Much has been written recently around whether COVID is sufficient to galvanise traditional organisations to focus more about 'digital' as customers naturally migrate from the high street towards physically 'safer' online services.
Will the physical restrictions currently placed on us across the UK finally supply the incentive for traditional banks to pay attention to investing in the right type of digital products and services to win back, or at least stem the flow of customers flocking to new digital only banks such as Monzo, Starling and the far smaller Atom?
Every traditional financial services CEO has spent the final 5 years evangelising the 'importance of digital' in their annual conference, and undoubtably COVID 19 has reinvigorated this message however this is not 'new' news, and yet despite relatively healthy investment levels digital offering from the high street bank has been pretty average.
Obviously, there are nice exceptions in some places, (take NatWest's recent open banking partnership with Pollinate to deliver Payit) but generally their digital products aren't game changers.
Meanwhile in the same timespan digital banks have gone from strength to strength, delivering innovative e-books and services to meet the relatively simple needs of their retail users.
What they're doing is not rocket science, but it is intuitive, digitally end to finish – using the tech that everyone has in hand, and most importantly designed around their customer. I am talking about who wouldn't want to record a two-minute video selfie to validate you are who you say you are versus a lengthy call with an offshore call centre. It's this sort of experience that's appealing to both those people who are financially established and those looking around for their first accounts.
What they're also very good at is hearing, and engaging with their customers, ensuring there is a sense of ownership of the product itself.
But the big issue for digital banks is they're currently struggling to make any significant money – especially with the bite of Coronavirus looming. Only Starling Bank is predicting it will break even this year.
Monzo's recent admission that the record loss of lb113.8 million in July 2021 may make operating increasingly difficult, specially in the current depressed financial climate, comes at any given time when stability is important. Recession is coming, Brexit is as confused as ever, people's tasks are hanging in the balance also it begs the question, do people want to be taking a 'risk' with their day to day banking no matter how amazing the customer experience is?
In fact, during the pandemic research produced by finder.com and social analytics specialist Brandeye analysing 800,000 social networking posts from customers, says digital banks saw a sentiment decline of just about three times that of high-street banks during the pandemic.
Is now the time for traditional financial services to begin winning back some of that exodus of consumers by building better, more user focused digital services? And if so, what's holding traditional banks back from seizing this opportunity by acting quickly? Could it be as simple as prioritising more digital investment to regain competitive advantage?
At Great State, we recently carried out research looking into the issues blocking digital transformation in traditional organisations – including high-street financial services providers. This revealed that delivering true 'digital transformation' was being held back by more than just investment decisions.
There were many other key blockers that were equally important in ensuring a brand could deliver the type of digital services customers are turning to digital banks for.
Firstly, getting the focus to deliver against an electronic vision takes some substantial alterations in organisation and reward, requiring a reduction in organisational silo's and prioritising/rewarding shared objectives.
Secondly, nurturing the best culture – one that allows empowers employees, reduces hierarchy, shortens approval processes, and allows risks to be taken. One of the single largest issues identified by those working in traditional organisations may be the 'lack of talent'. Culture isn't something that can be changed overnight, but traditional banks desire to make some very visible changes to attract the type of talent who's first thought might be to find a position at an exciting fintech or related start-up.
Finally, obtaining the right technology foundations in place, is critical. The one reason why the new breed of digital banks can deliver the right shaped services, quickly, is because they simply don't have the type of technical debt built through the high street brands over the years. Traditional banks have to get a way around this. Easy to say, very hard to deliver.
The growing number of fintech companies and start-ups is evidence of the variety of options, ideas, and processes that traditional banks can emulate to improve their current technology architectures and inform their internal processes. Equally collaboration or acquisition of digital pioneers is clearly another option.
What is clear, is that unless traditional banks can solve some of these significant obstacles and seize the potential opportunity presented to them, the kind of Starling and Monzo (assuming they can return to a stable financial footing) will invariably trump the experience, and increasingly the products traditional banks are able to offer and the customer exodus will continue.