A recent article in London’s Evening Standard suggested almost 90 per cent of UK businesses continue to bank with the largest high-street lenders. Burdensome regulation and large compliance costs have meant few online banks have gained a foothold in the market, the article argued.
Staggeringly, some recent data suggested Britons were statistically more likely to get divorced than change their bank. Even a litany of ‘misdemeanours’, from rigging Libor rates, to mis-selling PPI protection and breaching customer data, has proved insufficient to cause a mass exodus of retail clients or business customers from the incumbents.
Turn the tide
Fintech companies and digital challenger banks, which have yet to see anything like the number of new customers they had hoped for switching, need not despair though. There is some evidence to suggest the tide is turning in their favour.
Digital payments – a speciality of the new-breed banks – looks set to be a key area for winning new business. Just shy of two-thirds of small and medium-sized enterprises (SMEs), the backbone of the British economy, say they are increasingly making transactions digitally, with the largest businesses citing the substandard service of their current banks as a reason to switch, according to a recent survey from FIS.
Not only can fintech firms and challengers outdo the establishment on payments, they should also be able to make opening an account simpler and less laborious.
“At Centtrip we provide access to innovative online, app-based services, as well as free instant any-currency payments and the best foreign-exchange rates, all of which gives SMEs more and better options and the help they need to run their businesses,” said Mark Hipperson, CTO at Centtrip.
Start from scratch
The market share of e-money providers offering banking services such as Centtrip and Tide, as well as challenger banks like OakNorth, Starling and Atom, is only set to grow. The big five’s stranglehold over millions of customers and billions of pounds of transactions will only weaken.
Still the rise of new lenders does not mean a watering down of industry safeguards.
“We abide by the same regulation and compliance standards that apply to the largest financial institutions. Digital banks also need to protect their customers data and money, although arguably it is easier when you start from scratch with modern technologies rather than upgrading a patchwork of antiquated systems,” Mark said.
Some of the incumbents have been providing banking services for hundreds of years. While we respect some of their achievements, it is time to make way for the new guard who have proven they can competently care for the needs of private and corporate clients.