RBS a "bit late" launching Bó but analysts believe it won't be canned

By John Reynolds on Tuesday 4 February 2020

Digital Banking

RBS will announce full-year results on 14 February when it will update the market on its digital bank.

RBS a
Image source: Image provided by RBS.

The Royal Bank of Scotland is a “bit late” launching its digital bank Bó but analysts believe launching a rival to Monzo and Revolut “makes sense” for the banking giant, despite its troublesome start.

In less than two weeks, on 14 February, the taxpayer-backed lender RBS will report its annual results, the first under the leadership of new CEO Alison Rose.

A recent report in The Sunday Times suggested that the bank was discussing the possibility of cutting 3,700 jobs from its 65,000-strong workforce.

While it is unclear if Ms Rose will give details of job cuts in her presentation, it is likely the new CEO will update the market on the performance of Bó, its digital bank aimed at younger, tech-savvy consumers.

Sky News has reported that on 14 February or before Rose will confirm that Bó CEO Mark Bailie—a key supporter of the project who backed the initiative in his previous role as Chief Operating Officer of RBS—is leaving, a major blow to the initiative.

RBS would not confirm the departure of Bailie to AltFi or give exact details about when RBS would be undertaking a major marketing push behind the brand.

One likely question that Ms Rose is likely to face is how many customers have signed up to Bó—an app which is geared to encourage users to save and budget better, targeting the millions of Britons with savings of less than £100—since its beta launch in November last year.

Bó’s pitch to consumers is that features like instant spend alerts, budgeting tools and 'Piggy Bank' savings pots will help them save money.

Despite its troublesome start- along with uncertainty about the future of Bailie, Bó has also been the target for fraudsters, with around 30 per cent of applications received by Bó in the first two weeks being fraudulent-analysts believe Bó could help RBS fend off competition from Monzo, Revolut and other digital banks.

John Cronin, Financials Analyst, Investment Banking, Goodbody, told AltFi: “I think RBS is a bit late launching it. But I don’t by any means think it is too late.”

“I think it makes sense for them to do it in one respect. RBS is just trying to come up with a novel brand for the customer. I am not sure how well it is working in terms of early success.”

“I think it is late to the party vis-à-vis the likes of Monzo, Starling and Revolut. I don’t think Alison Rose is going to can it. But I  am not sure the branding works particularly well, from what I have picked up on some customer feedback forums.”

“It is just a way of converting existing and capturing some new customers for RBS. I suppose the big question is the cost of that exercise relative to the long-term benefits it can present. And that is the equation Alison Rose will have worked on.”

Nick Hyett, Lead Equity Analyst, Hargreaves Lansdown, meanwhile, believes RBS is dipping “its toe in the water” with Bó and told AltFi he does not expect it to be an overnight success.

Bu Hyett believes RBS is following the best path by building its own bank rather than buying a challenger brand, although a report suggested that RBS has previously tried to buy Monzo.

“If you can build the tech in house and reasonably cheap, what is the rationale for paying for it?” said Hyett.

Jonas Templestein, Monzo co-founder, said he was not overly concerned about the impact Bó would have on Monzo's own growth and said that Monzo had "created a positive shift in the industry".

Bó is one of two digital challenger brands launched by RBS in the last 12 months, along with business-focused bank Mettle.

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