London Daily

Focus on the big picture.

UK’s banking revolution offers insights for UAE’s digital lenders

UK’s banking revolution offers insights for UAE’s digital lenders

The distinctive red livery of the Monzo debit card, usually in the hands of twentysomething consumers, became the hallmark of a rapidly changing banking scene in the UK.

That excitement is now set to ripple around the UAE with the announcement of its first independent digital bank last week.

The entry of Monzo and Revolut into Britain’s consumer banking landscape in 2016 marked a step change from the offer of traditional banks reliant on customers using high street branches. The challengers relied on app platforms with customer support delivered through in-app chat.

Starling, another digital player, entered the marketplace a year later, with the challengers wowing customers with innovations, such as up-to-the minute spending notifications, commission-free spending abroad and the ability to instantly freeze and unfreeze cards.

Other features included bill splitting, saving pots or jars to help customers hit different savings targets, as well as instant PIN changes and even the ability to trade cryptocurrency.

For traditional banks, it was a wake-up call.

While banks had always relied on their ability to offer customers one-to-one support in their physical branches, the digital competition helped customers stay on top of their finances while also being able to adapt quickly to changing consumer needs.

“Every time established banks try to make innovations, it’s got to fit in with this huge legacy of systems going back decades and decades,” Andy Webb, founder of UK personal finance site Be Clever With Your Cash, told The National.

“But the new banks were starting from scratch. They could easily add new features on something that was designed for use on a phone, rather than adapted from older systems.”

Emirates NBD, Dubai’s largest bank, was the first to enter the digital banking arena in the UAE with Liv. in February 2017.

The app allowed customers to open an instant account, track expenses, split bills with friends, share money using social media and benefit from discounts on eating out.

However, Zand, headed by Emaar Properties founder and former chairman Mohamed Alabbar, takes the concept one step further as it will operate independently of existing lenders.

With the bank set to cater for both retail and corporate clients, what can it learn from the rise of challenger banks in Britain?


Pandemic dents profits at UK's challenger banks


While the digital banks started out as the shining stars of Britain’s financial technology industry, with customers even signing up for waiting lists to get their hands on Monzo’s iconic metal card, the pandemic has changed that picture.

After years of investor enthusiasm that allowed them to focus on winning customers over profits, Covid forced the UK’s three largest digital banks – Monzo, Starling and Revolut – to cut costs and hunt for new income streams.

Last year, Monzo’s losses rose to £113.8 million ($156.73) in the 12-month period ending February 2020, up from the £47.1m it lost in the previous period.

The business said slowing customer growth during the pandemic led to “material uncertainties”.

Monzo chief executive Tom Blomfield said the pandemic lead to slower customer growth.


“With this unexpected change in landscape, we’ve seen organic customer growth slow as word of mouth drops, and we’ll see reductions in revenue and higher credit losses,” Tom Blomfield, president of Monzo, wrote in the company’s annual report.

While rising losses are expected in the start-up scene, as that is often how a new company grows, the issue for digital banks during the pandemic has been slowing day-to-day banking, after card transaction fees, particularly from foreign travel, dried up.

Revolut reported a drop in revenue of 40 per cent in April last year, with the company’s chief executive quickly focusing on cutting costs and improving the product.

“The result was, six or seven months in, we started to break even as a business,” Nikolay Storonsky, Revolut’s founder and chief executive said. “We cut costs, risk management improved significantly and we continued growing.”

It also launched its regulated banking service in 10 new countries and applied for another banking licence in the US, while Monzo and Starling raised fresh cash earlier this year to fund expansion.

Challenger banks fight back against Covid


While they are now fighting back from pandemic-induced losses, challenger banks need to prove to investors and customers that they are a viable, long-term banking solution.

“They are still trying to find that model that works for them. Monzo in particular has introduced different paid features, with the first one a complete failure that they scrapped quite soon afterwards,” Mr Webb said.

“Because we have this culture of free banking in the UK, it takes a lot for someone to pay money to get something else in exchange.”

Another challenge is that many customers in the UK do not use the digital banks for their main account.

“So they don't necessarily have all their money sitting in there,” Mr Webb said.

“A normal bank has a lot of customers with a lot of money being saved and they are used far more regularly as a main bank account, so the money is sitting there and they can use that to lend out or invest. While Monzo and Starling do that too, they don't have that same scale.”

