At The Digital Banking Club’s latest debate, the eighth in the DBC series of debates, Stewart Bromley disclosed that digitally focussed Atom Bank was ready to launch in 2015. This, and many other topics, was discussed in depth at the event. Patrick Brusnahan reports
Held at the world famous Dorchester Hotel, the Digital Banking Club’s last debate of 2014, before a full house of more than 220 attendees discussed what the branch can learn from digital banking.
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Chaired by Douglas Blakey, group editor of Timetric consumer finance titles, the debate explored many sides of the discussion. All sides of the debate were covered and featured bankers David Young from Metro Bank, a financial institution devoted to the branch model and Stewart Bromley from Atom Bank, which is taking an entirely digital approach at opposite ends of the spectrum; Terry Cordeiro of RBS has a foot in both camps.
The discussion also explored the future of several forms of technology, from smartphone applications to video banking. Much was also said on the focus needing to be on the customer experience, rather than convenience. A common thread was giving consumers the choice to bank in the method which they wished to bank.
Simon Cadbury, head of innovation and strategy at Intelligent Environments had much to say on Atom Bank’s model. He said that there was “a gap for a purely digital offering in the market”. He added the fact that two thirds of branch transactions could be completed through self-service and stated: “Personally, if I can avoid visiting a branch, I will.”
Bromley took a stronger stance against the traditional branch method. He said that “the concept of needing a branch network is absolute nonsense”. He also claimed the difference between Atom and other banks was that Atom considered digital banking not as a channel, but as a business, which provides a less fragmented service.
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By GlobalDataHe said: “There’s a massive difference between digital as a channel within a mix of channels and digital as a business. The concept of ‘omni-channel’ has been bandied around for years but the concept of ‘omni-channel’ is dead, because it’s actually not necessary. It’s not what the customer actually wants.
“Whichever way you play that out, there’s a big difference between digital as a channel and digital as a business, you have to build the whole technology stack to service a very different experience. The products are different, the propositions are different, and you’re only limited by your imagination, instead of thinking of it as only another channel selling the same products which are sold across multiple channels.”
Cordeiro disagreed and argued: “It’s very difficult to do that on legacy systems with a customer base that is so large and so diverse, instead of being in your position, which is building from the ground up. It’s more complex. We are in a very different place to Atom Bank and it’s largely down to us having such a diverse customer base and we need to play to those needs. There’s no other way around it. ”
Michael Allen, chairman and founder of allen international, was slightly sceptical of this position as he understood that “even the online brands are looking for a physical presence”. He said, whether it is a digital or physical presence, the key factor was “getting the customer involved in a deeper way”.
David Young strongly defended the branch experience, even going so far as to say that branch is the wrong term for the experience. Metro Bank has always described its outlets as stores, designed to offer a more holistic experience and “tangible benefits”, as well as “offering choice and convenience”, in person. He believed that the branch was the only way to provide the full experience and service to the consumer.
Young said: “We can do things in a store that would take longer elsewhere. If anything, we should be putting more people in our stores.”
Terry Cordeiro took a view that combined the benefits of both views, believing it was about “the different needs of the customers at the time they need them”. He stated that “digital customers are hugely positive” and that the key is in “digitising services, not digitising the bank”. He said: “We’re moving to a world where customers are not locked into a certain channel. Giving customers the ability to do what they want, when they want to do it, is the advantage that digital has.”
Cordeiro continued: “We’ve stopped talking about online and mobile being separate experiences. We need to unify these experiences and just simply make it a digital experience.”
Another divisive issue was the cost of digitising services. Bromley said that big banks, such as RBS, were “burning billions” making the adjustment whereas Atom Bank, as a new bank, was only spending approximately £25m ($39m) from concept to launch.
Young reinforced his position on the issue not being about cost at all, but being about the experience the consumer has when banking. Cordeiro agreed with this notion, claiming that “I don’t think we are entering a world where we compete on price, but where we compete on the experience, but I think it’ll cost you a lot more to get to a customer base in the millions.”
When asked if Atom’s approach would narrow its potential customer pool, Bromley said: “Yes, definitely. Being a purely digital player is not going to appeal to everybody. That’s a given. We believe that there’s a significant amount of customers, we won’t go into numbers, but there’s enough out there to make the balance sheet work very effectively. It’s the biggest growing segment and whatever the number is today, we believe it will double in the next two years.”
With account switching being a meagre 2.5% in the United Kingdom, Bromley was not worried. He said: “Well, switching from something you don’t want to something you don’t want, really is pretty meaningless isn’t it? So, switching figures are never really going to change unless there is an alternative proposition that attracts for very different reasons. And that’s what we’re about.”
