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Last week the Government cut more of its stake in Lloyds Banking Group, bringing the total raised through the sale of its shares to more than £12.5bn and meaning that the UK taxpayer now owns less than 16% of the bank. Gordon Brown’s rescue of Lloyds TSB with over £20bn of public money came to be emblematic of the 2007-09 financial crisis and the severe blow dealt to the reputations of the UK’s major high street banks.
#Blog: The marketing is smart – but can the UK’s ‘Challenger Banks’ really challenge? http://t.co/X6nOJZ3zgM pic.twitter.com/JB5Z3k7d9W
— adconnection (@adconnectionUK) July 7, 2015
Yet one of the paradoxes of the crisis was that while it showed the dangers of having banks that were ‘too big to fail’, the initial outcome was that the big banks got even bigger. After Lloyds acquired HBOS and Santander UK swallowed Alliance & Leicester, the ‘Big Five’ retail banks had an even greater market share than before the crash.
Since then, Government reforms to the banking regulations have included attempts to stimulate competition. When Metro Bank was granted its banking license in 2010, it was the first new UK high street bank to be awarded such in over 150 years.
The new challengers – five different approaches
However, a raft of new ‘challenger banks’ have recently launched, (or are picking their way through the long regulatory process of attempting to launch). Some of these are starting from almost nothing and currently only exist as websites and marketing messages.
From a marketing point of view, those messages make for fascinating reading, as prospective banks attempt to carve out compelling USPs from the business of offering current accounts and standard financial products.
Here are just five of the more interesting approaches:
1) CivilisedBank – With the reputations of the major banks at an all time low, it’s not surprising that challenger banks are keen to emphasise their ‘different approach’ to the old order.
CivilisedBank @beingcivilised puts this at the fore of its marketing. Their website’s homepage states: “It”s about treating people the way you’d like to be treated yourself. With respect and honesty and care. It’s high time for banking to become more Civilised. We’ve made it our mission to make it so.” CivilisedBank is also the first bank to sign up to the ‘Banker’s Oath’, a lengthy Hippocratic-style pledge to uphold best ethical practice.
2) Atom Bank – The newly licensed (though not yet operative) bank based in Durham takes a very informal, chatty tone in its marketing. It focuses heavily on the people in the organisation, with blogs written by the senior directors in a clear attempt to differentiate itself from ‘faceless’ financial institutions. Their homepage launches with a giant ‘Woooo-hooooo!’ sailing across the screen – rather different to the traditional image of banking.
3) Fidor Bank – taking ‘Banking mit freunden’ as its strapline, this German-based bank attempts to apply the energy of crowdsourcing to financial products. It makes heavy use of social media for its marketing and customers can join a ‘Smart Community’ where they can influence things like interest rates.
4) Starling – still seeking its banking license, Starling is focused on using technology to offer users a super-convenient personal current account administered via smartphone. It ambitiously claims that it will to for banking ‘what iTunes did for music’.
5) Lintel – not yet operative, Lintel’s aim is to cater for a particular niche: migrant workers and overseas students coming to the UK. Lintel will attempt to do most of the paperwork before customers arrive in Britain, enabling them to rapidly set up a UK bank account to manage salaries and student allowances.
Can the challengers succeed?
As time goes on, it will be interesting to see which, if any, of these new bank concepts succeed, or whether others come to the fore.
The ‘challengers’ will certainly face their own challenges. Metro Bank’s model was based on opening swish, user friendly high street outlets, but most of the new breed of banks are digital-only. They will have to compete not only with the high street giants but also with other banks associated with huge brands, such as Tesco Bank, Sainsbury’s Bank and Virgin Money.
Perhaps the most difficult challenge of all will be to differentiate from each other. If everyone is claiming to be ‘different’, how do you make your brand stand out?