Timing is everything: launching a bank amid COVID-19
The COVID-19 pandemic is a significant turning point in modern history.
Not only has there been irreversible change to societies across the world and tragic loss of life, the COVID-19 outbreak is forcing consumers to become more comfortable with conducting their affairs digitally, like never before.
The banking sector is extremely challenged and likely to face prolonged economic pressure. But in crisis comes opportunity. And just as the fintech sector as we currently know it was born from the 2008 financial crash, so this very different global crisis will give rise to the next wave of fintech innovation.
It is likely these new entrants will serve niche, underserved markets with tailored propositions. And they will ideally be built on modern cloud and microservices tech, enabling a plug and play approach to new tech innovations when they become available or as client requirements evolve, and avoiding the legacy issues that even the challengers of a few years ago are now experiencing.
Operating under COVID-19 conditions has proven the importance of being agile, flexible and the importance of the ability to work remotely. It has demonstrated the potential of innovative digital technology, and people’s readiness to embrace it. Unsurprisingly, digital banking usage has soared under COVID-19, making a shift to a digital-first model all the timelier. And only those that move with the times, and match the new client needs, will prosper.
We have all experienced how different service providers have responded to this new environment. The leaders have been nimble and maintained excellent service levels primarily because they have the technology and mindset to do so. Others have struggled and are playing catch up, having delivered poor service experiences which range from long waiting times to temporary closure of telephone support even for their most valuable clients. A common theme for the firms that struggled is that they, and their systems, are notoriously outdated, bureaucratic and inflexible. COVID-19 has exposed this like never before.
The mass affluent market is unloved and underserved by banks
Whilst COVID-19 has further highlighted the inability of banks to serve the affluent market – those doctors, lawyers, accountants, entrepreneurs and investors with a net worth of between £250,000 and £5 million – this phenomenon is not new.
While building its business over the last 18 months Monument conducted multiple surveys, interviewing over 1,800 people in the mass affluent demographic. And one of those surveys revealed that 93% of respondents expressed dissatisfaction with their current banking provider. The conclusions from the research were that there is a clear opportunity for a new provider who genuinely understands this segment, values its members’ time, and appreciates what they have achieved whilst acknowledging and supporting their ambitions.
The survey showed that there are 3.5 million individuals in the UK who between them have over £200 billion in total in cash, and 100 million globally with an estimated £80 trillion combined net wealth. Thus far, this segment has been an Achilles heel for banks, as they have not been able to tap into it effectively and provide them with the supportive experience they seek and deserve.
Challenger banks? Broadly, the challenger banks that have been launched over the last few years have focused on mass market, day to day spending and current accounts, product specific solutions (FX specialists) and small and medium-sized enterprises (SMEs). None of them have been designed for and sufficiently serve the specific “premier” community in the UK.
Retail banks? In reality, retail banks’ “Premier Banking” offerings are premier in name only; the service is poor. The “premier” offering has been bolted onto the same infrastructure with little or no unique functionality. Their legacy systems are interconnected like a mass of spaghetti, compounding inefficiency and a lack of digital innovation.
And private banks? Well, increasingly, private banking is focused on the ultra-high net worth and lag when it comes to embracing modern technology.
None of these banks adequately cater to, and meet the needs of, the mass affluent community. And within this community are doctors working tirelessly through the pandemic, lawyers and accountants working remotely around the clock to help clients navigate the situation, and entrepreneurs and founders of scaling businesses that are crucial employers and represent the future of our economy. They are a resolute group who are depended upon by society.
They have not historically and are still not experiencing the level of care and attention from banks that they have earned and expect, and that they deliver to their own clients, especially in these challenging circumstances.
Other new banks have created a brand, a strong identity and forged a connection with specific customer groups around FX, simple cards and spending. This is what we are striving to do for the affluent market, which has yet to see fintech disruption until now.
We never planned to launch a bank during a global pandemic. But it turns out – as we now find ourselves in the latter stages of the regulatory approval process – the timing is highly relevant.
The option of a digital-first bank delivering exceptional client service is needed more than ever before, and the inability of existing providers to deliver this and meet their clients’ needs is more exposed than ever. Our clients will need tailored savings and investment solutions as they navigate through this challenging period and take advantage of opportunities that will emerge. Cutting edge technology will enable us to scale quickly as a business, and to offer our clients unrivalled service, speed and tailored solutions.
Our goal is to create an institution that truly understands its client community, treats their time as more valuable than its own, appreciates their loyalty, helps them save and grow their wealth, but which also recognises that there is more to wealth than money.
We are excited that we have already made so much progress on our journey. And we look forward to telling the full story of Monument over the months ahead. As a digital-first bank, Monument will be well placed to be at the vanguard of this new age.
Monument Corporation has formally submitted its application for a banking licence and is in the latter stages of the regulatory approval process. It will become a bank following completion of the process.