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A murmuration of bankers is gathering!

It was with great interest that I read the article last week about the plans to launch a new bank called Starling when Anne Boden, former AIB COO, announced her plans for the new digital bank.  Along with other new era start-ups like the high street bank Metro Bank, innovative digital players like Starling have a huge advantage over the traditional legacy brands.  I explore some thoughts below. 

Brands from launch to household names

Whilst start-ups have completely unknown brands at launch, if you get digital marketing right, the speed in which viral campaigns can communicate exciting new concepts and ideas means the product or service can very quickly become a household name.  There are so many examples of digital start-ups and APPS that have gone from zero to hero in a short space of time – LinkedIn, Twitter, WhatsApp, Hangouts etc.   New bank brands also have the huge advantage that they are not tarnished like the traditional high street Bank brands.

Infrastructure

New start-up banks can design their IT infrastructure on a blank sheet of paper. Basing the core on modern low cost package solutions with flexible account configurations, making use of low cost cloud services and an integrated omni-channel interface enables new players to create modern, agile and truly differentiated solutions. Existing Banks suffer from their legacy systems eating massive IT budgets just to keep them going and stifling any real innovation.

When to comply?

New start-ups like Starling can build their next generation platform without the need to continually meet the constant stream of new compliance requirements during the build stage.  Only once it is ready for launch does it need to deliver compliance and reporting.  Then if designed well, much of the compliance should be provided by the underlying package solutions.  Existing players claim to be spending up to 90% of their change budget on compliance.

No restrictions on "Target Market"

New digital banks can market their products & services to any segment of the market, anywhere.  Historically banks had to target individual segments of the market by location; such as possible future high net worth individuals by having the best local branch in University cities and towns or even by building a branch on the university campus.  Historically, consumers choosing their bank at University often remained with that bank for their entire life.  The digital branch perhaps sitting on the cloud can reach every town, city, consumer and business.

By creating targeted propositions, a digital bank can target any segment it chooses by creating the right product and then using the right mix of social and digital marketing.

History shows that the right solutions can work – whether digital or traditional.

A recent success story in the UK is Handelsbanken who have been quietly building their UK business.  It’s working well and has now expanded to about 180 branches across the UK.  This is very much a traditional branch banking business, but the success is based on a very focussed target market under pinned by the right propositions and processes, and a clear differentiation from the competition.

Another older success story is First Direct.  A start-up in 1989, still relatively new in banking terms, at the time it was very different, having no branches but offering a friendly telephone based service available 24/7.  It worked and it proved hugely successful, turning a profit in just its 5th year.  But what a different world it was then!  First Direct didn’t have any viral digital marketing and there was no easy account switching solution to enable the speedy on-boarding of new clients; just good TV advertising and physical adverts, imagine how different their expansion could have been with social media! 

These very different examples show that if you bring a new and exciting banking solution to market, and get it right, the business will follow. 

The timing is right

I believe that the timing is right for something new.  Now we just have to wait and see what gets launched and just how different it is.  I really like the concept of Starling. With the backing of WPP, the proposition and market offerings are likely to be both radically different and truly exciting (in banking terms!).  I believe that consumers really are ready for a change - up to now there hasn’t been anything worth changing to! 

Footnote: What also amazes me still is why none of the traditional banks have followed this strategy.  Why not create a new brand with a completely new IT infrastructure and actually build a bank fit for the 21st century?  The big four have been selling off parts of their business, cutting jobs and streamlining their business.  Isn’t it time for some new, growth, perhaps even some innovative thinking?  

 

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