On the challenges presented by newer entries into the market, Cordeiro said: “For too long, the big banks have had it their own way. These new start-ups are absolutely a threat and a challenge to up our game. To an extent, we are. In the last three years, we’ve seen a change in the ways the banks offer digital services to their customers. We are reacting to that threat but there’s more of it. We could talk about how we’re reacting to things like bitcoin and that kind of technology. It’s there, we acknowledge it, and we have to embrace it and we have to accept that it’s part of the market we’re in.”
The discussion moved onto the importance and the prevalence of banking apps. He stated that while “banking apps aren’t always people’s favourite; they’re often on their mobile phone’s homepage.” Simon Cadbury concurred and said that “the relevance of apps is only going to grow”.
RBS noticed a huge rise in mobile usage and recently logged their one billionth usage of their mobile app. Cordeiro added: “We do have a large chunk of digital only customers, much more so now than twelve months ago, so we know that they are high net promoters. We know it has a positive effect on our other channels. So now the challenge is to make that integration across channels as seamless as we can. We have three channels and need to unify them. The other challenge is to up-skill our staff so they can cope with the demands created by these channels.”
Other newer technological upgrades were discussed. One of them was the scanning of cheques to transfer money, instead of a consumer having to go into a branch. Simon Cadbury believed that “cheques will get a breath of life in the near future, but digitising the process is a win for everybody”.
Not all forms of technology, however, were so well-received by the panel. Video banking was seen as an unnecessary step forward with Simon Cadbury asking “How many people actually want to go to a branch and sit in-front of a video screen?” David Young had a similar view. He argued: “The concept of walking into a store and talking to a computer is odd.”
The debate also discussed the future of cards with Cadbury arguing:”We’re seeing innovation drive banking. By the time Atom is fully up and running there might not even be a need for plastic.”
As the debate drew to a conclusion, Simon Cadbury summed up succinctly the question about what the branch can learn from digital: “There is no one-size-fits-all solution to this question.”
Panel members:
Simon Cadbury, Head of Strategy and Innovation (Intelligent Environments)
Simon joined in November 2013 as Head of Strategy and Innovation. He came from Lloyds Banking Group where has was responsible for payment technology and also sat on the credit cards leadership team. He has a deep understanding of contactless (working with Transport for London in the early stages of their project to enable payment with contactless), mobile contactless (Lloyds, as part of its London 2012 sponsorship, worked with Visa and Samsung to deploy handsets capable of making contactless payments), person to person payments (including the UK Payments Council’s solution to use a mobile number as a proxy for their current account) and reward programmes (such as the card linked ‘Halifax Cashback Extras’ project). Prior to Lloyds, he held a number of strategic and product development roles in the TMT sector; including at BT, Vodafone and BSKYB.
Stewart Bromley, Director of People and Customer Experience (Atom Bank)
Stewart Bromley is one of the founding directors of Atom Bank, the UK’s first digital-only bank. Stewart has over 26 years of international blue chip corporate experience within digital, IT, manufacturing, HR and customer service. At first direct, Stewart pioneered People Experience, achieving record employee engagement levels, underpinning unparalleled levels of customer experience. He also created and led the first Digital Centre of Excellence for HSBC Group globally, achieving record adoption, usage, customer satisfaction and sales. Renowned for his thought leadership, Stewart is a professionally qualified coach and for the past two years has led his own independent consultant practice, transforming the digital capabilities of leading brands, improving their digital customer experience.
David Young, Director of Change and Innovation (Metro Bank)
David heads up change and innovation at Metro Bank having formerly served the bank as director of digital channels looking after online, telephony, mobile and product support. David joined Metro Bank in 2011; prior to that he held a number of senior roles in HBOS and Lloyds Banking Group, latterly as head of Projects, Retail Business Strategy.
Terry Cordeiro, Head of Mobile (Royal Bank of Scotland)
Terry has over 15 years of experience in the telecoms and mobile industry working in both the public and private sector before joining RBS UK (Retail) as Head of Solutions Design for Mobile in November 2011. Terry is currently the Head of Mobile for RBS UK (Retail). In this role, terry owns the strategic direction and delivery of the award-winning RBSG UK Retail Mobile banking Service.
Michael Allen, Founder and owner (allen international)
Having now been involved in over 200 banks’ projects over the past 20 years, Michael and his team offer unparalleled experience to either the brand values and personality of a bank’s brand identity or making the branch environment more customer-centric and profitable. Recent projects led by Michael include: State Bank of India launching digital branches as part of its programme to offer next-gen banking solutions to the growing mobile phone and internet savvy customer base; Virgin Money Lounges, designed by allen international to offer a unique and relaxing banking environment; Bank of Ireland’s new digital focused concept branch and also in Ireland, The Lab Project for AIB, designed to bring together AIB’s technologies in a physical hub to showcase test and introduce customers to one of the best digital banking experiences.
