetise existing customers and attract new ones.
While their technology might be new, the likes of RBS and Goldman Sachs still have serious reputational issues to tackle if they are to convince new customers to trust them again and use their digital-only propositions.
Although across the pond, that hasn’t managed to hinder Goldman Sachs yet, given Marcus has had considerable success since its launch two years ago. It has grown into a $26bn retail business generating $1bn of revenue – numbers that blow the likes of Monzo and Revolut out of the water.
In many ways, the first generation of digital-only challenger banks are victims of their own success. They defied the status quo and forced industry heavyweights to respond.
Existing challengers must communicate why they’re worth their salt
Still, it’s not all doom and gloom for the first generation of digital-only challenger banks. Now is the time for them to double down and emphasise what sets them apart from others operating in the sector.
They should reinforce their unrivalled dedication to customer service, especially via digital channels. A good example of this is Revolut’srecent communication to customers warning them that they may have been overcharged during the recent technical issues faced by Deliveroo.
They should also renew their commitment to transparency and explain to their customers the rationale behind major changes. Monzo’s recent post explaining their charges on overdrafts and spending abroad is a good example of how easily this can be done.
Emphasising key differentiators will help the first generation of digital-only challenger banks communicate an attractive proposition to a wide range of stakeholders, from investors to the media, and ultimately support their wider business objectives.
It also fires a warning shot to the latest cohort of challengers, who will be hoping that a new disguise hides a familiar face, and with it, some familiar problems.