The best kind of tech is here to support and enhance the needs of a variety of businesses, not hamper their potential for progress.
Neal Jannels (pictured) is managing director of One Mortgage System (OMS)
We’ve all seen and read about numerous tech disrupters which have torn up the traditional rule book to make an impact across many market sectors. This is also evident within financial services, and none more so than challenger banks. With many relying on apps or API-based services, they are transforming the banking landscape and showing that banking can be simplified and truly digital.
A recent prediction from consultancy giant Accenture, suggested that digital-only banks such as Monzo and Revolut are on track to treble the size of their customer base within 12 months - to more than 35 million people. Adding that it expects to see high growth in these challenger banks as more people switch away from incumbent banks to the fintech firms.
The start-ups have also seen an increase in the average amount stored in accounts. Accenture estimate that the average deposit increased from £70 to £350 per customer in the first half of 2019, with London-headquartered company Revolut already signing up 7 million customers and Monzo having two million despite only being available in the UK.
The research also found that digital banks have an average operating cost between £20 and £50 per customer, compared to over £170 for traditional banks.
This is quite a gap and whilst it appears that many challenger banks are yet to move into the black, funding lines remain well and truly open when it comes to embracing these concepts.
According to a report released by the start-up research company CB Insights, challenger banks raised $2.5bn in 55 deals this year through to the end of July, surpassing their previous record haul in 2018.
The sustained growth in such offerings highlights consumers increased willingness and readiness to adopt these types of products and services into their banking needs.
Genuine alternatives which challenge traditional banking methods are welcomed, and this also applies to business banking as well as for individuals.
Any business must understand exactly what problems or issues it wants technology to solve, and to do their due diligence in utilising the right service or solutions to overcome these problems and/or help streamline everyday business transactions.
In many ways this challenger bank appetite and momentum also reflects tech advances in the specialist lending markets. Both were industries that often continued to operate behind the tech curve and are still looking to play catch-up to some degree.
Focussing on specialist lending, tech was viewed as a barrier rather than facilitator for far too long. Thankfully, more avenues are opening up for systems and solutions which can support the complexity attached to it - in line with intermediary users, distributors and lenders - rather than work against it.
The best kind of tech is here to support and enhance the needs of a variety of businesses, not hamper their potential for progress.
It’s important for all parties in the banking, specialist lending and intermediary markets to realise this whilst integrating the right option for them into their respective businesses.
