Coronavirus update: challenger bank agility provides advantage over incumbents

By Emma Olsson | 13 March 2020

Incumbent banks may struggle to adapt to the impact of coronavirus as remote working and customer services falter. Commentators say these challenges could leave digital challengers with the advantage.

“Do the existing banks, the traditional banks, struggle to allow their staff to work remotely compared to challengers? You may find that the challengers’ setup is already quite flexible in that respect, they’re already very much cloud based etc. So that’s one aspect organisationally: are some set up to deal with this better than others? They’re more agile, they’re smaller anyway, they’re naturally set up in that fashion,” says Mark O’Keefe, founding director at Optima Consultancy and Payments Systems Regulator (PSR) panel member.

“It will be interesting if this puts pressure on digital services, so the fact that people want to avoid human contact might accelerate the use of digital services, which might put more pressure [on incumbents].”

Incumbent banks have already been feeling the pressure brought on by remote working and the increased need to access online and app banking services. Lloyds Bank and Halifax experienced an outage yesterday, with 2,000 customers being locked out of their accounts across both banks, Metro reported. Physical branches have also started implementing remote working; The Mirror reported that one Halifax call centre in Northern Ireland sent 1,000 staff home on March 10 after one employee tested positive for coronavirus.

“If they do start to feel the pressure technically, and have outages, how easily can their staff remotely fix these problems?” asks O’Keefe, suggesting that challenger banks would be better suited for solving such technical problems.

Alexandra Frean, head of corporate affairs at Starling Bank, said the challenger is currently trialling a split system of A and B teams working remotely during alternate periods. The method has been tested successfully in the past, she said by email.

“As a branchless bank with no physical touchpoints with our customers who can do all of that banking from our app without needing to leave the comfort of their sofa or their kitchen table, we do offer a great service. And also as a digital bank that’s built on a cloud, we are able to implement some remote working where it’s appropriate so that we can ensure business continuity,” said Frean.

With the World Health Organisation (WHO) reportedly cautioning against the use of cash in an attempt to slow the spread of the virus – and some businesses restricting their number of cash transactions – the move towards bank digitisation could be expediated. O’Keefe speculates that the virus could even lead to an increase in phone transactions, rather than chip and pin.

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