Long Read - "Sucking the profitability out”

Interesting long read today in the Grauniad

This paragraph struck me as potentially applicable to fintech. The big banks will likely survive, but they might end up eating much thinner gruel

By sucking in shoppers and, as former Aldi UK CEO Paul Foley puts it, “sucking the profitability out of the industry” – profit margins of 2-3% are now the norm – the two German-owned companies have forced the “big four” supermarkets to take drastic measures


That was a long read.

I’d actually read quite a bit about Aldi and Lidl before but it was interesting to see how they gained so much traction and how they beat traditional British snobbery!

I too can see a similar situation occuring in financial products. Reading the article seemed to suggest that Kwik Save had to go bust in order to create real space for a discount retailer to grow into…so which bank do we think could go first in order to give the Fintechs the elbow room they need?

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My mum shopped there with my brother and I way back in 1994 (and possibly earlier, but dating by Whigfield songs!). We really were Aldi ultras

Was tempted to answer your question with Co-Operative, but they have kinda already done themselves over

Maybe TSB or Santander?

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It may not be possible to directly read across from food retailers though

I mean what could be the banking equivalent of Waitrose?

Probably Co-op, it’s the closest I can think of!

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I’d go First Direct

The Coop Bank has the whole ethical angle which aligns with the Waitrose ethos. First Direct is just HSBC who are far from ethical.

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The ethical angle is just a marketing ploy though

I’d say Monzo is up there with its Ethics. The only things Coop does better are reducing environmental impact and ethical campaigning.

I don’t think it’s a ploy with both, they appear genuine with not investing or working with unethical businesses. And things like high transparency and creating a positive work culture and supporting customers.

And in terms of overall quality to Waitroise I’d say Monzo def has it over Coop which is known for its crappy banking service.

Yep First Direct are one of least ethical, it’s just HSBC with a lick of paint. They don’t give a monkey about customers or staff or the environment or who they do business with. Fuck helping the community, they would never campaign for social and economic change unless it was beneficial to them. I was with First Direct for ages and I’ve no idea how they get such a great rating. The app was basic and website once you logged in looked like it was using an off the shelf system from '99

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Im curious to find out if the Banking service quality reports that are now done will have / has had any affect in people switching. Monzo and Starling will be included in the next one.

Will people start to see these reports, as they have to be added to the banks homepage, and go why would I want to have a bank that has a 47% overall service quality.

The only thing thats still skewing it are the switching incentives like HSBC giving £175 to switch to them, but hopefully as switching is easy these days more people just take the money and switch away again.


Never underestimate the power of a long existing brand coupled with consumer inertia.

It literally took a widespread recession to get people to bite the bullet and give Aldi a try.

I’m sure there’s plenty of room for fintechs and over the very long term they may come to dominate, but at least for the medium term the big banks should be more than fine.

In my opinion, the likes of Monzo and Starling have offered a much nicer experience, but haven’t really been price competitive (at least for those of us who actively manage our finances).


I think Monzo will gain a huge amount of customers once it hits a tipping point socially, I’m actually starting to hear have you heard of monzo conversations in pubs and my office. It was only the other day it was at a million. Literally the other week was 1.5m and now 1.6m checking today. That’s rapid. Once it hits 5m it could have the potential to go bananas as the word gets out. 66m peeps in the UK to nab.

Will it be like Chrome taking on the browser wars where we now go why are you using IE, in 10-20 years people will be going “what was TSB?” “Clydesdale? nope never heard of that.” “NatWest/RBS wasn’t that the bank that was so slow to move forward it went bust after they lost nearly all of their customers switching?”

I think gone are the days of having the same bank as your parents and their parents before them.

I think the transparency and straight forwardness will win a lot of people, and things like the monthly budgeting will help the ever growing numbers living paycheck to paycheck. Using your phone and apps are becoming the norm.

Barclays seems to been the most switched on realising they need to step up their app game or risk losing a decent demographic of customers to the likes of fintechs.


What you’re talking about sounds more relevant for something like Facebook.

Absent a network effect, Monzo have already signed up the easiest customers to pick up. The cost/difficulty of acquiring every additional customer is only going to increase.


I think it will get to quite a few tens million before it starts getting tricky to convert customers.

I would say it’s still right at the beginning of it’s journey and it will at some point trigger a FOMO situation. Oh you don’t have a Monzo account? Like everyone has one.

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