Are banks all the same? Financial services in the UK over the last four years

This blog post is a summary of a talk that I gave at the Fintech Design Summit in New York.

It details what’s happened in financial services in the last four years in the UK.

In the last four years, retail banking in the UK has changed completely. It’s been revolutionised by customer-centric and design-led startups like Monzo, Starling and a few others. It’s created a better experience financial services experience for all.

Retail banking context

In the UK, we’ve gone from people thinking that "banks are all the same" and your bank app being mediocre at best, to it being possible for your bank's app to be one of the best apps on your phone. Some new banks are amongst the best examples of how to run a company and create great experiences for customers.

A lot has changed in a short amount of time.

Recent statistics from Which? show this. According to their survey, the UK’s best bank is Monzo – a digital bank that didn’t exist five years ago. Further to this, 10% of the UK adult population now bank with a Fintech provider that has existed for under five years.

Why have these new banks appeared in the UK? It’s down to two factors:

• Changes in regulation

• The brand-experience gap

Changes in regulation 

In 2014, five banks controlled 85% of the current account market. All five were recognised household names, all over 150 years old.

We had an established industry which meant it was not easy for new entrants to appear. When Metro Bank - a small regional bank - opened in 2010, it was the first bank to open in over 100 years.

Following the financial crisis, the government decided to create a new regulator for the industry. Part of their mandate was to promote competition. To achieve this, they made it easier to start a new bank by reducing the barriers to entry.

This meant that new banking providers could enter the industry and challenge the established players. Today there are two startups that are fully licensed and of significant scale: Monzo and Starling. We also have a couple of others - Revolut and Monese - which don’t have a banking license.

The brand-experience gap

So why did these startups attract customers so quickly? One reason is that the standard of banking experiences was so poor.

During thousands of hours of design research with banking customers in the early 2010s, we heard one thing a lot, that “banks are all the same.”

People were apathetic towards their bank and their relationship could be described as purely transactional. It’s not because they didn’t recognise the differences between banks due to being ill-informed. It’s because they were right. 

The reason they said big banks “were all the same” is because banks had been promising one thing and delivering another. If you looked at almost any bank in the UK, the advertising told people one thing, but the experience didn’t match up. We call this a brand-experience gap. 

Whether a bank said that they were “Here for every step of the journey”, “Always giving you extra”, “Here for your ambition” or any other message, this rarely came through in the digital banking experience.

There’s an important link between what people expect - based on what was promised - and what actually happens when they bank with you. What people think about your brand is only as good as the experience you provide.

So when startups such as Monzo arrived, and had a close match between what they said they would do and what they actually did, they stood out in the market.

Five ways startups disrupted the UK market through design

So far, we’ve explored why new banks emerged and why there was a gap in the market for them to fill, but what have they done to succeed?

1. Start with problems that others are ignoring

The most successful startups have focused on audiences that larger banks had been neglecting and/or parts of the banking experience which were universally bad. They didn’t try to replicate the vast array of products and services that big banks have.

For example, TransferWise and Revolut focused on international payments and spending, targeting people who live and work in different countries. Similarly, Monese was founded by an Estonian who struggled to open a bank account, having moved to London.

One of the central lessons of this approach is that if you are 10x better at a few things, people will forgive everything else you’re not great at.

The best example of this is Monzo, whose product at launch lacked many basic banking features, but gained traction because the experience they did provide was such a marked improvement on the status quo. 

They sent your PIN via text instead of through the post. Transactions appeared in the app immediately rather than three days later. You could freeze and unfreeze lost cards instantly. Many banks still lack these features four years later.

2. Align customer and company goals

People are understandably cynical about the motives of banks following the financial crisis. This presented an opportunity for those who could show that they were unlike the banks of old. 

By aligning business objectives with customer needs, startups like Monzo have been able to create products and services that stand out in the market.

One example is the “get paid early” feature. This helps their business objective of encouraging more people to bank with them as their main account provider, but also meets the customer need of wanting to get paid earlier.

3. Make it better not different

If people think “all banks are the same” and you want to position your bank as different, then it’s tempting to design your new bank to look completely different.

We’ve seen that this isn’t the most effective approach. Atom Bank launched with an app that was unfamiliar and required people to learn a new interaction model.

On the other hand, most other startups like Starling and Monzo have gone with a more familiar design. The successful formula is to be familiar enough to be comfortable, but different enough to be better.

It’s better to build on conventions that people understand than force them to learn something entirely new when they are apprehensive about moving their money to a new bank.

4. The experience reflects the culture

People’s behaviour is shaped by the environment around them. In an organisation, the environment comprises of things like culture, priorities, process, tools, technology and organisational structure. 

In most big banks, the environment is not conducive to creating great experiences and it means that people are often not able to do their best work.

If you’re given a dated laptop with terrible software, you’re in a thousand meetings, you can’t get access to customers, it takes weeks to find information, there are a lot of politics, everything is run in waterfall… how can you be expected to get anything done? In an environment like this, it’s very difficult to produce good design work and form a great customer experience.

On the other hand, Fintech startups tend to have a more modern approach. People have the right tools and technology to make changes, there’s a culture of experimentation and it’s easy to find out information.

In an environment like this, you’re going to get different results. People will feel more empowered and thus motivated to get things done. 

Here’s a thought experiment. If you took a team in a big bank and a team in a Fintech startup and swapped them around, what would happen?

The team working in the startup with the better environment would be able to produce better work and better outcomes every time.

The experience of banking with a Fintech startup is not better because the people who work there are 10x smarter than people who work in big banks, it’s because the environment allows them to do their best work. 

This highlights an almost universal truth: that the experience the customer gets is only as good as the organisation that makes it.

5. Engage your audience

It’s quite easy to criticise big companies – especially banks – for “not listening to their customers”. That’s generally because most big companies including banks don’t talk to them in the first place.

Sure, they might do some research, run a few surveys, collate feedback from customer service. But it’s not a genuine conversation. Everything is still kept behind closed doors. There’s a lot of secrets and they’re only announced when it’s ready.

The only time you hear the detail of what goes on inside a large bank is when something goes disastrously wrong and the CEO is hauled in front of politicians to explain themselves.

One of the biggest reasons for Monzo’s success has been their transparency and the community they have built.

When they first launched, you had to go to their office to pick up your card in person. It forced interaction between customers and the bank. They’ve run a monthly open office ever since. Anyone can go along and listen to a talk about what they’re working on, and ask questions. If you can’t attend in person, you can watch the videos online.

They also put their product roadmap online for everyone to see. This would probably give most product managers a heart attack, but this kind of transparency helped build trust in Monzo.

If you are starting a new bank and it’s lacking many of the features people expect, then you need customers to give you the benefit of the doubt and have faith that you will get there.

Having a genuine conversation with your customers is hard but it is worth it. Monzo appealed to the people who most wanted financial services to improve and it captured them by offering a way to express their excitement and feel like they were part of making the future happen.

What have we learnt?

We now have the best of both worlds in the UK: new and exciting startup banks that provide a world-class customer experience and larger banks investing more into changing their design culture and digital experiences.

It’s a brighter future for customers and the industry.

What the last four years has shown is that the human-centred design approach works.

If you understand people and their needs, align your goals to theirs, build better experiences that they’ll love, have a genuine conversation with your audience and give your team the best environment to work in, then you can change an industry.