Traditional lenders have also upped their game


Traditional lenders welcomed the glitches the challengers faced during the pandemic, giving them the opportunity to promote the security and human interaction that high street banks offer when customers face complicated issues or need specific financial guidance.

They fought hard to catch up with their innovative rivals, upgrading their online channels and offering apps with all the bells and whistles expected from their digital-only rivals.

“They are absolutely trying to up their game, some with more success than others,” Mr Webb said. “A lot of the features that we saw first on the likes of Monzo and Starling, such as separate savings spaces and pots, the other banks are offering that too and they need to,” said Mr Webb.

“For the challenger banks, however, the question is – what do they do next when the other banks catch up?”

What's next for the challenger banks?


Alex Nicolaus, the head of people and culture at global FinTech company Paysend – the first of its kind to offer card-to-card transactions – said digital banks needed to diversify their service to offer more than just pure banking.

He highlighted the example of Grab, a Singapore-based technology company that offers ride-hailing transport services, food delivery and payments in one place.

“Their success is very much around the super app, where you combine everything from banking, to food delivery, to ride hailing – any touchpoint someone has from their day to day,” Mr Nicolaus told The National.

“Everybody has a bank account, and everybody needs money transfers or savings but you need to diversify into other areas, so you want one app that allows you to do multiple things, aside from just banking and transfers … such as payments for other services in terms of transport, holiday bookings or food delivery.”

While digital banks in the UK have struggled financially during the pandemic, they are on the rise worldwide.

“The pandemic has forced consumers, by not being able to use the normal banking services as they would, to adopt what was already there,” said Mr Nicolaus, who is also the author of How to Create a Winning Start-up Culture, published this month.

“What you've seen in Europe, specifically, as well as south-east Asia, is that being at home, the trust level really increased. Consumers have the confidence and the agility to start using those services now.”

UK lenders close branches amid falling demand


Covid-19 has certainly not been kind to traditional lenders, with many choosing to close high street branches amid dwindling demand during the pandemic.

Last month, Santander said it would close 111 branches across the UK – a fifth of its network – in response to the shift to digital banking, accelerated by the pandemic, with HSBC also shutting another 82 branches this year.

Meanwhile, state-backed UK bank NatWest said it would overhaul its retail banking business to fight back against FinTech rivals and increase revenue.

The bank, which operates about 16 per cent of UK personal current accounts and struggled to sell off its retail business in Ireland, will make staff available for longer hours so that customers can talk to human bankers – a move designed to rival digital banks’ app chat option.

Other conventional lenders looking to take on the challengers include American bank JP Morgan, which plans to launch its own digital bank in the UK, based in Canary Wharf, London.

It is the second major US lender to enter the UK retail banking market, with Goldman Sachs unveiling its Marcus-branded digital savings accounts in 2018.

“With enough time and money most companies can copy what the challenger banks do, so the big commercial and retail banks will catch up,” Mr Nicolaus said.

“My advice for digital banks is to try to be one step ahead and understand what the next consumer integration or trend would be in order to solve those problems.”

Looking ahead, he believes the opportunities lie in banking for small-to-medium enterprises, an area into which Starling has already moved.

While it started out as an app-based current account for consumers, it pivoted towards a service for small businesses, lending more than £2bn to date.

“That is still an area where a lot of the challenger banks are going to go next. The business-to-consumer segment has been commoditised and everybody is pretty much offering the same,” Mr Nicolaus.

“With the pandemic, a lot of individuals have lost their jobs or been furloughed and started businesses online. And because there's less mobility as well, there's going to be a rise in transactions. There will be a real race to try to be ahead on the business-to-business banking side.”

