How an elevated & # 39; church needle & # 39; is driving a banking revolution

Challenger: Anne Boden's Starling bank has set its sights high

It's an idea with foundations as old as the buildings behind its name, but & # 39; church spire banking & # 39; It is part of a customer service revolution that runs through Britain.

As the traditional banking giants close branches in droves, the head of a defiant bank explains that his company "does not do business with a client that the manager could not see if he climbed to the top of the highest local bell tower."

Mikael Sorensen, Executive Director of Handelsbanken in the United Kingdom, continues: "If you have given a loan to a bakery in Inverness and suddenly there is no smoke in the fireplace of that bakery and is based in Inverness, you will find that in the road to work.

Challenger: Anne Boden's Starling bank has set its sights high

Challenger: Anne Boden's Starling bank has set its sights high

"But if you are in London, you will never notice it and it will be too late to do something the day it collapses."

The Swedish operator is so linked to the idea of ​​branch banking that its ideals can be traced back to those celebrated in the classic 1946 movie It's a Wonderful Life.

Handelsbanken saw the unhappiness of UK lenders in the financial crisis a decade ago as an opportunity to offer a friendly alternative to customers, and has quietly opened more than 200 branches in this country. Sorensen says he can afford to run a branch network because his bank does not have expensive management layers or lavish executive bonds.

It's just one of a series of banks in the wave of changes sweeping the industry. Another is Starling, led by Anne Boden, 58, the first British woman to found a bank.

It bears the name of the bird because it is sociable, adaptable and friendly, but also because of its tendency to gather in new territory and topple the rivals of its perches. Boden believes that she can simply overcome some of the burdens that weigh on conventional players.

Starling is a bank with no branches: it exists in the form of an application on customers' smartphones, so it is not necessary to maintain an expensive network of street outlets. And the problem of replacing the old technologies with new technology that the TSB lowered earlier this year is not something that frowns.

Principle of the church spire: Only do business with clients that the manager can see from the top of the bell tower of the highest local church & # 39;

Principle of the church spire: Only do business with clients that the manager can see from the top of the bell tower of the highest local church & # 39;

Principle of the church spire: Only do business with clients that the manager can see from the top of the bell tower of the highest local church & # 39;

She says that banking was perceived by customers as stagnant, outdated and dominated by men. "There was a lot of similarity, I felt it was time to do things differently and shake up the industry, I'm used to being the only woman and the only technology person in the boardroom.

Investors support the challengers. Monzo, another smartphone bank, based in the hipster haven of East London, last year attracted £ 71 million of venture capital in addition to previous fundraisers.

Atom Bank, backed by star fund manager Neil Woodford, earlier this year raised £ 149 million from its main investors, including Spanish bank BBVA and hedge fund Toscafund. Fintech signs Revolut raised $ 250 million in the spring, bringing its valuation to $ 1.7billion (£ 1.3billion).

Although they have attracted hundreds of thousands of customers, the new banks are still niche operators. People use them for secondary accounts and individual services, and keep their main account in a traditional operator. They have not yet made a dent in the dominance of the Big Four: Barclays, HSBC, Lloyds and RBS, but they have caused a change in behavior. RBS has an innovation center in Islington, north of London, developing a new intelligent technology.

Handelsbanken saw the misfortune of the UK lenders in the financial crisis a decade ago as an opportunity to offer a customer-friendly alternative

Handelsbanken saw the misfortune of the UK lenders in the financial crisis a decade ago as an opportunity to offer a customer-friendly alternative

Handelsbanken saw the misfortune of the UK lenders in the financial crisis a decade ago as an opportunity to offer a customer-friendly alternative

It includes portfolio optimization programs that can, in seconds, calculate how to minimize costs and risks and maximize returns in large investment baskets, a job that would take four people up to three weeks. RBS has also created Cora, a & # 39; digital human & # 39; that can answer basic queries from customers.

Both challengers and established lenders hope to embrace Open Banking, which for the first time will put customers in control of their own data. So, for example, people can connect their bank accounts to budget tools that will help them better manage their finances.

"If we do not keep up with the new technology, we will be overcome," says RBS chief Ross McEwan. It's going to be a great battle. The competition is the best, because it will make us better. "

"The first five years of the ten after the crisis were not good from the customer's perspective," he admits. "In the UK, it has taken a long time for banks to repair themselves and return to the position where they can really think about customers again."

Handy: Handelsbanken of Mikael Sorensen is opening branches

Handy: Handelsbanken of Mikael Sorensen is opening branches

Handy: Handelsbanken of Mikael Sorensen is opening branches

RBS and its peers have been criticized for closing branches. Around 3,000 will have been eliminated between 2015 and the end of this year, says Which? magazine. McEwan says that this reflects trends in customer use, and many rarely set foot in a branch. "Our approach has been to move away from the physical aspect because customers are not using it that much, digitally," he says.

But, like Handelsbanken, some challengers are opening branches, especially Metro: the first main street bank in the United Kingdom since 1840. It has a network in the southeast and plans to roll out across the country.

"You have this little island, with more than £ 2 billion in deposits, which is owned and operated by five or six players," says CEO Craig Donaldson. "We have very few banks that control the market, they need competition to improve."

Metro, founded by American banking magnate Vernon Hill, has its share of skeptics. But their stores, as they are called, are popular thanks to the opening from 8am to 8pm and the return of the facilities, such as security boxes.

It has been slow to arrive, but the crisis, together with advances in technology, have created viable competition in banking for the first time in generations. What is fascinating is that there is not a single vision of the bank of the future, but several. The challengers, in their various forms, are shaking the market, and that should be good for the consumer's choice.

Radio 4 In Business: Banking On Change, presented by Ruth Sunderland, will be broadcast tonight at 9.30 p.m.

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