The death of UK business banking?
“Entrepreneurs don’t trust their bank”
Truth? Threat? Opportunity?
The Debate

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JOHN ROSLING
jrosling@contexis.com
@jrosling

© Contexis 2017
It is said that 74% of
business owners believe
their Bank doesn’t understand
their business -
or even care about them

© Contexis 2017
We wanted to find out if this is even
remotely true..
what entrepreneurs really want from
their Bank..
and what the most innovative Banks
in the market are doing about it.

© Contexis 2017
So we brought together senior bankers from
traditional and challenger banks with
entrepreneurs, academics, journalists and
experts ..
..for an honest and sometimes fiery debate.
This is what was said..

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The entrepreneur’s
perspective
I know my bank doesn’t care a
jot for me
I have three problems with my bank:
they are incredibly slow
my relationship manager can’t make
any decisions
and there is no balance in the risk - I
am taking all the risk in this
relationship

© Contexis 2017
The entrepreneur’s
perspective
Most peoples views of their
Bank is “meh” - expectations
are so low
“meh” is a dangerous place to be.
I look at my Business Bank compared
to my Monzo interface and I wonder
why I need anything the Business
Bank offers.
Monzo has made me really think

© Contexis 2017
The challenger’s
perspective
The failing of the UK
banking industry is the
source of our success
The Big Banks are shooting
themselves in the foot. If you are
continually telling the customer they
can’t borrow, they find money
elsewhere

© Contexis 2017
The challenger’s
perspective
I can’t tell you how many
customers I’ve heard with
complaints about the Big Banks,
normally about time and lending
decisions
We were founded by entrepreneurs
not by bankers.
We are extremely speed conscious -
we don’t take 20 weeks to say no!
We invite all of our clients to sit in the
credit committee meeting

© Contexis 2017
The researcher’s
perspective
We have recently done a large piece of research and the findings were;
• Banks know us but sure as hell don’t understand us
• Banks tell us that they are full of probity but we don’t trust them
• Banks encourage us to talk to them but are they listening?

© Contexis 2017
The Big Bank’s
perspective
The relationship
between banks and
SMEs has become
transactional
What is the unmet
demand that is being
served by all these new
banking licenses?? Most
banks are chasing the
same clients and ignoring
large parts of the market
Banks don’t have any
upside in this game;
only downside. And
margins are challenged
in a low interest world

© Contexis 2017
The Big Bank’s
perspective
Fundamentally banks are there to
make money
but we have tended to
compartmentalise clients and don’t see
them as people.
We are overly product led and not
relationship or understanding led
We risk a pray and spray
approach, where some bright
spark has come up with an
idea and we tell our people our
clients need it when they don’t.

© Contexis 2017
So, what do entrepreneurs want
from their Bank?
I want something different. I just don’t yet know what I want from a
bank - and I don’t think the bank knows either

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Disruption; the existential threat?
.
The alternatives to traditional
business banking

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Do we even need a
Bank?
I don’t think this is an
existential threat. Why
bother to change banks
when it’s a low-cost
commodity?
If banks can’t understand how
to lend in the modern world
with flexibility then they do
have an existential threat

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New entrants, new ideas
The new entrants are
adding value, things
that matter. Triodos is
focused on
sustainability and
societal benefit
What does Monzo give
you? It’s the gratification,
the fun.
They are building a bank
based on customer need
Monzo and Tide will
change what people
expect from their bank
It’s impossible for a
bank like Barclays to
move at the speed of
Tide

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As a customer, I do
wonder if anyone is
listening..
Banks are talking about
“customer centric” as if it was a
revolution!
That’s what business is all about!
Business used to be all about
the product now it is all about
customer.
Banks have simply not noticed
that shift

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The death of Banks
15 years ago I was turned down by 42 Banks.
Now we have seven Banks and hundreds of
millions in turnover. The banks couldn’t or
wouldn’t understand our business so we
funded ourselves through a private bond.
We have done that twice.
The real disruption is
peer to peer lending.
Apple are looking at
peer-to-peer; they don’t
need the banking
infrastructure

