The Current Account: The Latest Headlines From Across The Banking Sector - August

2022-09-07 |  Ben Dineen

Headlines from the banking sector this month

In this edition of The Current Account, we focus on how challenger banks have taken the lead on customer satisfaction in the sector and the impact of the FCA’s Consumer Duty delivery timeline extension.

Challenger Banks Top Customer Satisfaction Scores

  • In a survey conducted by the Competition and Markets Authority, Britain’s high-street banks are being outperformed by challenger banks when ranked on customer satisfaction.
  • Digital banks Starling and Monzo topped the leader board, reflecting the slow revolution of Fintech banks that have emerged over the last decade. The agility and accessibility of their services has meant they are better equipped to support customers during the cost-of-living crisis.
  • Nevertheless, financially the giants of British banking have managed thus far to keep their challengers at bay; Starlings £32 million profit last year were dwarfed by those on the high street, with Monzo even making a £115 million loss.
  • The enduring resilience of high street banks speaks to their modernisation efforts and investment in newer technology, as well as attempts to build partnerships with the fintech industry. Banks such as HSBC, Barclays, and Lloyds have signed UK's Fintech pledge which aims to support fintech start-ups and fosters partnership and collaboration rather than competition.
  • By transitioning to better technology banks will be better equipped, to capitalise on the latest technological developments. Consequently, high-street banks are heavily investing in digital transitions including the metaverse. Currently, challenger banks are better positioned to dominate this space by using their current capabilities to successfully interact with customers on the virtual platform.

PEN Point Of View:

The fintech revolution of the last decade has offered lessons on the importance of modernising and investing in technology for high-street banks, as well as building partnerships with the fintech industry to ensure they are not left behind. 

As consumers flock to open accounts with challenger banks their success in customer satisfaction may soon reflect profits to rival that of high-street banks.  

After all, modernisation does not just reflect enhanced customer experience but improved product innovation, market reactivity, operational efficiency and reduced future risk.

Responding to the FCA Consumer Duty Extension

  • At the end of July, the FCA extended the delivery deadline for its new Consumer Duty; the delivery for all new and existing products and services has been extended from April 2023 to July 2023.
  • The rules are a comprehensive overhaul of customer protection across the financial services sector and are seen as a catalyst for lasting change in the sector.
  • Financial Service institutions welcome the extension, although still believe the timelines are tight. Also, there is still a strict deadline for an implementation plan, signed off by board members, by the end of October 2022.
  • Earlier this year TSB entered its ‘Discovery Phase’ to move in line with the new requirements, by assessing all business units against the draft rules. For other banks, it is crunch time to update, define and agree a deliverable and robust implementation plan, ready for scrutiny by the regulator.
  • It is important that within this plan, banks manage the potential risks associated with the Consumer Duty implementation. This includes mitigating financial implications; the upfront costs are thought to be £2.4 billion shared across c.51,000 firms regulated by the FCA. Also, it is important to consider governance risks such as protecting customer data through the new evidence-capturing measures required by the FCA. 

PEN Point Of View:

Consumer Duty regulation is vital to the banking sector, not only for its role in empowering the customer but for how it will fundamentally shift how banks are governed and held accountable. 

Whilst there are costs and risks associated with the implementation, these risks reflect the importance of an effective implementation plan.

Through efficient preparation banks can choose to view Consumer Duty as an opportunity to reshape their delivery services, to better meet the needs of their customers, rather than a threat or check box to be ticked.

And in case you missed it…

We’d love to hear your thoughts on this month's edition, connect with us and share on LinkedIn, and we look forward to continuing the series.

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