Newsletter

Related Articles

London Daily
0:00
0:00
Close
Unelected PM of the UK holds an emergency meeting because a candidate got voted in… which he says is a threat to democracy…
You Are So Beautiful
Rob Schneider explains California reparations legislation.
Postmodern Jukebox European Tour Version
Who knew badminton could get so intense?
An old French tune (by Georges Brassens) Pomplamoose ft. John Schroeder
Farmers break through police barriers in Brussels.
Sattahip Motor Show 20
London's Iconic British Telecom Tower Sold To Become Hotel
SONATE AU CLAIR DE LUNE - Moonlight sonata
Ukraine Arrests Father-Son Duo In Lockbit Cybercrime Bust
A kiss to build a dream on
US Offers $15 Million For Info On Leaders Of Cybercrime Group Lockbit
Wonderful Tonight - Eric Clapton (Boyce Avenue acoustic cover)
Russia Claims UK Cultural Agency Spied for Ukraine
Mean Blues
Apple warns against drying iPhones with rice
La Chansonnette
Alexei Navalny: UK sanctions Russian prison chiefs after activist's death
Pattaya Addicts
German economy is in 'troubled waters' - ministry
Franz Liszt - Liebestraum - Love Dream
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Dream a little dream of me
New video
Unchained Melody sung like you've NEVER heard!
Tucker Carlson says Boris Johnson wants "a million dollars, in Bitcoin or cash, from Tucker Carlson to talk about Ukraine.
Dave Brubeck - Take Five
Russia is rebuilding capacity to destabilize European countries, new UK report warns
Édith Piaf - Non, Je Ne Regrette Rien (Sofie)
EU Commission wants anti-drone defenses at Brussels HQ
Rondo Alla Turca
Von der Leyen’s 2nd-term pitch: More military might, less climate talk
Kiss of fire
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Tom Jones - I´ll Never Fall In Love Again 1967, 1989, 2001
Prince William Urges End to Gaza Conflict
Israel Cachao López - Guajira Clásica
UK court to hear Assange's final appeal against extradition to the US, where he faces charges related to his journalistic work—the publication of a classified video in 2010 that exposed US war crimes against humanity.
Edward Maya - Stereo Love (feat. Vika Jigulina) (Extended Mix)
About 50-60% kids either chose to be YouTuber or influencer
Strauss - Radetzky March - Karajan
A viral video of Nationals MP Barnaby Joyce lying on a Canberra footpath is celebrated by his media mates.
La vie en rose
European Countries React to Navalny's Death by Summoning Russian Diplomats
The Temptations - My Girl (Smokey Robinson Tribute) 2006 Kennedy Cent
Israel has gone ‘beyond self-defence’ in Gaza, says Labour’s Streeting
Orlando Cachaito Lopez Redencion
English farmers to be offered ‘largest ever’ grant scheme amid food security concerns
Edith Piaf - NON, JE NE REGRETTE RIEN
Cameron government knew Post Office ditched Horizon IT investigation
RADETZKY MARCH-2008-Wien, New Year Concert
EU Calls for Immediate Ceasefire in Gaza Conflict
Only you (And you alone)
EU Vows To Hold Putin "Accountable" After Meeting Alexei Navalny's Wife
Strangers In The Night
EU Launches Probe Into TikTok Over Child Protection Under Digital Content Law
Charles Aznavour - La Boheme
The EU Initiates Naval Mission to Defend Red Sea Trade Routes
Summer time
EU and UK Announce Joint Effort on Migration
Sting and Stevie Wonder - Fragile (from Sting's 60th birthday concert)
Brazil's Lula Likens Gaza Operation to Holocaust, Israel Says "Red Line" Crossed
Aux Champs Elysees
Ministers Confirm Proposal to Prohibit Mobile Phone Usage in English Schools
Stand By Me - Ben E. King (Boyce Avenue acoustic cover)
Microsoft-backed OpenAI valued at $80bn after company completes deal