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The curse of legacy
thinking
Is there the desire for the Big
Banks to start up new technology
services?
We have asked every Bank and
they always have reasons for not
doing this, either legacy or
regulatory reasons
The problem as I see it is that
my Bank runs on a 1960s IBM -
and I want Monzo

© Contexis 2017
The curse of legacy
thinking
Why is it that when we wanted a
new payment system, we as an
industry couldn’t respond. PayPal
developed it. It was an
entrepreneurial not a banking
solution. To survive we need to
learn how to address that problem
PayPal is reacting immediately
because they can read their
customers and their needs
almost in real-time; have you
just had a holiday for example..

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The fastest elephant
in the elephant race?
Banks are moving so
slowly. It reminds me of
the record industry. The
EMIs of this world
moved so slowly against
Apple, Spotify etc. it
feels like that
History tells us that
large, inflexible
organisations always fail
in an environment of
disruptive technology
Shifting a Big Bank is so
difficult.
Challenger Banks can
move fast because they
have no legacy

© Contexis 2017
The inconvenient truth
behind Amazon
Themadeafortunebutitwasn’tthenwhocreatedrefrigeration.Theyrejectedthetechnologyandbelieved
intheincumbency.It’sthesameforSonyorKodak.It’s takes us 20 weeks to make a loan decision, 7 days to get a debit card.
With Amazon doing everything next day, for how long is this tenable?

© Contexis 2017
Institutional
arrogance?
There is institutional arrogance in
the Banks. A sense of
entitlement. It can’t happen to
us.
It can
And it will
The Big Five are claiming to
move faster - does anyone see
any evidence of this?!

© Contexis 2017
The existential threat
Themadeafortunebutitwasn’tthenwhocreatedrefrigeration.Theyrejectedthetechnologyand
believedintheincumbency.It’sthesameforSonyorKodak.
The disruptor never comes from the incumbent industry. 200 years ago the
biggest US industry was cutting ice from lakes and sending it around the world.
The ice Barons of Boston made a fortune but it wasn’t them who created
refrigeration. They rejected the technology and believed in the incumbency. It’s
the same for Sony or Kodak. It’s the same for the Banks.

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It all sounds pretty bleak so far..
Is it really that bad?
The surprising answer turns out to be
.. maybe not..

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The surprising level of
affection we still have
for the Bank
At the moment the Big Banks still
have the hearts and minds of
most customers. If you continue
to abuse this, the future is a
wholesale move to someone who
will offer substantially different
benefits
The Banks right now have the
opportunity to turn around the
situation

© Contexis 2017
The rosy future for UK banking?..
in two words..
Relationship
and
Data

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1. The enduring power
of relationship
The power of the Relationship
Manager is extraordinary when
they are given the knowledge
and the opportunity. The value of
their connectivity is exceptional.
They can spot opportunities for
me and for the Bank
The insight the Banks seem uniquely
unable to grasp is that you focus your
people on what people are great at
and your technology on everything
else.
People are great at relationship.
Banks turn their people into order
takers.

© Contexis 2017
The enduring power of
relationship
All they need to do is ask
questions and learn how to listen
and only then what service they
can offer - and that might not be
anything to do with banking.
But people or listening skills are
not encouraged or taught
Why aren’t all Banks providing a
service that starts with ‘what are you
trying to achieve with your business’?
What is missing that means this
doesn’t happen?

© Contexis 2017
Relationship Management
Back to the future?
I would gladly
pay for this
There must be an
opportunity between the
service-focused private
banker and the
automated proposition
What if I asked you as an entrepreneur “would you
like a new client”. As a banker, if I understand your
business, I can provide those opportunities
As an entrepreneur I
would pay for this
service.
That is why we moved
Banks

© Contexis 2017
Taking the time to get to
know our customers
better
We take the time to get to know our customers better.
Every one of our customers has a dedicated RM.
We take time to really understand the customer and understand their investment
and payback cycles.
We are patient

