Reuters released an announcement on 26th February stating that Britain’s biggest banks are “poised to introduce money management apps” that will compete with products launched by Fintech start-ups. As the article states, the banks are betting that “their trusted brands, large client base and deep pockets” will enable them to play catch-up with the new technology pioneers and ensure they continue to dominate the way people store money, spend it and invest it. Is this news a sign of things to come?
Banks develop apps that already exist
Three of the banks involved in developing cutting-edge apps are HSBC, Lloyds and Royal Bank of Scotland. The products are thought to enable customers to “pull data from different accounts, even those at rival lenders, on their mobile devices and home computers.”
However, there are apps providing these services already in existence, Monzo and Money Dashboard being two examples, and they have a loyal following of young fans who ‘get’ the technology. Take Monzo, an app that analyses users’ spending habits, gives budgeting advice and allows its users to freeze and unfreeze cards with ease. Its user base grew by an astonishing 300% to 450,000 during 2017.
A Fintech frenzy
This kind of competition has sent the banks into a Fintech frenzy and placed the need for products to compete in this market at the top of the banks’ product development agendas. It is also being driven by new ‘open banking’ regulations that require the top nine British banks to share data so that customers can view aggregated data and this compare what each bank offers. This will be available in March, although some banks have been given longer to implement it for security reasons.
As a result, we can expect to see plenty of aggregator type apps appear, but so far only HSBC has shown any real interest in it and has partnered with Fintech start-up Bud to deliver an app for HSBC’s First Direct brand.
Obviously the banks have the financial resources, as well as brand familiarity, to scale up at pace. Lloyds is spending three billion pounds on digital products and staff with Fintech know-how over the next three years.
Will big brands win out?
Reuters spoke to some of the customers trialling HSBC’s app. One, a 30-year-old graphic designer, said that although he would like some features changed, overall he would trust it because it comes from a well-known brand rather than “some mysterious company nobody has ever heard of.”
The Fintech start-ups don’t seem too worried about all this. Nikolay Storonsky, founder & CEO at Revolut, doesn’t see the banks’ financial resources as a challenge at all. He believes that the banks are going to be trailing behind the Fintech start-ups for some time, because businesses like his have the speed and flexibility to launch several additional features and move on “to the next big thing” while the banks are still working on their concepts. He also believes that the younger customer base that companies like Monzo and Revolut have want less red tape and products that are innovative, whereas the banks will produce copycat apps.
There is something in what he says and the only thing that remains to be seen is if the power of giants, in this case the banks, will defeat the ‘small guys’ as is usually the case, or whether the tide will turn in favour of the Fintech start-ups.