La Mer (Beyond the Sea) – Avalon Jazz Band
‘Alexei would want to tell Russia not to give up fighting’
She
Rwandan Footballer's Dismissal Sparks Concerns Over UK Asylum Plan
Nathalie Song by Enzo Petrachi Stjepan Hauser Cello
Whisky Challenges China's Baijiu Market During New Year Celebrations
Shape of My Heart - Sting (Boyce Avenue acoustic cover)
Avdiivka - Symbol Of Ukrainian Resistance Now In Control Of Russian Troops
Radiohead - Creep
Putin Critic Alexei Navalny's "Killers" Refusing To Hand Over Body, Say Allies
Quizás,Quizás,Quizás - Andrea Bocelli - Jennifer Lopez
"Historic Step": Zelensky Signs Security Pact With Germany
Perhaps, Perhaps, Perhaps - Multi-Couples
"Historic Step": Zelensky Signs Security Pact With Germany
Pentatonix Havana
20 Tech Giants Sign Effort To Fight AI Election Interference Across Globe
Paula Cole - Autumn Leaves
Joe Biden Accuses Putin of Causing Navalny's Death
Oscar Benton Bensonhurst Blues
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
OH NANANA vs ABUSADAMENTE
Tucker Carlson grocery shopping in Russia. This is so interesting.
Nina Simone - ”I Put A Spell On You”. Vezi aici cum cântă Jeremy Ragsd
Julian Assange's Wife Warns of His Death if Extradited to US
NIGHTWISH - The Phantom Of The Opera
‘A lot higher than we expected’: Russian arms production worries Europe’s war planners
Motorshow 2016 Tanjay Negros Oriental
Greece Legalizes Same-Sex Marriage and Adoption Rights
Monica Bellucci - Ti Amo
Hungarian Foreign Minister: Europeans will lose Europe, the Union's policy must change drastically
Michael Jackson - Billie Jean Milena The Voice France 2018
In Britain Homeowners are receiving CPO’s (Compulsory Purchase Orders) so their homes can be redistributed to migrants
Michael Buble (Help Me Make It Through The Night) feat Loren Allred
Memories Canon In D - Maroon 5 (Boyce Avenue piano acoustic cover)
Matteo Simoni - Marina
Maroon 5 - One More Night
Maroon 5 - Memories
Mark Knopfler - Brothers In Arms (Berlin 2007 Live)
Mark Knopfler & Emmylou Harris - Romeo And Juliet (Real Live Roadrunni
Marina, Marina - The LUCKY DUCKIES intimist live concert at Guimarães
Major Lazer & DJ Snake – Lean On Mauranne The Voice France 2016
Love Theme from Romeo and Juliet - Joslin - Henri Mancini, Nino Rota
LoLa & Hauser - Love Story
Linkin Park Jay-Z - Numb Encore (Live 8 2005)
Hallelujah Mennel Ibtissem, The Voice France Leonard Cohen
Leonard Cohen - Dance Me to the End of Love
Leonard Cohen & Natasha Rostova - Dance me to the end of love
La casa de papel - Bella Ciao
La Camisa Negra
L'italiano (Toto Cutugno) - The Gypsy Queens
Juanes - La Camisa Negra
Jonathan and Charlotte - Britain's Got Talent 2012 Live Semi Final - U
John Powell - Assassin's Tango
Joe Cocker - You Can Leave Your Hat On (LIVE in Dortmund)
Joe Cocker - Unchain My Heart 2002 Live
Joe Cocker - A Whiter Shade Of Pale
Jay Z & Alicia Keys - Empire State of Mind LIVE
Jason Mraz - Im Yours (live)
Jarrod Radnich - Bohemian Rhapsody - Virtuosic Piano Solo
James Blunt - You're Beautiful
James Blunt - You're Beautiful & Bonfire Heart (Live at The Nobel Peac)
If You Go Away - Helen Merrill & Stan Getz (Tribute to Virna Lisi)
I'LL BE MISSING YOU
I Say a Little Prayer
Hotel California ( Eagles ) 1994 Live
Historia de un amor - Luz Casal. Vezi interpretarea Biancăi Sumanariu
Here Comes The Sun - The Beatles (Boyce Avenue acoustic cover) on Spot
Heart - Stairway to Heaven Led Zeppelin - Kennedy Center Honors
HAVANA by Camila Cabello Zumba Pre Cooldown TML Crew Kramer Pastra
HAUSER and Señorita - I Will Always Love You
HAUSER - Waka Waka
HAUSER - Sway
HAUSER - Lambada