© Contexis 2017
£8 billion of potential fee
income..
We looked for people
who are good listeners
and were patient, who
were willing to
understand the needs of
the business
We attribute our
spectacular growth to
the relationship
approach not the
product or price
Our research
suggests there is £8
billion of potential fee
income from SMEs in
the UK alone

© Contexis 2017
Business people, not
product sellers
Some Banks are looking to upskill their Relationship Managers. But there has to
be a choice; a low friction technical solution for those who want it, and a
relationship focused service for those who would value it.
What the Banks must do is turn their people into business people, not product
sellers

© Contexis 2017
So, what’s stopping
us?
Because the banks have
completely de-skilled their
people.
Their front-line people have no
clue about my business - or any
business
When the RM has 300 clients
how can they possibly advise or
create value?
The advice that used to be available
through RMs has been retrenched
and lost through greater
centralisation

© Contexis 2017
The choice.. one size fits
all won’t work any more
it’s a matter of choice
but surely the choice is
for the client
What do entrepreneurs
actually want; low cost
debt services or
relationship?
What we need to do is to
find out what customers
actually want from their
banks; offer a basic
frictionless, data-smart
service at low-cost, AND
offer a full service to
those who will pay for it

© Contexis 2017
2. The power of data
What the Challenger Banks and the
peer-to-peer platforms are doing well
is using data.
The Big Banks have much more of
that data but don’t know how to use it
’
The biggest opportunity for
the Big Five is big data.
And the biggest threat is big
data

© Contexis 2017
BIG data
Forward to the future
We have a view into about 25% of
all UK transactions. Apple or
Google would do something sexy
with that. We can’t seem to do
this
A.I. will start to replace some
aspects of business banking.
That’s a good thing. But the Banks
need to be careful what they
replace

© Contexis 2017
So, the future for UK banking is bright?
Well, maybe..

© Contexis 2017
The opportunity to do
both
There are so many options if we’re
just talking about debt
but not if we are talking about value.
Who has the network?
Who has relationship and can offer
partnership opportunity?
AND who has the data?
The Big Banks, uniquely,
have the opportunity to do both
relationship and technology
Their biggest opportunity is to reboot
personal relationships and work out
how to streamline the vanilla stuff

© Contexis 2017
The future is bright..
“The future for European banking is binary; it’s either fantastic or
disastrous. Banks will either learn quickly to use their assets or lose out.
They have visibility of so much data they need to learn to use it.
They have unique relationships at local level they need to learn how to stop
abusing these and create more value.
The future could be very bright. But if they don’t, alternative providers will become
dominant…

© Contexis 2017
The future is bright?
Ant Financial is five years old and already sees 90% of transactions in China.
Their approach is wholly disruptive.
They are already talking to technology companies in Europe…

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So, what have we learnt?..

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Business owners don’t trust their Banks?
.
It is rather more nuanced than that:
• They don’t feel understood or listened to
• There is no real relationship in the way entrepreneurs
understand it
• They are starting to ask why they even need a Bank

© Contexis 2017
And YET .. there is still loyalty and affection for a
traditional banking model

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The Big Banks are under multiple threats
.
• Challengers are much more agile, much more
customer-focused, much better at using data
• Offering value; fun, ease, social conscience
• Big Banks are:
• too slow to adapt
• strangled by legacy
• arrogant
• product obsessed
• compartmentalising clients and not treating
them as people

© Contexis 2017
And YET.. the Big Banks have all the data, if
they only knew how to use it
and all the relationships if they didn’t continue
to screw them up

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The market is becoming ever more
diverse
• Multiple different forms of offering
• Masses of choice for credit
• New brands, new technology, easier and quicker
solutions

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And YET .. banking is about much more
than credit

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So, according to this group of
entrepreneurs, academics and experts,
what must the Banks do:
• Learn to ask
• Learn to listen
• Respond with genuine choice

© Contexis 2017
So, according to this group of
entrepreneurs, academics and experts,
what must the Banks do:
• Re-prioritise and rebuild relationships; the Bank’s
ultimate USP; but this requires a wholesale
reassessment of front line people from order-takers to
business partners
• Learn how to use data and innovate creatively with
the customer in mind.

© Contexis 2017
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