What can traditional banks learn from digital only providers?

With rivals just a click away, traditional banks moving online need to understand the importance of reputation, feedback and agility.

Everything in cyberspace is equally far away, which has two dramatic impacts on the way that banks do business.

The first is that bricks and mortar banks that try to win transactional business by having a branch nearer to a customer than their competitors will always be further away than any digital bank.

Banks cannot win on convenience without a digital ‘location’.

The second is that once banks have nullified that disadvantage by establishing a digital presence, location ceases to matter at all, which changes the way users see banks completely.

As the banking old guard is pushed into providing online services at a rapid pace, it finds itself competing with two new types of competitors: big technology companies who’ve been online all along and a new generation of nimble, internet-only banks that arrived online without any baggage at all.

The ease of comparing products and the willingness of significant numbers of people to bank exclusively online means that these market entrants can focus exclusively on the most profitable products or market niches.

Those niches will inevitably expand and proliferate and the traditional banking industry needs to compete for them or risk ‘death by a thousand cuts’.

So what can they learn from tech giants eyeing their customers and the upstarts snapping at their heels?


Attracting customers to your online location means having the right products, the right tools and a reputation they trust.

Increasingly, the reputations that matter online are the ones that were earned online, which is creating an opening for non-traditional companies to enter the financial services industry.

Completely new, digital-only banks like Moven, Simple and GoBank who can’t trade on brand recognition are consciously avoiding associations with the traditional banking sector and positioning themselves to look like technology companies.

Law firm Pinsent Masons surveyed 2,000 people in the UK and concluded that digital-payment services like PayPal and WePay are more likely to disrupt the banking market than new lenders Metro Bank or Virgin Money.

Similarly, Intelligent Environment’s own research of UK building society customers uncovered a readiness amongst consumers to trust organisations like Google, Facebook and Amazon with payments and paying bills.

The reason? These challengers from outside the industry aren’t challengers at all – they’re trusted online companions that customers are intimately familiar with already.

Digital-only banks are springing up as the cost of entering the market falls, social platforms like Snapchat are offering online payments, and behemoths Google and Apple are dipping their sizeable toes into the water, the pressure is on from all sides.

Traditional banks and building societies aren’t building reputations from scratch but they need to work hard to make their existing reputations relevant online.

In part that means cloaking themselves in the styles and language that users already trust online but it also means understanding the critical importance of feedback.


There are a host of ideas and methodologies for creating great online products but all of them, from Agile development and ‘release early, release often’ to UX and perpetual betas, have one thing in common; they’re all about embracing feedback.

Online platforms like the web or mobile apps allow you to monitor countless variables easily, across huge user populations. Observing customer behaviour has never been easier.

Smart organisations aren’t just looking at conversion rates and pageviews though – users are also using social media channels to share their thoughts with organisations directly.

Embracing user feedback allows organisations to spot changes in behaviour sooner and makes it possible to create and refine products by exposing early versions and competing implementations to real users.

Pulling this off requires a complete shift of emphasis away from advance planning, preparation and getting things right first time to releasing imperfect products early and then improving them rapidly but iteratively thereafter. Easier said than done in the financial services market where compliance is king.

Of course getting feedback is one thing, acting on it with appropriate speed is another matter altogether.


You can’t act on feedback without first understanding it and for digital products that means breaking key metrics out of organisational ‘web analytics’ silos and making them common currency.

Agility also demands that decisions are made quickly and new versions of products produced rapidly – something that’s far easier in smaller organisations with fewer staff, tighter objectives and lower levels of technical debt.

Technology start-ups tend to have those attributes naturally and successful digital-only companies tend to hold on to them.

The emerging generation of digital-only banks arrive free of baggage, without a legacy back-office or branch network – obligations that come at a high cost and that impair agility significantly.

For traditional banks with large IT departments, long established ways of working and technology stacks that have been built up in layers over decades agility may be the hardest act of all to pull off.


The potential rewards for established banking players who can embrace the techniques of their digital-only competitors are clear.

Despite the upheaval that the shift to digital banking has already caused in the industry it’s still a bricks and mortar business. Consulting firm McKinsey estimates that European retail banks have only digitised 20 to 40% of the customer experience.

What’s left is an enormous opportunity, and some breathing room, for traditional banks to master the tricks of their newer, internet savvy competitors.