Big banks beware: It’s tougher than ever to stay ahead of the curve

Phillip Monks
WE’VE seen a steady stream of good news and positive figures about the UK economy recently. Unemployment is down, consumer confidence up, and the IMF suggests that our economy will be the fastest growing in the G7 in 2014.

This is not limited to London, either. While some economists and politicians have expressed recent concerns over the impact of Help to Buy in the capital, this should not overshadow the positive impact it is having on the housing market beyond London. And as City A.M. readers will know, the banking landscape is changing fast. Large, established institutions are being kept on their toes by new entrants and a stream of new technologies.

We entered the market at the height of the crisis, when lending was at an all-time low and people across the country were unable to get on the property ladder. And it was a time when public opinion of banks and bankers generally was at rock bottom.

Despite the market challenges back in 2009, however, Aldermore has emerged today with more than 155,000 customers and a loan book of £3.7bn. As such, we no longer see ourselves as a “challenger bank”. But there remain significant challenges in our sector. Banks’ customer bases are continually evolving and have changing needs. Customers now require access to their finances 24 hours a day. Bank branches are becoming less relevant for today’s consumer, as technology is providing further competition in the traditional banking sector.

Consumers, property developers and startups are constantly looking at alternative providers in the financial sector, including the likes of peer-to-peer lending and crowdfunding. They may represent a small percentage of the market at present, but their reach and reputation is spreading. According to innovation charity Nesta, £949m was raised through alternative finance intermediaries in 2013.

But like many industries, to survive we need more competition in the market. It means greater innovation, and a wider choice of products and services for customers. It also ensures we remain focused on new developments (from the introduction of the Funding for Lending scheme to speeding up time spent opening accounts online), to try and stay ahead of the curve.

Regulation will always be a challenge. Yes, we need a regulated market for financial services that protects consumers. But the regulatory burden must not become so significant that it stifles innovation or restricts banks from providing essential products and services.

Customers in the banking market – whether individuals or small businesses – are savvier than ever. In response, we must create products that can’t simply be picked off the shelf. If one provider does not meet a customer’s needs, they can simply move on to the next one. To survive, banks must realise that people are well-informed – and must establish, quickly, what it is customers want.

Phillip Monks is chief executive at Aldermore Bank.