As RBI’s May issue goes to press comes the news that Civilised Bank is to hand back its banking licence to give it more time to develop its technology platform before reapplying for a new licence, writes Douglas Blakey
The Civilised Bank news begs the question: was the regulator premature in granting a licence when the bank clearly has much work to do with its IT?
It also causes cynics such as the writer to question the PRA granting 31 new licences since 2009. Do we really need 31 new players in the UK? At some point, sanity will prevail and we can expect to see a wave of M&A activity.
The Civilised news puts into doubt some of the overblown language about how it planned to, in its words, ‘reinvent traditional banking’.
Some of the quotes attributed to its backers verged on the ridiculous.
Backers Warwick Capital Partners said: “CivilisedBank stands out as a specialist bank by offering a peerless banking service to the SME market, and we’re delighted to increase our investment in what we see as a game changer for the sector.”
As recently as February, CivilisedBank said it would be the first start-up bank to introduce a business current account for SMEs since Metro Bank’s launch in 2010.
That claim in itself was a bit off the mark and would come as news in particular to Starling Bank. In March, Starling became the first mobile-only bank to launch business accounts for SMEs and entrepreneurs in the UK.
Raising capital for the start-ups remains no issue. A rough back of envelope calculation shows that the best known four UK start-ups: Atom, Monzo, Starling and Tandem have together raised approaching £400m to date and counting.
And as Tom Blomfield reveals in May’s RBI he has not been short of offers recently, were he minded to flog Monzo and cash in his chips.
It makes perfect sense for Civilised to take its time and ensure that its IT build phase is a success. By the same token, until and unless it gets that right, it might consider toning down the overblown nonsense about game-changing and teaching the incumbents how to do banking.
The May issue of RBI also features comments from ClearBank founder Nick Ogden.
Given his track record, the segment of the market he is attacking and the bank’s business pipeline, there seems no danger of ClearBank scaling back its ambitions. Redwood Bank has also made a solid start.
But it seems that rarely a day passes without a call or email from a PR pitching a story on behalf of a consultancy or tech vendor alleging that incumbent banks have had their day.
I recall fondly the challenge of arguing with Brett King about the future prospects for HBSC. He had just forecast that HSBC might be the first global victim of the digital disruption sweeping the world.
I disagreed then and still do and the last time I checked, HSBC seemed to be ticking along nicely and in rude financial health.
Digital startups – the consumer awareness challenge
Research released by price comparison website MoneySuperMarket in early April found that Atom is the digital start-up that most Brits are aware of, on 19%. Roughly 10% of the survey sample had heard of Monzo with Revolut and Starling on 7% and Tandem on 5%.
At first glance, the figures appear to be surprisingly low but it remains early days and one of the hugely impressive successes about the likes of Monzo is its customer acquisition on virtually nil ad spend.
It comes as no surprise to learn from MoneySuperMarket that regionally, those who live in London are the most clued up on digital-only banks, with nearly three quarters of those surveyed in the capital having heard of at least one of them.
Sooner rather than later, the start-ups digital banks may consider that there is life in the UK outside their comfort zones of Shoreditch, Hoxton and Brixton – and customers to target in far-off untrendy places north and west of the M25.
Atom, to its credit is based in the North East but its customer numbers remain low; it is still to launch a current account and it is too early to say it is genuinely optimising the customer experience. The kindest comment one can make about its app is that it has to be regarded as a work in progress.
As for the most exciting banking innovations of the past 12 months, off the top of your head how many come to mind from the start-ups? Idea Bank has been acclaimed for its “Idea Hub Express,” the first bank branch on tracks – part of Getin, Idea is no new start-up.
In Asia Pac, for digital innovation look no further than DBS and its clean-up at RBI’s Asia Trailblazer event in March.
In North America, look at what RBC is doing with NOMI Find and Save. Similar AI success is credited in Russia to Sberbank. BBVA is leading many a pack when it comes to its API Market.
In the UK, Lloyds has the numbers to back up its claim that it is the country’s largest digital bank.
As for the notion that the tech giants Google, Apple, Facebook and Amazon are going to be your next bank – the issue also tackles that debate and it is one that will rumble on. Meantime, it would be good to get through even one week without a PR call offering an article about how incumbent banks are fit for the bin.