Traditional banks aren’t used to moving quickly, but will coronavirus change that? AltFi’s Aisling Finn is doubtful.
The ongoing coronavirus pandemic has caused economic turmoil across the world as countries go into lockdown to tackle its spread.
UK fintechs have already displayed their nimbleness through the creation of schemes and side-projects aimed at helping those suffering as a result of the pandemic.
In light of this, I had a dig around to see if the coronavirus will finally push traditional banks towards fintech.
The UK Government’s instruction that all non-essential employees were to work from home, if they could, made little to no difference to the UK’s fintechs (aside from not having to go to the office).
Remote working is much easier when you have cloud-based systems and staff using laptops like so many fintechs do.
Just a few weeks ago, Thought Machine’s CEO Paul Taylor told AltFi: “Each event like this pushes banks further towards realising they really have to get on top of cloud-centric banking once and for all.”
Throughout this pandemic, the fintechs AltFi has spoken to all said that working from home has not had much of an impact on their day-to-day operations, with some even ramping up recruitment drives to help cope with an increase in traffic.
This nimbleness and ability to adapt quickly is what makes digital banking so appealing to so many and so easily translatable into real figures.
Meanwhile, it’s no secret that banks have been trying to digitalise their offerings for a while now—with the likes of Natwest (Bó and Mettle) and Goldman Sachs (Marcus) launching their own digital banks.
Even today banks still rely on in-person meetings for account opening or approving loans whereas digital banks have perfected the process of digital onboarding, all you have to do is download the app, verify your identity and you are on your way.
This is reflected in the data as well.
And more than 21,000 people made Monzo their primary bank account last winter, trailing only to Nationwide’s 25,000. For comparison, Monzo is just five years old with 4m customers and Nationwide is 134 years old with 15m members.
These innovations and subtle tweaks to the way we do banking is what has made digital banks so attractive to UK consumers.
Incumbent banks are cumbersome and I, for one, remain sceptical about the extent to which they will embrace fintech despite the ongoing coronavirus pandemic.
While they might accept new processes in the short-term to cope with immediate issues, I very much doubt that coronavirus will tip banks over the edge. They are simply too bulky to digitalise at the same rapid pace as their digital counterparts.
The future of banking is no longer old financiers like George Banks from Mary Poppins, rather it is younger, faster-moving companies who saw a gap in the market and pounced—for the first time in a very long time, giving traditional banks a run for their money.
Almost immediately following the outbreak, we saw fintechs building new products and giving concessions to customers, while it took big banks much longer to mobilise and help customers in need.
Despite the need for innovation, I don’t think the coronavirus will push traditional banks towards fintech, but not through lack of trying.