Current accounts get upgrade as challenger banks shake up everyday payments

Mobile has transformed the way customers manage their day-to-day finances and spend money, resulting in them interacting with their banks far more frequently through apps and other online services. The UK will be home to more than 43.6 million smartphone users by the end of 2017, m-commerce sales are now worth billions and payments are increasingly integrating with social media applications such as WhatsApp and Facebook.

Through multiple mobile touchpoints, consumers are giving more of themselves to their banks than ever before. But traditional banks are failing to translate this unprecedented wave of interactions into a more engaging customer experience due to a reluctance to invest in current accounts, an area they consider complex and a drag on profitability.

“For many banks, everyday payments are far from their core focus because current accounts have been considered loss-making products,” says Anne Boden, chief executive at Starling Bank, an app-only bank founded three years ago. “They’ve been more interested in the products they can cross-sell or up-sell like mortgages, loans and ISAs. So while people are engaging so much more with banks, banks are not responding.”

Current accounts are people’s day-to-day banking centres and represent the central part of their financial lives. But providing an exceptional user experience requires significant investment in a nimble and resilient infrastructure. It’s hard for traditional banks to do this because of the infrastructure and processes already in place, and starting a new bank was previously too complex and expensive. Nearly two-thirds of UK adults now bank via mobile, but 43 per cent believe products no longer fit their lifestyle.

However, changes in regulations have allowed more companies to not only break into the payments industry, but disrupt it with a fresh and innovative approach. The biggest winners of these developments are customers because new challengers such as Starling have everyday payments built into the heart of their operations.

We are helping people to manage their money in a modern, efficient and secure way, all from their mobiles

Starling users can receive real-time mobile notifications for income and outgoings, making them instantly aware of their finances. Spending is automatically categorised and portioned with percentage values allocated to individual merchants. Daily spending can be checked at a glance and payments can be set up in an app with the option to add images to keep track of them visually. Meanwhile, in-app security means users can instantly lock their card if lost, unlock it again if found and control where it can be used, online, offline or at ATMs.

“We’ve built our own systems from scratch, and with the resilience and infrastructure necessary to provide both a great service for customers as well as a means of engaging with them through the process,” says Ms Boden. “We are helping people to manage their money in a modern, efficient and secure way, all from their mobiles.

“Banks have existed for decades with legacy technology built on top of other legacy technology, so naturally they are not going to transform overnight. Creating a mobile-only current account from scratch means we have completely different ambitions when it comes to technology and providing the best service for our customers.”

Starling isn’t just shaking up consumer payments, but also the business-to-business payments industry with Starling Payment Services, the only sponsor bank offering real-time faster payments access. Its on-boarding time from initial inquiry to sending the first payment using its published application programming interfaces or APIs is under 12 weeks, including extended due diligence, risk committees and contracts.

The bank is also building a network of other fintech products and startups that can integrate with its APIs through the Starling Marketplace, Europe’s first fully regulated connective platform. This will make Starling the gateway to financial products offered by other fintechs, startups, payment service providers and corporates.

“Very soon, payments will be synonymous with the way we live our lives. There will be no physical, visible objects attached to activities, including banking,” says Ms Boden. “We’ll be paying for purchases without having to check out at tills and we’ll travel without taking out a card, using technology such as Apple Pay and Android Pay to make payments.”

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