Hold the front page

As part of the editorial process for Fintech Insider we review a lot of stories and see how media outlets report on challenger banks. Some recent pieces had the distinct feel of unhappy incumbent bankers lobbying hard to change the narrative.

It’s no big deal. New banking service has 500k users, but you have 15m so it doesn’t feel like much of a threat. Then they start winning Which? awards, industry plaudits, and surpass a million customers. Next, they’re raising new capital from backers with serious financial clout and all of a sudden it’s much harder to ignore.

It’s fascinating that stories regarding challenger banks have seen a distinct shift in tone and narrative.

Those of us who work in media have seen this play out plenty of times. It’s the classic narrative evolution as we move through the incumbents’ defensive playbook. They were the arguments levelled at Amazon, eBay and more recently Spotify, and now it’s banking’s turn:

• They won’t gain customers in a sticky market / too much inertia.
• They won’t get customers using them as a primary account.
• They won’t turn a profit.

You have the new breed of service providers being hyper-transparent as a core value. They openly talk about financial wellbeing, budgeting, and creating positive friction to help those with gambling addictions. All these damn feelings and emotional intelligence. A softer, more human side to what has traditionally been a hard-nosed business.

I’m willing to stake multiple drinks that this change of tone and the frequency is less to do with these new services in of themselves. Sure they’re a threat but it’s not massively harming the bottom line, yet. No, this feels like a concerted effort by incumbents to take back the banking narrative to something far less uncomfortable.

Shifting narratives

It shouldn’t need saying but I will anyway. This is not about journalists performing an important role and asking difficult and searching questions about these firms.

We’re seeing Revolut quite rightly getting flak for a series of missteps from poorly thought-out advertising to more serious accusations of systemic process flaws. N26 is being questioned after the German regulator demanded it fix issues around staffing and engineering, and that’s after significant issues with client identification processes at the bank were raised.

The shiny new thing is always going to get attention by dint of it being fresh in a sector that has been pretty stale, but something has changed in tone from the stories of ‘funky card design’ and plucky start-ups firms used by ‘the millennials’ to something far more strident.

It’s the subtle digs, or the carefully chosen words used by editors tweeting stories about these banks (ironic in that case given it turned out that the story was not entirely accurate).

Or take this piece on customer service, which is the most bizarrely backhanded compliment to the new banks you’re likely to read. The headline choice is revealing: “Ask a hipster bank”? Then check the subhead: “Controversy surrounds Monzo, but it is still a big hit with trendy account holders.”

I won’t even attempt to unpack whatever a ‘hipster’ bank is. Let alone what ‘trendy account holders’ is a shorthand for. Beard? Living in Hackney? Tech savvy? Cares deeply about the brands they want in their life, let alone who they bank with? All of those. Some. None.

Some of this is part and parcel of the modern media landscape of clickbait headlines, as well as the more time-honoured tradition of an outlet preaching to its choir of loyal readers. Monzo appears to be the primary target - although Revolut is trying its hardest to wrestle that crown from them - presumably because they have the temerity to be highly customer-centric, transparent and the fastest-growing bank in the UK by new account opening. The plucky upstart now has a target on its back.

By way of comparison, it’s interesting to note that when Starling Bank is written about, whether it's fundraising or a general story, its valuation is never probed, and its potential profit or loss rarely in the headlines, or even in the story. This is likely a by-product of how secretive it is around funding but regardless, the tone of ‘challenger bank’ or ‘app-only bank’ is noticeably more respectful, or at least far less sneering.

An avalanche of FUD

The recent RBS Remedies fund announcement came ready-made with more revealing headlines. But Geoff, I hear you cry, providers of all shapes and sizes should be held to account for whether new services are delivered! Of course, but perhaps give them a chance to define this service and launch it, not decry it less than a week after a funding announcement.

These new banks have ‘failed’ to make an impact? That’s odd given we’re talking about firms that are somewhere between four to six years old, compared to institutions that have decades, sometimes centuries on them. And if we’re judging impact by column inches, they clearly are having an impact, if not on the wider public just yet, then certainly on the industry.

Someone, somewhere at an incumbent was seriously annoyed at missing out and lobbied hard to reveal anything that could cast the process in a negative light. A process we all know they would have been just fine with thank you very much, had they won.

As these new services are rolled out it will be fascinating to see how the media reports on them. Things will break or fall over because they always do. But as we’ve already seen, many of the newer players live and breathe transparency as a value, openly publishing blogs on why decisions were made, what went wrong and why.

Let’s briefly return to the playbook:

• They won’t gain customers in a sticky market / too much inertia. Well they are - whether it’s retail, SME or loans. Revolut has 3.5m customers, N26 has 2.5m, Monzo 1.8m and they’re all growing.
• They won’t get the customer using them as a primary account. Fair, but increasingly Monzo and Starling are, with the former reporting 30% of users now paying in their salary.
• They won’t turn a profit. This is the last bastion of defence and it’s going to fall. OakNorth already is after just two full years of operation.

So then what?

I, for one, welcome our new ‘hipster’ banking overlords and their ‘trendy’ approach to financial services if that means I can get a service that treats me as an individual with my own financial hopes, aspirations and fears. Or one that doesn't chide me for not viewing PDF statements that aren’t available on their app due to “an unforeseen error”. But that’s a whole other blog about brand permission, and Simon got there before me.