Preference Choice Publication

Banking at your fingertips: how digital-first providers have revolutionised the finance industry

Mobile Marketing

Nigel Frith, Vice President of Financial Services at AskTraders, discusses how challenger banks have revolutionised the banking industry, and the opportunities more traditional banks can explore as they aim to extend their digital offerings. 

Whether it’s being able to FaceTime friends from across the other side of the world or simply being able to answer the door from the comfort of your own sofa, the role technology plays in our lives has only increased in recent years. As people become accustomed to having access to almost everything at their fingertips, businesses have been forced to adapt the way they operate. With digital-first providers like Monzo and Starling combining banking and technology in such a seamless fashion, traditional banks have been forced to evolve quicker than most. Despite launching only a few years ago, a number of these challenger banks already have millions of users, so just why are they so attractive to customers, and how have the big players in the industry risen to this digital challenge?

How challenger banks are putting the needs of customers first 
Key to the success of challenger banks has been their customer-first approach. While they recognised they wouldn’t be able to compete with the big boys in some aspects of banking, such as the ability to offer detailed financial advice, what they spotted was an opportunity to make time-consuming daily tasks that bit easier. Using their services, customers no longer have to spend hours figuring out what they're spending their money on or discussing how they’ll split the bill following a meal with friends. Instead, they can rely on an app to do the hard work for them. 

With more than 4m customers, Monzo is perhaps the best-known challenger bank. It started out in 2015 as a prepaid card that could be topped up via its app before transforming into a sole banking brand in 2017. It offers all of the usual current account services that regular banks provide, but also enables customers to manage their money in an effective and efficient manner. Features such as a ‘get paid early’ setting, which allows users to be paid their salary or student loan a day early, have proved to be especially popular among its customer base. 

The likes of Monzo and Starling have been particularly clever at taking advantage of Apple Pay and Google Pay so people can use an app or just their phone to manage their entire bank account and make purchases – taking automation to the next level. Having hooked customers on their chic apps and game-changing features, digital-first providers generate revenue by offering overdrafts, loans and insurance savings through a marketplace in their applications.  

Responding to the rise of challenger banks 
While the continued headlines surrounding high-street bank closures could lead people to thinking banks are neglecting their customers, the opposite is in fact true. Banks are beginning to invest in the areas where customers want to see change and although they’ve not struck a perfect balance yet, they are getting closer to reaching a happy medium. 

With own recent research revealing that many people in the UK still rely on banks for vital services like paying bills and seeking financial advice, NatWest and Lloyds Banking Group have committed to initiatives which ensure all communities have access to face-to-face banking in some capacity. This has included working with Post Offices to expand their financial services, as well as deploying mobile banking vans to rural areas which don’t have a physical branch on the high street. There has,  however, been a strong drive to encourage customers to switch to digital banking. This transformation aims to put the power back into the hands of customers who can now pay for purchases through an app on their phone and even block payments to certain websites. 

Whereas a few years ago, these personalised features would have been exclusive to digital-first providers, now, almost all of the traditional banks can offer a viable digital offering. Having invested £4.15bn into their digital platforms in 2017, more than 90 per cent of Barclays’ transactions now take place over mobile devices – signalling a highly successful transition to digital banking. 

The future 
Although further high street branch closures are inevitable, banks are working hard to maintain their in-person services for those who prefer to operate in this capacity. While digital banking isn’t for everyone, the ease and efficiency with which millions of people can now complete financial tasks has left a lasting impression on many. Over the coming years, banks will continue to evolve their mobile offerings, providing customers with even more personalisation and automation. The big question is, how much more innovation is possible?