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Bó and the role of digital banks in a crisis

Stephen Palmer EVP, Financial Services 13/05/2020

What can digital banks learn from their more established counterparts?

At the beginning of May, RBS announced that its digital-only bank Bó was shutting down after just six months.

Data from BrandVue Finance shows that Revolut’s trust score dropped from 66% to 58% between April and May.

CEO Alison Rose stated that the bank, which had 11,000 customers, hadn’t failed but would be merging with Mettle — NatWest’s digital business bank. While not specifically mentioned, it’s no coincidence that this announcement was made as the effects of the coronavirus pandemic took hold.

In fact, since the COVID-19 outbreak began we’ve seen trust fall among many digital-only banks as well as a decrease in the number of sign-ups.

As recently as last year, digital banks were inspiring high levels of loyalty and even ‘love’. Monzo, Starling and Revolut were anomalies in an industry still trying to shake off its negative reputation among those who remember the financial crisis a decade ago.

However, as the lockdown has kicked in, things have changed somewhat. For example, data from BrandVue Finance shows that Revolut’s trust score dropped from 66% to 58% between April and May.

The role of traditional banks in a time of crisis

Amid job losses, furloughing and businesses being forced to shut down for an unknown amount of time, many people are relying on banks to issue funds simply to keep their businesses and households afloat. In a BrandVue Finance ranking of the banks with the highest trust scores, the top five are all established brands –  Halifax, Lloyds, NatWest, Santander and Barclays – and trust in these brands is staying level through the crisis.

What the public needs at the moment is a bank that’s set up to deal with large volumes of requests for help and, in many cases, a calming and knowledgeable voice on the phone. Unfortunately, ‘nice-to-have’ features such as splitting bills via an app or receiving your salary a day early are redundant now that restaurants are closed, and many have no salary to receive.

Bridging the gap between old and new

One challenger bank bucking the trend is Starling, which is an approved lender on the Coronavirus Business Interruption Loan Scheme (CBILS).  Its digital background also means it’s responsive and technologically agile enough to introduce innovations such as the ‘Connected Card’ —a spare debit card for trusted shoppers aimed at vulnerable customers who need to self-isolate and rely on others for help.

In fortuitous timing for the bank, it also launched its first TV advertising campaign last year, leading to an increase in ad awareness of ten points.

One of the main hurdles challenger banks face is appealing to an audience beyond their young urban core demographic. Starling has also put its money where its mouth is in this regard by opening offices outside London and creating jobs beyond the capital.

Over the last few years, start-up digital banks have played an important role in putting pressure on traditional high street banks to up their game in terms of mobile apps, user experience and other digital functions. Is the pandemic a catalyst for tipping the scales – is it time for the start-ups to learn from the high street banks about what’s important to customers when the going gets tough?

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