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Optima's 5th mobile bank app review: executive summary

June 09, 2020 | Banking
Optima's 5th mobile bank app review: executive summary

We've published our 5th edition of the mobile banking app review. Download the full report, for free, from our website.

No way back

Covid-19 has changed the way we’ve been living and each day we get more evidence of how permanent this disruption will be. Digital banking was an established technology before this pandemic with two-thirds (72%) use online banking services monthly, a third (34%) logging in once weekly and 13% doing so once every 24 hours. UK Finance’s latest payment report for 2019 has mobile banking now used by 50% of consumers. Covid-19 has poured accelerant on this trend like nothing else before it.

The apps best serving customers in light of Covid-19 are Monzo and Starling, followed closely by Halifax, Lloyds and Barclays

The question is, when digital is more important than ever, can the big banks really compete? Will the current digital divide with their fintech rivals become more prominent to customers? Enough to make them switch allegiance in significant numbers?

Evaluating which apps are best serving customers in light of coronavirus restrictions showed some incumbents fare better than others. As expected, although challengers Starling Bank and Monzo were at the top, Halifax, Lloyds and Barclays were strong in delivering features that allow a customer to interact remotely: preventing customers needing a branch or calling customer service (like amending or cancelling a regular payment or paying in a cheque through their app).

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No excuses

Competing in the market is tough and over the duration of the study we have seen many apps go to the grave including Fidor and Loot. This year they are joined by N26, Tesco and Bo. N26 withdrew from the UK market in May and Tesco Bank announced a decision to ‘focus on other products’. Unsurprisingly, RBS’ digital spin-off Bo, having launched only six months ago, has also decided to exit the market shortly after their executive and Loot-founder departed the bank to become VC partner at Antler . It appears Covid-19 and Brexit may have given a few the excuse they needed to get their coats and leave without too much embarrassment.

Covid-19 may have given a few providers a convenient excuse

Talking of embarrassment, a recent study by Built for Mars compared some of the account opening experience of many of the apps that feature in our study. This research seemed to cause a bit of a social media storm when posted by Revolut's Chad West and challenge the obvious gap between new and old, but when we compared Peter Ramsey’s results to our own experience two years ago, little has changed! 

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The fintechs are now mainstream, evident in the latest current account switching statistics. Starling and Monzo appear to be taking customers from Nationwide as their net gains climb whilst Nationwide’s descend. Monzo for the first time had the biggest net gains of all the providers and in comparison, almost all of the traditional providers are running towards zero or suffering repeated net losses. Customers are perhaps now tired of the excuses from their banks?

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Haves and have-nots

We can understand customers feeling frustrated at a lack of progress. The lack of functionality from some major banks’ apps has increased the pressure they have on their limited staff resources during the pandemic. It was fascinating to read the post from TSB COO Suresh Viswanathan recently on LinkedIn, who commented “we had been considering an online chatbot to answer queries for some time…we were able to introduce [it] in just five days”. Why did it take a global pandemic to deliver something which ultimately took such a short time for the bank?

Why did it take a global pandemic to deliver something which ultimately took such a short time for the bank?

He reported they have subsequently answered 400,000 queries on their website with this chatbot and now plan to deploy it to their mobile app (with greater AI to make it more sophisticated). This type of feature gap is evident when we report in this 5th edition that many mainstream banks have 5 to 8 features missing that are offered by two-thirds of the market!

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No time to stop 

Apps across the board are getting faster to log-in, with a median of 6.4 seconds (down a second from the previous study). There remains a notable difference between the quartiles, with the quickest 25% of apps take an average of 4.6 seconds to log-in and the slowest 25% double this!

Not only are the apps noticeably different to log-in, they update and release app updates at a very different pace. Fintechs on average, are on track to release more than twice the number of app updates than traditional providers in 2020. Perhaps incumbents fear the impact of numerous updates on their resilience, although we have seen some traditional providers not reporting any major incidents in the last 12 months, so some glimpses of progress there. On the whole though, challengers are faster, more reliable and they release more features more often: what’s going to stop them?

Fintechs on average, are on track to release more than twice the number of app updates than traditional providers in 2020


 

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Next destination: super-app?

The growth in features and functionality in finance apps, together with the thriving open finance ecosystem may be laying the groundwork for the super app. Revolut top the table for the number of features supported and having now integrated into open-banking also have a strong money-manager proposition. In fact, just as we finalised this report, they released a redesign of their app “focused on creating one app from which you can manage all your finances with safety and ease, every day”.

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Will customers choose a range of specialist providers such as a bank, an everyday spending account, an AISP (of which there are many new entrants coming to market) or will they gravitate to one super-app that does it all?

A word of warning though. If the mainstream banks that have integrated open banking to date think they got the super-app building blocks ready, take a closer look at the reality of the proposition and how empty it looks compared to specialists. There is nothing super about it right now.

The new digital ‘space’ race

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SpaceX’s recent successful mission transporting US astronauts to the International Space Station, illustrated the challenge ahead in this new digital landscape with one of the images being circulated around social media. Many traditional banks are trying to compete hamstrung with the Apollo-like 1960’s infrastructure. Some of the first wave of direct banks launched in the last couple of decades have a slightly more flexible and cost-efficient structure. In reality though, it is the Dragon2-like challengers that are setting the course of travel with their cloud-based, open architecture. Are they heading off with ambitions of Mars and beyond, going where no bank can follow? It’s a race we’re intrigued to watch evolve. Find out which app would get Elon Musk’s approval in the full report, out now.

We'd love to here what you think of the report - reach out on social media to any of the team with your thoughts or feedback.

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