Big banks and fintech startups – friends, foes, or neither?
If 2016 was the year that big banks realised that challengers could be friends rather than foes, 2017 is the year that they’ll realise that they can cut them out entirely.
While the fintech startup industry continues to grow – with a frankly unsustainable 57 new banks supposedly on the way in the UK this year – there’s a growing trend among major retail banks to put some of their considerable resources towards providing a startup-like experience, without the messy business of actually being one.
The big bank’s little brother
One example is Spain’s ImaginBank, a new mobile-only offering from the local giant CaixaBank. Similar to startups such as MonzoBank and Tandem, you can join directly from a smartphone app – but unlike the challengers, it’s got the reassuring backing of a major financial institution.
And that’s the key for major banks entering the challenger space – their existing brand prestige and financial resources mean that consumers will likely feel more comfortable trusting them with their money compared to a relative unknown. If they can setup a service unhindered by their legacy systems and give themselves the aura of newness and modernity that the startups boast, there’s the potential for them to be a nightmare for the challengers.
How the ‘true challengers’ can still compete
The saving grace of the startups will likely be their capacity to be nimbler, iterating services and fixing issues more quickly. Major retail banks are not known for their agility. ImaginBank’s launch has been a case in point, with negative reviews citing issues signing up rife on the App Store and Google’s Play Store. These are the typical teething issues of a technology launch, but CaixaBank haven’t been quick in resolving them. A true challenger is free of a big bank’s layers of bureaucratic approval and shouldn’t have this problem.
This agility also means that they can introduce new features more quickly, and more often, rapidly iterating their software to offer customers an evolving service. Not unlike a social network, the largest of which have become successful partly on the basis of evolving their offering to discover the most appealing and addictive features. There’s only one problem – while these frequent updates will appeal to some early adopters (the people who are currently signing up for challenger banks), they might not have mass appeal in the long term.
Making retail banking less boring
Can the truly independent challenger get the average customer excited about the possibility of being on the cutting edge? Possibly. There’s a history of mundane product categories being enlivened by a technology-based disruptor, with the now Google-owned thermostat maker Nest a prime recent example.
It can be done – but the challengers will still need to watch their backs. The big banks might be slower moving, but they’re a significant force to be reckoned with.
Vipera are currently helping another major European bank develop a challenger-style offering. To find out what we could do for you, contact us.