Have the big banks lost the thread?


I’ve been saying for a few years that digital challenger banks won’t break the big banks’ hold on the retail banking space. Am I wrong? Things are changing fast, according to a new report from UK regulator the Financial Conduct Authority (FSA).

What intrigues me here is the nuance.


The shade.

The shade ?

Yes, nuance. Let me explain…

People don’t leave the big banks. They only relegate the big banks to the functions of big banks. People use other banks for other functions. Think of your analogy with pots and jam jars: people open deposit accounts in the UK with multiple banks for multiple functions. It fragments the banking sector, but creates more choices and opportunities.

So, some people use Monzo for daily life, Starling for their small business, and Barclays for their other boring stuff like paying utility bills, mortgages, currency, etc.

I’ve seen this trend develop for a while and when I saw that the average UK citizen now has 1.9 deposit accounts, that’s the explanation. They delegate accounts to functions, not closing accounts.

The question for the Monzo’s, Starling’s and Barclays of this world is what is their function and how do they retain it? If Starling offers a better way to extend your small business account into everyday life and boring stuff, are Monzo and Barclays becoming unnecessary? If Monzo offers a great small business account, are you closing your Starling account? And Barclays? Oh my god…as a big old bank I have no idea what Barclays can do.

One of my regular interactors on twitter, akohli,, posted this for example (in response to my tweet):

Why on earth would Barclays post an in-branch image of service metrics that clearly indicates you could deliver much better service from Monzo, Starling and other competitors, duh? Ah, it’s a “regulatory requirement”. Well, I’d hide that somewhere in the back then, bearing in mind that there are only 17 banks in the survey.

Now I myself use the old banks in place and the cool new digital banks. The problem with the old incumbent bank and change has nothing to do with the pain of change. It has to do with historical relationship, credit limits, ability to leverage analysis of being good (or bad) for the money. New accounts don’t have that flexibility in the same way, which is why my digital challenger bank is getting transactional accounts rather than full account service.

This will change over time due to data. In fact, Open Banking, Open Data and Big Data. Analytical overview makes that clear.

The emergence of open banking brings the most crucial change by increasing public awareness of how companies handle personal information and demanding more personalized solutions from financial institutions. Third-party connections make life easier for consumers. Individuals and organizations can use third-party applications to improve their daily lives rather than depending on archaic technology and user experience of their bank account.

This is reinforced by the comment of Harpreet Oberoi, Vice President of Customer Success at Infostretch:

“You can be sure the danger and opportunity that Open Banking presents is taken seriously when an organization like Visa buys Tink, a Swedish API fintech with just 400 employees, for $2.15 billion.”


The old banks are faced with the challenge of the challengers. That doesn’t mean they’ve lost the plot or lost the market, but if they don’t radically rethink their commitment to digital transformation, they will.


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