HAUSER - Historia de un Amor
HAUSER - Despacito
Great Pretender
Georgia May Foote & Giovanni Pernice Samba to 'Volare' - Strictly Come
Gary Moore - Still Got The Blues
GIPSY KINGS VOLARE Penelope Cruz
Fugees - Killing Me Softly With His Song
French Latino - Historia de un Amor
For A Few Dollars More The Danish National Symphony Orchestra (Live)
Flashdance • What a Feeling • Irene Cara
Filip Rudan - “Someone You Loved” Audicija 4 The Voice Hrvatska Sez
Eric Clapton - Wonderful Tonight
Enya - Only Time
Enrique Iglesias - Bailando (English Version) ft. Sean Paul
Enrique Iglesias - Bailamos
Elena Yerevan Historia de un amor
Ed Sheeran - Shape of You (Official Music Video)
Ed Sheeran - Perfect Symphony [with Andrea Bocelli]
Ed Sheeran - Perfect (Official Music Video)
Easy On Me - Adele (Boyce Avenue 90’s style piano acoustic cover) on S
ERA - Ameno
ELENA YEREVAN- Cancion Del Mariachi-IN STUDIO-2017 DPR
Dust In The Wind - Kansas (Boyce Avenue acoustic cover)
Don't Let Me Be Misunderstood
Despacito x Shape Of You - Pentatonix
Deep Purple - Child In Time - Live (1970)
David Foster When A Man Loves A WomanIt's A Mans World (SealMichael Bo
Dance me to the end of Love ( Pi-Air Design )
Coolio - Gangsta's Paradise (feat. L.V.) [Official Music Video]
Conquest Of Paradise (Vangelis), played on Böhm Emporio organ
Cielito Lindo
Chico & The Gypsies - Bamboleo
Canción Del Mariachi - Antonio Banderas, Los Lobos • Desperado
Camila Cabello - Havana (Audio) ft. Young Thug
Camila Cabello - Havana ( cover by J.Fla )
California Dreamin' - The Mamas & The Papas José Feliciano (Boyce Ave
Buster Benton - Money Is The Name of The Game
Hallelujah Pentatonix
Bobby McFerrin - Don't Worry Be Happy (Official Music Video)
Bob Dylan - Knockin' On Heaven's Door Emilia The Voice Kids France
Besame Mucho - Cesaria Evora
Ben E. King - Stand by Me Sax Cover Alexandra Ilieva Thomann
Bella Ciao
Bella Ciao - INSTRUMENTAL
Beautiful in White x Canon in D (Piano Cover by Riyandi Kusuma)
Bad Romance - Vintage 1920's Gatsby Style Lady Gaga Cover ft. Ariana Savalas & Sarah Reich(1)
BELLA CIAO 2020 - KARAOKE ITALIANO
BAMBOLEO - Gipsy Kings • Antonio Banderas, Katya Virshilas
BAILANDO (original)
Awesome Ukrainian yodeler - SOFIA SHKIDCHENKO (with English subtitles)
Avicii - The Nights
Atom - The Great Gig in the Sky
Aretha Franklin - (You Make Me Feel Like) A Natural Woman (Official Ly
Antonio Banderas - Cancion del Mariachi (Desperado)
André Rieu - Zorba's Dance (Sirtaki)
André Rieu - Can't Help Falling In Love
André Rieu & Mirusia - Ave Maria
Andrew Reyes Elton John - Don't Let The Sun Go Down The Voice 2020 (
Andreas Kümmert Whiter Shade Of Pale The Voice of Germany 2013 Showd
And I Love You So
All About That Bass - Postmodern Jukebox European Tour Version
Alan Walker - Faded (Piano Cover)
Ain't No Sunshine -- Bill Withers (cover by Canen 12 y.o.)
African music
Adriana Vidović - “Creep” Audicija 4 The Voice Hrvatska Sezona 3
Adriana Vidović - “Believer” Nokaut 3 The Voice Hrvatska Sezona 3
A Fistful of Dollars - The Danish National Symphony Orchestra and Tuva
4 Beautiful Soundtracks Relaxing Piano [10min]
2CELLOS - Whole Lotta Love vs. Beethoven 5th Symphony [OFFICIAL VIDEO]
2CELLOS - Smooth Criminal (Live at Suntory Hall, Tokyo)
2CELLOS - Smells Like Teen Spirit [Live at Sydney Opera House]
2CELLOS - Despacito [OFFICIAL VIDEO]
13 Year Old Girl Playing Il Silenzio (The Silence) - André Rieu
094.All About That Bass
00 - SADNESS PART 1
(Ghost) Riders In the Sky (American Outlaws Live at Nassau Coliseum, 1
(Everything I Do) I Do It For You - Bryan Adams (Boyce Avenue ft. Conn
What a wonderful world
Moon river
×