Trusting a new bank you’ve never heard of

6th February 2017

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visual representation of how mobile phone size and design has changed over time

I got my first phone at 13 and I still remember the phone number.

But that’s only because I’m with the same contract and the same provider as when I started. From flip phones to my iPhone, I’ve relentlessly stuck with a service I quite honestly loathe. Through awful signal coverage and even worse customer service. But why?

It’s exactly the same as my current account.

A branch nearest my house. The same one my parents bank with. Opened in my teens and never changed. Of course, since then, my lifestyle has changed just a bit. I’ve left home, got a job, pay rent and do my own laundry. My earnings, savings, and spendings have totally altered. Yet my banking experience hasn’t seen a drastic change since I moved from piggy bank to bricks-and-mortar ten years ago.

At least with my phone the actual device is radically better than when I was in Year 8.

Do we ever question what a bank is? What defines them? Or do we just accept that they exist?

Moreover, why stay with a bank you don’t like?

A big reason seems to be an existing level of doubt.

Can you even trust a bank that’s entirely on your phone? Are they really secure if they don’t have physical branches? Sure the usual suspects aren’t exactly wonderful, and they’ve had their fair share of scandals in recent years. But what makes the new banks any different? Can you really put your faith and trust in a new bank that you’ve never heard of?

There are a lot of questions to ask. And there are a lot of reasons for asking them.

However, as I’ve learnt since starting here, there are some pretty good reasons to think a digital challenger might deliver the same kind of step-change in banking as the iPhone did to mobile.

The first thing to note is that entrants must have banking licences (without which a new bank can not operate, much less call themselves a bank).

Authorised and regulated by all the official bodies, in exactly the same way as the old banks, they are members of the Financial Ombudsman and the Financial Services Compensation Scheme. This means complaints will be dealt with fairly and your money is protected up to £85k.

So although you may never have heard of these new challenger banks – most of which began as fintech startups – they are regulated in exactly the same way and provide the same protection as the Barclay’s and the HSBC’s of this world do.

Another reason why the new kids on the block aren’t to be feared comes from the fact they’re often specialised, focused on one thing and doing that one thing really well.

Steve Jobs doing a speech

"Do not try to do everything. Do one thing well." - Steve Jobs

Setting them apart from the norm, they tend to focus their energy on providing one excelling service, be it a current account, a savings account or loan, rather than being a jack of all trades.

Importantly, this means that they’re not selling you things you don’t need. Banks in the past have pushed various products onto their customers and cross-sold whether you need that loan or not, and that’s lead to the lack of trust in banks.

In a survey asking ‘What Customers Expect from Banks?’, customers said they had 4 main expectations: to be taken seriously, to work when they work, to be the kind of bank they want to work with, and crucially, to provide them with products they want to use.

So it’s time to question our relationship with our banks. Given how much we unconsciously rely on them for majority of our lives, we ought to know that we’re getting the best from them. That they’re offering the best to us.

I think that’s where the new wave of challenger banks come in. And that’s why I was inspired to get involved with Starling.

Challenger banks are set to meet our expectations – not just as customers but as individuals – and then exceed them.

Anne has said often that the only thing that really separates the big banks at the moment is the colour of their carpets. The new players on the scene are trying to make up for the shortcomings of the traditional banks in terms of diversity of products, experience, and service. Now is the perfect time for something new to disrupt the beigeness of banking.

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