A few years ago I was writing article after article about how the big banks were under threat from challengers coming to the market using fintech as an advantage.
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But the big banks seem to have come though the perceived threat.
One of the banks damaged most by the financial crisis of a decade ago, in financial and reputation terms, was the Royal Bank of Scotland. So much so it was nationalised.
RBS customers seemed there for the taking. But it hasn’t really panned out like that. Last week we had news of the Royal Bank of Scotland’s first profit in ten years taking the headlines.
The bank also reached another significant milestone in its mobile banking division. It announced that for the first time it now has more active mobile banking users than internet banking customers, some 5.5 million.
This has been coming. Back in 2015, according to the British Banking Association’s Way We Bank report there were 11 million logins to banking apps, via mobile, every day in the UK compared with 4.3 million logins to internet banking via bank website.
This represented a 2% fall in internet banking logins compared with the previous 12 months. RBS said there has been a 40% decline in bank branch transactions since 2013. We will probably see similar declines in the use of internet banking in the near future.
Furthermore RBS also said it is beginning to move its businesses banking customers to mobile. It has 90,000 commercial customers using its Bankline online service to bank but it expects these customers to move to an app which it will launch this year. Initially, customers will be able to view transactions and send payments with biometric approval.
So fintech has helped RBS cut its costs and seemingly prosper.
I must admit once I moved to mobile banking I have never even considered using internet banking via a desktop or laptop.
RBS is a very old bank, dating back to the early 18th Century so this is quite a big achievement.
It does bring home one of the major advantages the new challenger banks have. A bank like Starling for example is only app based and has only ever been in its brief history. Starling got its UK banking license in the summer of 2016.
Banks like Starling don’t have the huge additional costs supporting other banking channels such as branch networks. Banks like RBS are cutting down their branch networks as fewer people use them and IT operations are also changing with cuts made in the traditional IT department made to make room for new types of skills for the digital age.
But would it take to convince you to move your banking to a fintech based challenger bank?
Despite all this the big banks are retaining their customers. They have managed to keep up with developments in fintech, such as mobile banking, and rather than appearing to be under serious threat they are benefitting from them.
The service that was introduced to make it easy for people to switch bank accounts has not really been taken up in droves. Challenger banks are gaining customers. For example thousands of people are downloading Starling’s app. But it seems people are using challenger banks they seem to be doing so as a second account.
The truth is, and I say this as a consumer, there is little point changing bank unless they offer real financial benefits like high interest rates for saving and low interest rates for mortgages and loans.
I would like to hear from people about their mobile banking habits. Let me know if you have moved to mobile or whether you still use internet banking.
For example. I have an account with a challenger bank and one of the big high street banks. I have to say my main bank on the high street has really improved the mobile experience and although the challenger bank app is easier to use and has some really useful tools there is not really enough for me to move my main banking activity to the challenger yet.
But one contact of mine thinks there could still be a threat lurking for the big banks. He believes big tech companies could make in-roads into the market share of traditional banks. “If the big tech firms like Apple, Google, Microsoft, Paypal, Amazon and others wish to get into specific financial services, I think they have the power to beat the banks. But increasing regulation and de-globalisation of financial services may put them off.”
With the Open Banking and PSD2 rules now in force banks will have to up their game. Third parties, including big tech firms, will be looking at ways of offering financial services to consumers.