Low cost to entry for Retail Banking

I recently posted on the Market Analysis that Starling Bankhttps://www.linkedin.com/pulse/retail-banking-fintech-great-analysis-john-morton had made concerning the state of the Retail Banking sector.

On further consideration, I felt that market entry and specifically the ease to enter the Retail banking sector hadn’t been considered enough.

Starling Bank made comment that “Legacy systems restrict innovation, and large customer bases restrict the ability to expand quickly to meet evolving customer expectations”. Others have been more stark and outspoken in their views on classic banking highlighting that decades of IT underinvestment is crippling some of todays major banks.http://www.computerweekly.com/news/2240212567/Big-banks-legacy-IT-systems-could-kill-them

What about the cost of entry for new banks?

Support services

Today, there are a range of supporting services and engineered solutions available to prospective new banks. These can accelerate the business operating of a digitally and data driven business, and also adhere to banking regulations and compliance.

For any new Bank one of the first considerations is “onboarding”. Ok so “onboarding” isn’t a common banking terminology, however it is a banking capability. (The term capability being used is defined here :http://www.bainstitute.org/resources/articles/defining-business-capability-cheat-sheet )

Within retail banking there are three types of onboarding that takes place: private customer acquisition; Commercial customer acquisition and employee acquisition. Today onboard vetting requires an extensive network of quality data sources, with organisations in the security and other industries to screen individuals and companies and reduce risk. Depending on this initial Risk determination and the context, there may be need for extensive due diligence on individuals.

Today you can buy or rent this capability. Classic banks processes focus on onboarding at acquisition time. However, in the digital world continuous assessment is built into assuring customers and employees throughout their lifetime. E.g. suspected fraud. (see http://www.robertwalters.co.uk/banking-financial-services/career-advice/be-prepared-for-pre-employment-screening.html, http://www.contego.com/ and others)


For startup banks the cloud is the ideal choice, it allows flexible growth to meet customer acquisition. Clever management of the Cloud environment will be the key to Digital success as Cloud requires more detailed analysis of business operations and IT operations to make successful.

A December 2015, CIOinsight published details of a survey on reasons for using Cloud. The key reasons were :

  • 45% adopted for increased security
  • 39% adopted to keep shadow IT under control
  • 39% adopted because of anticipated cost savings (!)
  • 39% adopted to deliver greater business agility to meet customer and business demands
  • 38% adopted to deliver competitive advantages.

Over a third of cloud users were expect to save money, however the reality can be very different, with unplanned costs amounting to significant overspends. A range of reasons for this were identified, including: the cost of upgrades, customisations, internal maintenance and software, consultancy, and implementation and personnel.

For digital retail banks a key challenge in terms of cloud adoption and cost: is the direct alignment to business growth, business control and understanding the customer cost and value of IT. This requires Retail banking services to be tracked, managed and usage monitored. If this doesn’t happen, the business is exposed to compliance issues, security breaches, business continuity issues and extra costs.

Make sure you have someone who can work through the detail, as that is the key skill required.


This may all sound expensive, however an advantage for Digital Banks are embedding Big data analytics technology from day one, thus the assessing and understanding the IT capacity demands is aligned with understanding the different customers both leveraging the same sets of data. This also means that the digital banks from day one have a data management strategy that aligns to the business and stays current with business demands. Can you say that about existing monolithic banks?

Software development and software approaches

This is an area where Digital banks can really take advantage of new working methods, approaches and capabilities. The key value is learning quickly and delivering quickly.

Today there are many development frameworks (e.g. www.outsystems.com) that allow entrepreneurs to focus on delivering business functional needs. Such systems allow developers to take advantage of different platforms and changing technology without the up-front costs of learning and developing all the new wearable technologies which may be out of Vogue within the same year!

Dev ops brings together the operating personnel and the development personnel to make sure that what you are delivering can be operated and supported. For digital business the key themes are making your systems totally autonomous and continuous operations. Continuous operations is not just about continuous updates, continuous monitoring and continuous assuring it also has to consider disasters, requires stronger configuration management and controls and a broader view of testing.

Agile can be the killer method for digital business, first it can literally destroy a company if not applied with a high degree of planning within a business framework. Second, when deployed effectively it can be the engine that drives innovation and growth with fast turnaround on new functions and features and the ability to bring new products and features to market inhibiting competition.

Advice for those seeking to launch their digital business is: A custom build from the ground up in a new programming language may be your ambition. However, if someone brings their product to market taking advantage of what is already available a year ahead of you, expect what you get.

Seek to specify how you wish to differentiate yourself in the market place, and then focus on what you need to deliver.