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The Digital Bandwagon is truly rolling....

Over Christmas I tweeted that 2015 could be the year of the new digital bank. 

I really believe that the bandwagon has finally started rolling - it may not have arrived at its destination yet… BUT if you do want to catch it, you need to jump on quickly.   

Why is the industry so interested in this whole topic?  Well how often does massive disruption impact a market?  In the world of retail banking, we have had several mishaps and scandals over recent years, but never has a real alternative come along for consumers so, despite the ability to simply move your account from one bank to another, customer churn continues to be very slow.  Why?  Well there is really no point in moving from one legacy player to another legacy player - broadly what’s on offer appears to be pretty much all the same - particularly in the consumers’ eyes! 

However, imagine the scenario - The launch of a completely new digital bank, with a totally different proposition for consumers with no negative history or baggage. Once the initial customers and early adopters settle on the new platform, then the heavy-duty marketing will kick in supported by an exponential social media frenzy of happy initial consumers (driven by their excitement at something new different and designed for the modern mobile consumer). In a matter of a few months we could see massive migrations of consumers from the legacy players to the new digital player.   

It will most probably be based on a new technology infrastructure, running on fully flexible, power-on-demand processors in the cloud.  Importantly the new bank will be unencumbered by legacy systems as there wouldn’t be any, the bank would be able to spend their IT budget on leading edge customer engagement and marketing.  New product development will be high on the agenda, and spending on compliance minimised through the use of standard packages. This bank will be focussed on being bankers to the modern consumer, rather than an old fashioned IT development shop trying to add multi channels onto a legacy core!  

I truly don’t know exactly what it will look like, or what all the differentiators will be; maybe logging in through Facebook, signing up through Facebook, paying higher interest rates on current accounts as their costs will be much lower than the traditional players, etc.   

What I do know is that the first arrival of a “new concept” digital bank could (and probably will) have a massive impact on each regional market.  I believe that all the markets right across Europe and probably right across the developed world are crying out for something radically different and exciting.  Once the bandwagon is rolling, social media will kick in and the momentum created may be unstoppable.  

We are now seeing the initial movers break cover.  mBank in Poland has launched on new technology having taken the very wise and brave approach to totally transform their technology, creating the right environment.  Consors Bank launched recently in Germany, and its sister bank in France - Hello Bank has already exceeded expectations.  There are plenty more in progress, such as Starling Bank in the UK announced here last year, which is a truly new initiative, unlike the BNP spin offs.  

I believe that 2015 will see more big digital announcements and perhaps the scenario above might come true.  Sadly for us marketeers, these types of opportunities don’t come a long very often, so when all the aspects align, it should prove to be very exciting!  Let those wagons roll!

 

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Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 January, 2015, 10:09Be the first to give this comment the thumbs up 0 likes

Product, marketing and consumer preference have little to do with whether a bank is a legacy player or a digital neobank:

  1. As I'd highlighted in this blog post (http://www.finextra.com/blogs/fullblog.aspx?blogid=8608), "With whatever (legacy) systems they have, banks have proved their innovativeness by launching ARM, CDO, CDO2, CDS, MBS and a slew of highly innovative structured financial products...".
  2. The same old legacy banks are amongst the biggest spenders on Digital Marketing, as suggested by the fact that the three most expensive keywords in Google Ads are for banking products (http://www.wordstream.com/articles/most-expensive-keywords). 
  3. I wonder how many customers who availed - or did not avail - themselves of accounting switching facility even knew what "legacy player" meant, let alone decide whether to switch banks or not on the basis of that expression.

IMHO, legacy systems is only the deck a bank is dealt with. What an individual bank does with it is entirely up to that bank.

A Finextra member
A Finextra member 07 January, 2015, 07:40Be the first to give this comment the thumbs up 0 likes

Tim Brew thanks for a great summary. I liked "how often does massive disruption impact a market" .. sometimes these trends are talked about early and lay dormant for a while so it is easy to overlook the fact that Digital Banking has finally started to take off.