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CHALLENGER BANKS Building good banks
Hannah Prevett reports on the new wave of digital banks looking to shake up the establishment, and the challenges they face coming to market
UK online-only venture Mondo was born out of necessity. Founder Tom Blomfield says he was “hugely frustrated” by the service he was receiving from his bank. “Every time I went abroad, I’d get my card blocked, or if I went overdrawn I’d have to wait three weeks until they posted me a physical letter to find out if I’d been charged.”
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Blomfield says he’s not alone in his despair. “Everyone you speak to has a nightmare story, whether it’s charges, dealing with lost cards or indecipherable statements. It’s bizarre nothing’s been done about it.”
But if nothing has changed, it’s not for the want of trying. In recent years, the financial services market has been flooded by scrappy young upstarts vying for a slice of the pie traditionally owned by the ‘Big Five’ High Street players, Barclays, Lloyds, HSBC, Santander and RBS. More than 20 new ventures (including Mondo) have been granted banking licences by the Financial Conduct Authority (FCA) since 2012, with five in 2015 alone.
With so many challengers to the status quo, is the very concept of disruption being diluted? Blomfield thinks so. “‘Challenger’ is a label that’s been applied so indiscriminately (I’ve even heard Santander described as a challenger bank) that it has become a little devoid of meaning.”
One of the most common criticisms levelled at this new tranche of banks and FinTech firms is that they are still relying on clunky legacy infrastructure favoured by the incumbents. Blomfield says it’s a fair observation.
www.ibsintelligence.com © IBS Intelligence 2016
ike many business ideas, the concept for
“Some of the newer banks are using some of the same technology that powered Tesco Bank. That’s fine but it basically means you’re reskinning the same old product and you’re not really doing anything different; you’re just offering the same product at a lower cost. That is a perfectly viable business model, but it isn’t that disruptive or transformative. That’s one of the main reasons we decided to build our technology platform from scratch; we wanted to think really hard about what the relationship between a bank and the customer was. What are the problems we should be helping you solve?”
Mondo is one of a subset of new entrants, described in a
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