Could Digital Banks Replace Traditional Banks?

Jeems

I actually work in the digital department at one of the big banks and imo, no. 100+ years of trust and brand familiarity isn't easily done away with.


What has happened in the tech world will be replicated here ie the exit plan of these digital banks is the be acquired by a tradional bank and happy days for the founders. Revolut is valued at around $1.7bil, Monzo estimated at around $1bil. HSBC in contrast recently released their 2018 results and despite missing their targets, still made nearly £20bil profit. The big banks will swallow up these digital app only banks eventually, improve their own digital piece and carry on with a reduced branch network.

unrecordings

Jeems wrote: »

I actually work in the digital department at one of the big banks and imo, no. 100+ years of trust and brand familiarity isn't easily done away with.


What has happened in the tech world will be replicated here ie the exit plan of these digital banks is the be acquired by a tradional bank and happy days for the founders. Revolut is valued at around $1.7bil, Monzo estimated at around $1bil. HSBC in contrast recently released their 2018 results and despite missing their targets, still made nearly £20bil profit. The big banks will swallow up these digital app only banks eventually, improve their own digital piece and carry on with a reduced branch network.

Nice viewpoint
So what do we end up with - the usual 'high street' suspects (the trusted brands) but still with the consumer problem of reduced physical footprint ?

I'm interested in the valuations and the exit strategy thing - as the value of a bank has to be calculated differently to the average startup doesn't it..?

18cc

That is an interesting viewpoint but just wondered if the competition authorities would allow eg HSBC to take over Starling or Monzo or whoever?

eskbanker

18cc wrote: »

That is an interesting viewpoint but just wondered if the competition authorities would allow eg HSBC to take over Starling or Monzo or whoever?

I can imagine some resistance if HSBC went after another major player such as, say, Barclays or Lloyds group, but would be amazed if absorbing a minnow was seen as anti-competitive enough to trigger regulatory action.

Fintechs are undoubtedly interesting disruptors and it's a part of the market showing real growth, but they do get disproportionate airtime on here and elsewhere, and are minuscule in the grand scheme of things....

EssexExile

eskbanker wrote: »

...Fintechs are undoubtedly interesting disruptors and it's a part of the market showing real growth, but they do get disproportionate airtime on here and elsewhere, and are minuscule in the grand scheme of things....

And if they get swallowed up by the big boys something else will come along to replace them.

murp

I think there will always be a need for a central physical banking function but I don't see that as being a branch?

It was always inevitable that digital only banks would challenge the traditional banks and because they operate at a much lower cost they can offer a much better offering.

I think if you look at the offering of the traditional banks though they are switching the focus massively from branch services and more to digital as well. Lloyds now provide the ability to pay cheques on an app, RBS now offer a digital only mortage?

Some banks though are now providing a new type of branch like Virgin who see them more like a community hub with workshops, free refreshments, kids area. So it is much more than a stand in a queue to see a cashier service.

uk.virginmoney.com/virgin/about-lounges

murp

Jeems wrote: »

I actually work in the digital department at one of the big banks and imo, no. 100+ years of trust and brand familiarity isn't easily done away with.


What has happened in the tech world will be replicated here ie the exit plan of these digital banks is the be acquired by a tradional bank and happy days for the founders. Revolut is valued at around $1.7bil, Monzo estimated at around $1bil. HSBC in contrast recently released their 2018 results and despite missing their targets, still made nearly £20bil profit. The big banks will swallow up these digital app only banks eventually, improve their own digital piece and carry on with a reduced branch network.

I work in a digital department of a traditional bank too and the problem you have is that because of the legacy culture and technologies progress is very slow and always has a lot of challenges getting functionality to market without creating a transformation programme to remove old tech whereas I have worked for a FinTech brand and it is much quicker not just the systems etc. but the mindset and attitude to risk.

EssexExile

murp wrote: »

Some banks though are now providing a new type of branch like Virgin who see them more like a community hub with workshops, free refreshments, kids area. So it is much more than a stand in a queue to see a cashier service.

uk.virginmoney.com/virgin/about-lounges

Eight Virgin lounges in the whole country! Also I don't see much reference to banking services in these lounges other than "We have areas where you can do a little online banking or service your Virgin Money products".