However, most interestingly of all, we are starting to see a real shift away from the dominance of the traditional high street banks towards a new world order; a new generation in banking, if you like.
It has long been the case that the ‘big five’ have dominated the UK banking scene. In 2012, those five banks accounted for roughly 90 per cent of the market share in Britain in terms of customer numbers and total lending figures.
However, there have been a number of new entrants in the past few years that are shaking things up. Furthermore, this looks like a trend that is likely to continue. The FCA recently stated that it has had 21 requests from firms looking to launch new banks next year. Clearly there is strong appetite out there for new entrants to enter the banking industry and this can only be good news.
The average customer on the high street has grown disillusioned with the current UK banking set-up. Most people in this country blame bankers for the financial crisis – and with good reason. It was the risky ‘casino’ activities and imprudent controls that caused much of the problems for banks; it was those same banks that were eventually bailed out by the UK taxpayer. It is imperative more competition is encouraged within the UK banking sector, in particular firms targeting the underserved segments of the population. These include serving those customers in remote rural areas where access to high street branches is not practical; or opening up access to alternative finance for small companies that are struggling to access traditional lending; or allowing those with a blip on an otherwise unblemished credit score to get onto the housing ladder. These are customers that break the traditional mould and these new banks should be targeting them.
This is where the challenger banks come in. New banks have been formed in the wake of the financial crisis to provide a credible alternative that customers are crying out for. The British public and other banks should welcome the 21 firms that have filed applications with the FCA. However, they need to ensure that a single concept informs their business approach at all times: putting customers at the heart of what they do.
The average consumer on the street is wiser and less trusting compared to five years ago; the financial crisis has left its scar on the UK population. Today, customers are wary, more financially astute and certainly hesitant to place their trust in banks. Transparency, great customer service and acting in the interests of your clients is therefore imperative.
For me, this is a basic necessity in running a bank. Being able to gain the trust of your customers should be the main priority for any challenger bank. The simplest and most effective way to do this is to build secure, long-lasting relationships with clients. Nobody wants to be put on hold or put through to an automated message when speaking to his bank. I also think it is important for a customer to be able to speak to the same person every time they call their bank. That same person should know the ins and outs of the customer’s story and seek to understand what they need.