Banking has changed a lot in the last 50 years. In the 1960s going into a physical high street branch was a regular thing; you knew the bank teller; the clerk handled your paperwork and overall you understood enough to trust the institution with your money. Then came the 80’s and digitisation, when the banks were able to cut costs and increase profit. The ability to self-serve created an efficient service for customers but removed the truly ‘personal’ side of banking. From that point on the there was a sense of complacency in big banking, which of course we all paid for in 2008.
The pressure is on for big banks to change and learn from the mistakes that caused the 2008 crash.
They lost people’s trust, but they still dominate the high streets. Post-crisis there were promises of transparency and firmer regulation, but really the same practices linger. Still, this loss has also opened the door for challengers. Most people don’t feel like they owe any loyalty to their bank and now with new legislation they can swap banks in just 48 hours.
We are now at a point where technology can take us back to personal banking, but in a new way. Digital challenger banks seek to serve customers in this new way. The challenge is to combine what has worked for banking in the past with the best that technology can offer customers.
So, what worked? The role of a trusted bank teller who offered services tailored to a customer’s need can now be replicated through banking apps that leverage your financial data. With these apps you have real time advice on how best to spend and save quite literally at your fingertips. You can instantly tap into a marketplace of financial products to find the one that best suits your needs. By using artificial intelligence and open APIs fintech creates a wealth of new possibilities for people who feel like they have very little control over the way they manage their money.
A lot of this comes from the things we can now do with machine learning and financial data, particularly when it’s all aggregated into one place. This data can be used to give customers a new personalised banking experience that is entirely digital. This might sound scary, but by helping you leverage your own financial data a bank like Tandem can help you save a tonne of money. For example, if we see from your data that you have booked a flight and are about to go on holiday, we can help you save or perhaps suggest useful financial products for your travels.
The incumbents and challengers alike understand that this new technology is disrupting banking. The big four are investing millions to keep up with fintech’s evolution. In theory they have the resources to keep dominating the space – the trouble is that their size is actually a disadvantage when it comes to developing great tech. Their cumbersome structures make it difficult to change something quickly, and there are often months or even years, between a product being developed and it seeing the light of day.
Challenger banks are smaller and we get stuff done. At Tandem we detect a problem in our app and get it fixed within a matter of hours. In tech we’re used to constantly testing our code, both through automated systems that check it line by line, and by having our compliance team working closely with our developers. This means everyone is on the same page and we can build out new features quickly and efficiently.
Another advantage is that our systems were built from the ground up with data in mind. Tandem are 15 years ahead of the big banks when it comes to data. We store everything in a single data pool that means our systems can tap into it efficiently. Meanwhile, the big banks are stuck with siloed data, which makes it isolated and inaccessible.
This is new personal banking is going to transform the banking industry. We can disrupt the industry and make it better, more consumer focused and personal – and that doesn’t have to mean going back to the old days of bank managers and clerks. Banking needs a revolution and it’s about combining what customers engage with in high street banks with new technology that gives them control.