ALEX BRUMMER: High Street banks face digital stress as online rivals’ slick software wins over customers
The reputation of Britain’s High Street banks never recovered fully from the 2008-09 financial crisis, and is not helped by the savage cuts in savings rates during the current pandemic.
Nevertheless, after a slow start, the banks have done a heroic job in making loans to businesses of all sizes during the Covid-19 crisis with 1.2m enterprises supported by government-backed schemes.
The banks will pay a heavy price for providing support and set aside £17billion to cover potential losses in the first half of 2020.
High Street banks have done a heroic job in making loans to businesses of all sizes during the Covid-19 crisis with 1.2m enterprises supported by government backed schemes
That said and done, senior executives at the Big Four banks will draw little comfort from the annual Ipsos MORI survey of the services provided to current account customers.
The most domestically focused banks, Natwest and Lloyds, are rated poorly for customer service compared with newcomers such as online lender Monzo and Starling Bank.
HSBC’s First Direct, a pioneer in telephone and online financial services, comes out well with 83 per cent customer satisfaction.
Embarrassingly, Tesco, which prides itself on its retail skills, is struggling with its banking arm with just 44 per cent of customers saying they would recommend its services to families and friends.
Arguably the bigger banks have struggled with customer services in recent months because of the preoccupation with business lending.
But they haven’t helped themselves with limited opening times and branch closures. The decision of Natwest to leave staff working from home until January 2021 does not signal the kind of ‘can do’ attitude required if the UK is to lift itself out of the stupor caused by the pandemic.
The real reason for dissatisfaction is the struggle the legacy banks have with technology. Most of them are lumbered with pre-digital-age IT, patched together with an overlay of modern systems and software.
The danger of too rapid a transition to modern, open banking technology was demonstrated by the catastrophic meltdown at TSB, which is still suffering the consequences with just 51 per cent of customers ready to recommend its overall service quality.
Online systems may be working well now, but chief executive Debbie Crosbie has a great deal of catching up to do.
The complexity of creating digital banking from scratch is enormous and the newer online financial groups such as Monzo, using the most up-to-date fintech software, have huge cost advantages.
Nevertheless, the reputation of the newcomers will not have been enhanced by the Wirecard scandal, which might give switchers – who put safety before anything else – cause for pause.
In almost every sphere of life, Covid has changed the way in which transactions of all kinds are handled. There is a premium for offering top-of-the-class mobile services, which is why Monzo is top-rated.
The Silicon Valley giants have been reluctant to dive too deeply into the financial space because of fears of becoming entangled in regulation and capital requirements.
Facebook’s flirtation with its own digital currency, Amazon’s provision of credit to Marketplace clients and Apple Pay all demonstrate from where the ultimate online challenge will come unless established lenders adapt speedily and well.
The big test for acquirers of liquor brands used to be prising ownership away from family dynasties who regard the income as an annuity.
Diageo chief executive Ivan Menezes has found a new route via Hollywood. After amazing success with George Clooney’s Casamigos tequila (sales climbed 64 per cent in the US last year) Diageo has swooped in on Deadpool star Ryan Reynolds’s Aviation American Gin, picking up some tequila, mezcal and sake brands along the way in a deal worth £481million. Aviation, priced at $27.00 a bottle in the US is light on juniper and drunk with soda water.
Diageo’s Tanqueray sells for $22.00 and is drunk with tonic. Reynolds and colleagues get £256million now but may have to wait a decade for a full payout depending on performance.
It’s still a super-hero return for a super-premium brand.
Much concern among the young about how exam algorithms could potentially affect life prospects.
There is little awareness that algorithms drive so much of their lives, with 97 per cent of 18 to 24-year-olds glued to the controls as gamers.
Travel bookings and the cashless society are powered by similar tech. Is that rage quitting I hear?