All businesses – but particularly those in fiercely competitive industries – have to come up with answers to the following question: ‘How do we stay ahead of the competition?’
For banks, this has never been more important. The growth of the fintech market means there is a regular supply of new, innovative businesses looking to do things differently and give consumers an alternative to established providers.
Look at the new generation of challenger banks in the UK, for example. The likes of Atom Bank, Tandem, Monzo Bank and Starling have all emerged in the wake of the 2008 financial crisis.
And the British government has shown a commitment to fueling competition and diversity in the banking industry, partly by making it easier for customers to switch accounts.
Just this week, the Competition and Markets Authority (CMA) welcomed a commitment to overhaul the Current Account Switch Service. One of the most significant changes is intended to reassure customers that all payments will be safely moved from their old account to their new one.
Only three percent of personal banking customers and four percent of businesses in the UK change banks in any given year, according to the CMA.
Alasdair Smith, chair of the competition watchdog’s retail banking market investigation, said: “Switching is the key way for people and small firms to find better banking deals and save money. Improvements to the switching service will give customers better information about, and so greater control over, their finances. This in turn will make it easier to move their money and capitalize on better offers.”
The UK is not the only country pushing for a more dynamic and competitive banking industry. In Australia, for example, there have been calls for reforms including improved access to consumer data, which will make it easier for people to switch banks.
It’s clear the industry is changing, and banks that want to stay competitive and keep their customers must change too.