By Ian Bradbury, CTO of Financial Services, Fujitsu UK
At this time of year, it’s natural to cast your eyes forward to what’s to come in 2020. But to understand the changes that are set to come in the year ahead, we need to take a look back at the last 12 months. 2019 was the year that the pace of change ramped up for banks and insurers. From the rapid rise of challenger banks and the transformation of high street banking, to the emergence of a new sense of purpose in the industry, financial services leaders have been facing enormous shifts in how their business operates.
So, what have these changes meant for the sector and how have banks responded?
Digital disruptions and the challengers
While challenger banks have been in the market for almost a decade, 2019 was the year they really came of age. With their slick customer interface and digital-first features, challengers have seen a wave of consumer adoption; at last count Monzo boasts 2 million users and, according to YouGov, people are more likely to recommend Monzo than any other brand in the UK.
And customers are now using challenger banks in ways they weren’t before – while big banks have long been the ‘everyday’ financial centre for consumers, challengers like Monzo, Starling and Revolut are fast becoming peoples’ default banking option. This is especially true among younger consumers, with our recent research showing that 16% of 16 to 24-year olds bank solely with a challenger; forgoing the traditional big banks for new digital services.
However, the biggest sign that challenger banks are reaching maturity, beyond simply their growing customer base, is the interest they’re seeing from investment firms. The funding that challengers are attracting is significant, and with consumers well on their way to falling in love with the challenger bank experience, investors are recognising the potential for growth and rushing to get in at the ground floor.
The disappearance of physical banks and ATMs
2019 was also the year that the industry recognised the risks that come with banks and ATMs disappearing from our high streets. For those in large cities, this didn’t raise much alarm, but for rural communities the consequences can be enormous and far reaching, especially for industries like hospitality and retail.
With more than 2.2 million people in the UK still reliant on cash, the industry sat up and took notice, launching a £1 million fund through Link to allow rural communities and small towns to request free-to-use cash machines. In one month, the service received 100 requests. And initiatives like the one from Mastercard, which have seen convenience stores being able to offer cash services in local areas, are all steps towards ensuring consumers aren’t disadvantaged by the shift to digital banking.
Banks are putting purpose at their core
With so much disruption on their doorstep, 2019 was the year that banks looked at their role in society and started to really invest resources in establishing their social purpose. As organisations that hold deep seated trust with consumers, demonstrating a wider commitment to making positive change within society became one of the defining business goals for banks in the past 12 months.
You only have to look at Lloyds partnership with Mental Health UK, which offers support for people experiencing mental health and financial difficulties, to see how the industry is recognising the need to deliver a strong social purpose. And then there was the rallying cry from some of the world’s biggest businesses this past summer, including the US banking giant JPMorgan Chase & Co, for companies to prioritise social responsibility above profit. Clearly, with such visible statements being made from big banks, 2019 was the year that social purpose took its place as a key business objective.
It’s time to take stock
While the last 12 months may have delivered mammoth shifts in the market, next year will only see greater change in everything from increasing automation, further branch closures and a solidifying of the challenger banks position. As 2020 fast approaches and the pace of change only continues to accelerate, banks and insurers must take stock and prepare themselves for the coming change.
