The mission was to launch a new bank in one year. And that mission was completed successfully. This is the last in …
Everyone remembers Aesop’s fable of the Tortoise and the Hare. The account of this race between unequal partners has several different interpretations, causing many debates over the years. The story relates the common folklore where ingenuity and trickery are used to overcome a stronger opponent, similar to the story of David and Goliath.
It is easy to apply this analogy to the battle of the banking industry; Traditional Banks racing against Neobanks to secure future customers and profitability. One is fast and confident, the other is slow and steady.
But which is which?
Neobanks have been on a steady march for the last decade since the financial crisis. Like a Greek phalanx marching into battle, they haven’t really changed their pitch or offerings. They’ve maintained a steady pace with a pitch that has been winning over customer hearts consistently over that period. Why? They appeal to users’ roots in their ability to challenge traditional banks’ old school model.
Convenience is the number one reason why people switch to Neobanks in the UK with about 9% of British adults (totalling around 4.5 million people) already having opened one which is estimated to grow to 8.5% of the next 5 years, that is a 16% increase.
Conversely, the traditional banks have rested on their laurels and, having been caught “taking a nap”, are now running to catch up. It’s true the banks have started to push out online banking in a huge way and improve customer experience, but it’s generally all “shiny front end”. The back end is a different story. I know several banks and fund houses who still run systems on Excel spreadsheets. They are running fast and hard to catch up because they have realised, they’ve missed an opportunity and Customer Journey is becoming more and more important.
Neobanks are growing at a consistent pace, building momentum by moving into new areas of business, loans, mortgages, and business banking. They are in essence offering the same products, but with a different approach to their customer base. Traditional banks are running at full speed (as much as a Tier 1 bank can run at speed). They are not known to embrace technology quickly and certainly the concept of “early adoption” until recently has been a foreign concept. They are running faster than they ever have because the Neobanks have been eating into their bottom line. This makes their shareholders get fluttery because valuations in some cases have dropped or, in the worst case, the banks have had to be bailed out by governments (which equates to our taxpayer money).
It’s safe to say I do not think the taxpayer could again stomach having to bail out the banks and financial houses on such a huge scale as we had to during the crisis, and as such this is one major reason why millions of people have turned to Neobanks, they have lost trust and have zero empathy for the old school “fat cat” banker analogy. In part the banks have realised this and thus have started to change their way of handling and dealing with their customer base through technology, so like the hare they are running fast to catch up with the steady march of the Neobanks.
In my opinion its clear who I think is the hare and who is the tortoise, but you may view it differently and to me it’s not about who wins but who is playing which roles.
The question is not who wins; we know how the analogous race ends. The hare is confident of winning, so stops to rest and falls asleep. The tortoise continues to move slowly and without stopping, wins the race.
The question is Who is who?
It’s safe to say that Neobanks are winning the “Hearts and Minds” campaign with their users having the deep-seated roots of wanting to challenge and move away from traditional banks.
Digital Banks, Neobanks and “digital disruptors” have already started cutting into the revenues of the traditional and financial markets and institutions.
Read Nick Foggin’s complete deep-dive into Neobanking here