I read an interesting story recently regarding the Competition and Markets Authority requiring banks to open up their doors to innovation.
The story tells how banks need to do better at the nuts and bolts, switching accounts, capping fees, all the stuff that makes banking miserable when banks get it wrong.
It’s useful to see a light shone on this area in the general media, but in this case I think the story somewhat misses the point. The real battleground in banking isn’t around the ease of switching and clear statements, but around the experience of banking.
For most people banking is an inconvenient necessity, a commodity. Banks already fight over headline rates knowing that most folks who switch to their account will be retained even when the rates start to creep in a less generous direction.
The real question here is the user experience. What does it feel like to use my bank? Does it feel like I have to justify withdrawing cash to a teller who has no business enquiring what I need £500 for, or do I need to queue up and fill in forms? As people begin to use technologies like apple pay and contactless cards, the contrast between the retail and the banking experience on the high street becomes very sharp.
And the same is true in business banking. Small businesses in particular want a bank to support and help them – really deliver meaningful help not just sell them “business stuff” at a small discount.
The good news, is that this revolution is happening. Not because the watchdog is barking about it, but because big banks and challenger banks alike are deploying modern digital technologies to their customers (like our own credithq) and finding that they improve their ability to attract and retain new customers and that those customers do better whilst they’re with the bank – reducing risk and growing faster.
So it sounds great doesn’t it. Well there’s still a problem or two to overcome. Banks are big – really big – and really set around doing things in a particular way. They’ve set things up, and then restructured and then built on the stuff that was originally there until the systems, departments and functions are woven together in a way that’s really hard to change quickly and at scale.
So does this mean that high street banks are doomed and it’s these challenger upstarts with their new IT systems and shiny brands which will succeed? Not necessarily. Banking is fundamentally about trust, and that’s one reason we don’t like to change our bank account very much. Maybe that gives the high street time to catch up. Only time will tell, but watch this space.
This particular revolution won’t be televised, it’ll play out on your browser, on your smartphone, and in your high street.