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Could Digital Banks Replace Traditional Banks?

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Could Digital Banks Replace Traditional Banks?

edited 6 March 2019 at 1:34PM in Budgeting & Bank Accounts
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p12ttnp12ttn Forumite
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edited 6 March 2019 at 1:34PM in Budgeting & Bank Accounts
Hi there, I'm a student studying in final year of university and was wondering if anyone could help me out.

I am looking for responses about do you think a fully digital bank is the way forward even more than a traditional bank. This is for a research project that thinks about how we could make digital banking better and more competitive than it currently is. If there is anything you think should be improved or just general gripes about things banks get wrong.

Also if you have any more complex complaints, pain points or ideas you'd like to see in a digital bank feel free to put it in the thread, I'd love to hear them! :j

Thanks again!
Nathan
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Replies

  • Ken68Ken68 Forumite
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    There is no way, Nathan, that my old eyes will let me do banking on a mobile, though if Starling Monzo etc went over to conventional computer , then I will be quite willing to adapt.
    What does happen when digital users get old and forgetful, do they go back to pen and paper. So easy to press the wrong button.It worries me , can you mention this in your thesis.
  • p12ttnp12ttn Forumite
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    There is no way, Nathan, that my old eyes will let me do banking on a mobile, though if Starling Monzo etc went over to conventional computer , then I will be quite willing to adapt.
    What does happen when digital users get old and forgetful, do they go back to pen and paper. So easy to press the wrong button.It worries me ,

    Hi Ken, yes this has been a problem that I have noticed crop up on a number of occasions and something that I think needs to have more consideration and thought rather than just considering one group of people that will use the app.

    The website idea is something worth looking into and it seems like most digital banks currently have overlooked this.
  • 18cc18cc Forumite
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    I think 'traditional' banks will go pretty much fully digital ie no branches. They will then be the same as what we currently call digital banks (eg Monzo, Starling).

    The difference is that you can access traditional banks via a laptop/PC as well as smartphone app, whereas currently the Monzos of this world are app only. This may very well, of course, change.

    The other difference is in the size of the customer service department for when things go wrong eg Barclays has more support than Monzo (I would think, and it may even out over time).
  • Ken68Ken68 Forumite
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    There will have to be a backstop of some sort. Probably the good old Post Office .
  • Uxb1Uxb1 Forumite
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    Not to mention that one such new bank Revolut is having some "problems" at the moment.
    Recruitment and staff issues
    https://www.wired.co.uk/article/revolut-trade-unions-labour-fintech-politics-storonsky
    The small matter of the CFO resigning and allegations of lax money laundering policies
    https://www.finextra.com/newsarticle/33454/tales-from-the-dark-side-of-the-revolut-revolution-cfo-resigns
  • EachPennyEachPenny Forumite
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    18cc wrote: »
    The other difference is in the size of the customer service department for when things go wrong eg Barclays has more support than Monzo (I would think, and it may even out over time).
    I think this is possibly one of the most important issues. The traditional model involves employing large numbers of humans who can try to help in times of crisis, which is valuable (as TSB discovered not so long ago). In extremis staff in branches could be redeployed to answer phones of the disaster planning has been done correctly.

    Digital-only banks relying on technology rather than people are vulnerable in this area. It will be interesting to see how the regulators react when one of the new model banks has a major IT foul-up affecting larger numbers of customers, and without the human resources necessary to deal with the fall-out.
    "In the future, everyone will be rich for 15 minutes"
  • londoninvestorlondoninvestor Forumite
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    18cc wrote: »
    I think 'traditional' banks will go pretty much fully digital ie no branches. They will then be the same as what we currently call digital banks (eg Monzo, Starling).

    The difference is that you can access traditional banks via a laptop/PC as well as smartphone app, whereas currently the Monzos of this world are app only. This may very well, of course, change.

    I think you're suggesting that Monzo et al will move towards something which is web-based rather than app-only. But interesting to think what would happen if things move in the other direction. If banks which are app-only become predominant, there might start to be competition concerns about the role of Apple and Google in the retail financial system - since you have to be a customer of one of them to use an app.
  • gt94sss2gt94sss2 Forumite
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    The newer challenger banks - not only the digital ones - need to have a longer more established track record - before being able to appeal to more customer groups.

    There has already been a huge shift to banking transactions online - even at 'traditional' banks and this will continue. I suspect those which will do best will offer a combination of app, website access and/or telephone.

    The gap between old and new banks is also reducing - features like being able to block/freeze your cards online, online chats and instant notifications of transactions - which were once the preserve of digital banks - are being offered by more and more financial institutions - not just those which are only app based.

    The offerings by app based banks is at the moment only really for simple products - current accounts, overdrafts and credit cards etc.

    To be more functional as a customers default choice they need to offer more complex products such as mortgages but many people would like advice when purchasing such products. They also don't offer cheque books which are important, in particular, to certain segments of society, such as parents - despite the increasing popularity of electronic payments.

    Existing banks have reduced their branch networks but you will note that they all consider having 600-800 branches (and post office access) is necessary to meet the needs of their customers. Metro Bank has even specifically targeted this customer segment with longer opening hours, open 7 days a week etc.

    As has been mentioned, banks with physical access are also more 'resilient' if there is a crisis - i.e. an ISP, mobile operator or LINX goes down - and the newer banks have yet to face this in anger.

    However, there are areas where app based banks are definitely missing a trick though - and in areas you would think should play to their strengths - such as not already having the ability for customers to pay in cheques via their apps unlike many of the big banks - meaning that even if customers want to switch totally to an app based bank, they may well keep open another account for such transactions (though you can post cheques to Monzo etc).

    An alternative to issuing cheque books to everyone could be to allow someone to enter details of the payee in the app, and the firm then posting a cheque to them directly (an account I had in the US used to do this years ago).
  • ThrugelmirThrugelmir Forumite
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    Someone will reinvent the bank branch. Not as we currently know it though. Disruptive technology has an impact. Often isn't the final answer though.
    “Markets have been so good for so long, that many investors are trivialising the advanatages of actively managing portfolio risk" - Gervais Williams
  • unrecordingsunrecordings Forumite
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    Thrugelmir wrote: »
    Someone will reinvent the bank branch. Not as we currently know it though. Disruptive technology has an impact. Often isn't the final answer though.

    As Waterstones did (or tried with the coffee shop concept, I suspect banks will evolve into a hybrid Wetherspoons/betting shop/bank concept (assuming there's no law against that)

    The thing about disruptive technology though is that it's often designed by people with no knowledge of the sector, and coded by graduates who may be brilliant at what they do, but have next to zero real life experience translating human behaviour into their model, along with poor middle management. When it works, everything is new, exciting & tickety boo, but when it fails... ...take Quadriga for example

    Why am I in this handcart and where are we going ?
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