“The industry thinks we are successful because we have more modern technology, but we don’t. We’re using databases that have been around since the ‘70s,” he says.
“The difference is in our approach to technology. We think technology should be created in an iterative, product-based manner, where you continually improve and develop our products – which is different from how the incumbent banks do.”
A study conducted by SmartSearch revealed that two thirds of British consumers still do not trust online banking. Controversially, the research showed that the same demographic place high confidence in digital-only banks.
Maude says high-street banks are falling behind the race of digital transformation due to their lack of cultural change.
“The difficulty for them is their culture. Our agile technology – our culture – has helped us to maintain and update our software in such a way that when new consumer needs come along, we spotted a new opportunity to help customers. We can very quickly grab on to it and implement it and serve that need,” he says.
The ability to produce infrastructure from scratch has been a major benefit for digital-only banks, according to Maude – a process which prevented Starling from undergoing any drastic cultural change to adopt an agile way of working.
“The problem is that high street banks have proprietary technology, either because they built it themselves, or because they bought it in from a vendor who specifically created it for them,” he says.
“Another challenge for incumbent banks is keeping good software developers because they’re going to have trouble keeping good software developers when these prefer working for a firm that did things the right way.”
The lumbering processes within incumbent banks, brought by different vendors, remains a disadvantage, says Maude.
“If high street banks remain as they are, it will always be a losing battle. But that’s not to say that some of them couldn’t change the way they do things.”
Data analytics has also bridged the gap of online banking trust by providing key information to consumers around their finances.
Wendy Redshaw, chief digital information officer at Natwest, says challenger banks’ good reputation is not caused by the services they provide but rather by the distrust of consumer over high-street banks following financial crises.
“Consumer confidence takes a long time to earn back,” she says. “There was a massive dent in trust towards all the incumbent banks during the credit crisis, PPI scandals and alike. The new digital-only banks appear after that period, so they had the appeal of a new chapter, a new movement.”
Redshaw says the hybrid mix of digital and physical within Natwest came as an advantage during the health crisis.
Features such as Cora – the digital assistant of Natwest’s banking app – and the Video Banking Service, enabled customers to remain informed about their finances whilst the bank also kept 95 percent of its branches opened.
Above all, Redshaw advocates the high-street bank’s culture of change.
“I joined a bank, which I had anticipated would be very much an incumbent bank and actually found a very open-minded culture to this change.”
Whilst it is easier for challenger banks to build a product from scratch, Redshaw says they provide “a very limited product suite” and lack “all the different things an incumbent bank would offer.”
As digital-only banks develop, regulators will also be prone to take more scrutiny in their investments, much like incumbent banks, according to Redshaw.