Are dentists more attractive than banks?
By Amelia Bengtsson
10 minute read
- 71% of millennials would rather visit the dentist than their bank (me included)
- 73% would be more interested in financial offerings from Google and Amazon than from high street banks
- 33% believe that banks will be unnecessary within 5 years and are open to switching banks in the next 90 days
So how can the banking sector engage this digitally savvy, disloyal and demanding audience?
Gone are the days when reps from the high street banks rocked up at Fresher’s Week and recruited their customers for life – the 4 UK leading banks are now among millennials’ 10 least-loved brands according to a 2018 study. These digital natives – cash and time-strapped but with high expectations – know what they want, and a group of challenger banks are lined up in the race to win them over.
So what do they want and who’s winning?
- Ease of transaction and transparency – multiple passwords and not knowing if your payment to account number 007007, sort code 00-70-07 has actually reached James Bond are no-no's
- Real-time information – most banking updates are instant but contactless; albeit an excellent innovation, often doesn’t show up for a couple of days
- Personalisation – millennials love it
- Money management tools – to see where they’re spending their pennies and meet targets
- …and innovative and digital, preferably an app – The ‘Uber’ of banking
Since the relaxation of banking rules in 2012 and the launch of the Current Account Switching Service in 2013, many digital challenger banks have emerged. These players are still jostling for position; let’s look at four…
#1 Monzo…the best for overall consumer experience
- Some 15% of all new UK bank accounts are Monzo accounts, and in 2018 Monzo joined the Unicorn club, with a £85m investment that helped them hit a valuation of over $1bn.
- On the consumer side, they became a Which? Recommended Provider, with the highest consumer score of any UK bank.
- Having launched current accounts, savings accounts, and overdraft capabilities, they are setting their sights on increasing the number of third-party financial products they offer, retailer loyalty and discount schemes, price comparison sites, investments and even the possibility of switching utility provider or filing your tax return – all this as part of a move toward “banking as a marketplace”.
What do we think?
- Monzo has brought a buzz to the banking customer experience by energising it with personalisation – photographs of users, emojis and effective word-of-mouth marketing with ‘Willy Wonka-style’ golden ticket referrals.
- They have created a community which appeals to millennials and engages users in the company’s development. The website encourages suggestions (open innovation), and the transparent publishing of their product roadmap on the website increases trust in the brand.
#2 Starling Bank...the best for current accounts
- Starling’s goal is simply to build “the world’s best current account”. They call themselves a ‘tech startup with a banking licence’ and have partnered with Moneybox to give customers access to a suite of saving and investing tools, and with both Flux and Tail to give users access to exclusive loyalty schemes and unique restaurant and bar experiences based on their transaction activity.
- Starling Bank also unveiled a 2019 Euro Account, enabling customers to hold, send and receive payments in euros.
- They offer real-time balance check (Starling Pulse) and notifications, overdraft facility with adjustable limits and biometric identification by Picture2video.
- They are the first UK licensed bank to launch a public PSD2-ready API, the first challenger bank to offer Faster Payments and to organise hackathons to encourage open innovation.
What do we think?
- Of all the challenger banks, Starling is the most mysterious and guarded about future plans, but we particularly like their idea of personalised current account numbers and their planned use of AI to offer a personal assistant service, suggesting an alternative coffee shop if you’re spending too much at Starbucks.
#3 Atom Bank…the best for savings
- Atom Bank was one of the first challengers to launch (in April 2016) and so far have focused on savings and mortgages. Their USP is high savings rates (until March the best in the market) and low mortgage rates – year fixes start at a rate of 3.59%, which all come with £500 cashback on completion (the next comparable deal is 1.74% from First Direct).
- They are ‘UX-ing’ banking with personalised colour-themes, logos, selfies and voice biometric log-ins.
- In the future, Atom plans to use 3D animation and sound to engage its customers through its gaming platform Unity.
What do we think?
- While I fancy having my own personalised ‘Amelia’s bank’, Atom’s current offering seems to target older millennials – younger, cash-strapped millennials will be less interested in a bank offering mortgages and savings products than a payment card or current account, which Atom will only be launching this year.
- The ‘What’s in Store’ page on their site engages potential users by informing them of future plans eg. current accounts, instant access savers and credit cards.
#4 Tandem…the best for money management
- Tandem offers bank accounts, credit cards and saving accounts.
- It records spending and offers personalised advice. Rather than opening a brand-new bank account, Tandem pairs itself with your existing accounts to provide a simple solution to help customers monitor and manage their finances.
- While currently unable to offer full banking services, robo-based Tandem will, for the moment, provide a price comparison service. In the future they are hoping to be ‘corporate’s worst nightmare’ – giving customers actionable insights into where they can save by switching eg. energy supplier and then actually switching them.
What do we think?
- The fun, animated website gets our vote.
- It feels more ethical. The ‘co-founder’ community engages millennials by working in ‘tandem’ with customers to build a bank which reflects their needs, and encourages responsible banking.
- Tandem stands to increase healthy competition in industries way beyond banking.
These are just four of a multitude of fintechs looking to revolutionise the world of banking for the next generation – check out also exciting Revolut, Loot and Curve. All challengers offer an enhanced customer experience and increased transparency which was lacking in the incumbent banks, but as yet all are lacking a full product offering. As such they are complementary rather than substitute products. If they want to win back millennials, high street banks should snap up these baby banks in their infancy and allow them to flourish and grow with an independent identity.