RBS plans on opening a digital challenger bank

(Alex Sherwood) #63

It would help if the challengers got a high enough valuation to make an acquisition too difficult / risky for an incumbent. Revolut’s is $1.4 billion (or more) which is heading in the right direction..

(Andre Borie) #64

3 billions & 3 years is a red flag by itself. There are very few software projects that would require such time & budget. A bank backend definitely does not. This shows a lack of understanding & planning right from the start, but not surprising when it comes from a legacy mindset.

(Alex Sherwood) #65

To be fair, they’re having to handle a lot of legacy issues too. But I agree with your general point - £3bn seems like a lot of money to spend to replicate what Monzo built with less than £50m.


Agreed (again!)

You also need a set of investors that are in it for the long-haul, or are agreed on best-case exit.

Do we know where Passion Capital stand?

(Alex Sherwood) #67

Given that Monzo has been turning down an acqusition offer a month (on some months at least), it looks like they’re prepared to be patient :slight_smile:


True. If I’ve understood @Rjevski’s point correctly, it’s that the initial mindset isn’t there - that by specifying a (large) budget and a delivery milestone it suggests a waterfall, old-school approach from the get-go.

And then, as you imply, if this money is to correct legacy issues and they’re not spinning out a separate challenger like RBS, then I’m not sure there’s much hope for them. (I mean, it could work, but it won’t be game-changing, in my view).


The £3bn just seems to be the budget for their rolling investment plans for the entire business (not just IT). The article mentions that it’s 40% more than their last 3 year plan.

Looks like they plan in 3 yearly packages and the headline for this one appears to be ‘digital banking’. It will have all sorts included in it.

(Alex Sherwood) #70

That’s hard to judge. If you look at their proposal (the link I posted earlier in the thread), they seem to sort of get it - there’s some potential there.

Dismissing bank employees’ desire to innovate is always risky. There’s a lot of smart, motivated people working at the incumbent’s but they have to deal with a lot of internal obstacles that’re standing in the way of that innovation.

I don’t think we know exactly what form this project’s going to take yet, when it comes to in-house vs a separate challenger.


I read it yonks ago - but thanks, will take another look, but I don’t recall being particularly struck either way, to be honest. I was responding more to @Rjevski’s point (that you quoted).

That’s true. For clarity, I wasn’t claiming that a decision had been made, more a comment based on a hypothetical “they’re not building a separate bank” which I thought was the implication of your statement. Apologies if I read it wrong.

(lee) #72

Nah everyone wanted current accounts - they just still weren’t available!
Either way the numbers are a drop in the ocean.

We definitely have different views on the market place. Spoon feeding poor deals that you could go onto a comparison or cashback site doesn’t seem amazing to me. Not aggregating alternate accounts which you can do (and had been able to previously).

If it hasnt cost monzo 3bn why would it cost LLoyds if it wanted to start the same. Comparing investment in its current business is kinda pointless. Even if they’re investing that much its servicing a ton of customers, brands and products. They could of course just buy monzo.


Quick follow up (I think this was added later?). Absolutely agree, no one should dismiss anyone’s desire to innovate.

But, and I’d hope this was clear in my post - again very sorry if it wasn’t - the mindset here is a corporate one. Individual employees don’t publish strategy - organisations do. Your point about internal obstacles is well made and, I think, supports the notion that if (and that’s a big if - I’m just another uninformed person behind a keyboard) Lloyds is starting from a legacy mindset (waterfall planning, internal bureaucracy, hierarchy and control, leading to inability to deliver and iterate rapidly and at pace etc etc) then the right mindset isn’t in place.

I might be wrong. Others’ views may vary!


I find this idea that high street banks need to completely abandon their current systems and develop completely new ones very hard to reconcile with reality.

To catch up with Monzo all Lloyds need to do is add spending categories and push notifications to their app.

Job done.

(Alex Sherwood) #75

Yet Monzo built those features two years ago & Lloyds hasn’t done that :thinking:


Cost/benefit analysis…

(Alex Sherwood) #77

What does that mean sorry?


Not worth the hassle right now, I imagine

(Alex Sherwood) #79

Why not?

(lee) #80

How long have they been offering.
save the change
money analytics
money deposits
direct debits
…and so on and so on


Looking at the article about RBS (and getting us back on topic - yay!), I suspect the driver for the big banks is more about cost reduction.

I think Tom said at the Open Office event that a typical current account costs >£100 to run. Monzo is cutting those costs right back:

That’s got to be appealing for a banker, right?!

(Alex Sherwood) #82

Yes, the Forbes story says that’s one of the big drivers. But it’s kind of missing the point because the challengers represent a shift in business model orientation, not just a lower cost base / more competitive pricing.