Research in January 2015 from the CBI and PwC pointed out that the majority of finance companies plan to increase investment spend on IT and marketing as competition and technology change the nature of the sector.
And with four out of five UK consumers claiming they would trust challenger banks with their money if they had the right IT infrastructure, it’s no wonder that technology has become the current differentiator of the industry.
Take, for example, Britain’s first new retail bank in five years Fidor Bank. It has only just launched in the UK, having been founded in Germany in 2009, but what makes it so unique is that its banking model is based around its online community.
Users are financially rewarded for giving and receiving financial advice, as well as reviewing financial products. Fidor also invites members to help build the banks future services, including the chance to name its upcoming debit card, as well as suggest new functions and features. Furthermore, for every 2,000 “likes” the bank gets on Facebook, it reduces its loan interest rate by 0.1 per cent.
Essentially, Fidor Bank uses social media to overcome the cost and complexity of traditional banking, while increasing customer trust through an online community.
The concept of an online-only bank is nothing new, but few had a banking license. Recent months have seen a spate of new banks granted licences, with others going through the process of getting approval. This is significant when you consider that Metro Bank in 2010 was the first firm to be granted a banking licence in 150 years.
Read more on the banking industry:
- British banking evolves as mobile apps become top way to manage finances
- Metro Bank and Zopa aim to further disrupt British banks with new partnership
- The UK has set out one of the most stringent regimes governing bankers’ pay in the world
Digital bank Starling, which was set up by former Allied Irish Bank banker Anne Boden, is getting a full licence at the end of 2016. She may not be hoping to be a social media-inspired bank, but her concept is just as innovative ? launching an iTunes-style bank.
According to the Irish Times in November 2014, she said: The music industry has been transformed by iTunes, retailing by Amazon, but banking hasnt changed its approach in a long time. The same simple services traditionally offered in branches have just moved online and into apps. Empowered, tech-savvy consumers want and deserve more from their banks they want easy, intelligent banking, not just mobile versions of paper statements.
Boden explained things are changing as UK regulators have amended rules to enable new entrants to compete. She said: Finally, the technology behind all the best internet platforms can be brought to banking, allowing us to create a digital banking service thats truly personal to each customer.
Although internet giants like Google and Amazon will not offer banking services, the companies will disrupt the sector through other services that take consumers away from traditional banks, according to a recent report from Forrester. For example, Irelands central bank approved Facebook as an e-money institution, which will allow it to offer consumers the ability to store money and pay others.
Read more about the app-style bank launched by the former chairman of Metro Bank, and the company set on using the cloud.