The effects of the global banking crisis still reverberate today. Some of the old banks remain, hollowed-out shells; some are still standing, remarkably intact; and entirely new banks, like green shoots, have emerged. The distinctive difference of these new banks lies in a combination of better marketing – presenting a 'cool' image to potential customers – and deploying infinitely better IT to improve customers’ personal banking experience.
The Portland, Oregon-based Simple bank, founded by Josh Reich, CEO, has, since its start-up in mid-2012, notched up 40,000 customers – and there’s a long and growing waiting list – using its online services. In July 2013 Simple passed a key landmark, exceeding $1 billion in transactions. Simple’s website plays on the widespread distrust of traditional banks: “Welcome to better banking” is the first statement greeting visitors.
What is 'better banking'? For Reich and others doing new banking start-ups, the dream of humanising how banks are experienced has a hard-edged reality – the utilisation of digital technology to make the experience friendlier, easier to understand, more personal and customisable. Simple’s USP is to offer customers a neat 'Safe-to-Spend' application. This takes your current balance, automatically deducts upcoming payments and pending transactions, calculates any regular savings, and gives an easy-to-read final total of what you are able to spend. Inevitably, in this brave new banking world, Simple – the name gives it away – markets itself as a humane alternative to conventional banking, but with a twist: unlike traditional banks, Simple is also nimble in its appeal to younger customers, who have grown up in the world of digital technology.
In Finland, Holvi, founded in 2011, says it offers "a whole new perspective on banking services" according to its homepage. Holvi is even smaller, with around 10,000 customers currently but ambitions to grow fast. Its co-founder, Kristoffer Lawson – who enjoys the title of 'Chief Evangelist' – says the idea for the bank grew out of a digital arts festival he was organising. The financial transactions company Lawson used for reconciling payments for the festival was clunky and inadequate. "I thought we could do better," says Lawson, who studied computer science at Helsinki University.
Like Simple's Reich, Lawson is steeped in digital technology. This tech-savvy background, combined with starting a bank from scratch, offers the chance to create a bank that isn't cluttered with the culture or the antiquated technology of more long-established banks. For Lawson, the essence of Holvi "is that everything regarding your personal account can be set up online within a couple of minutes, and you can have an immediate real-time overview of your finances. Technology is at the core of what we do." Holvi likes paradoxes. It claims to be a bank that isn’t a bank; it "replaces your bank". As with Simple, Holvi has the support of a much bigger partner; customer funds are held in client money accounts in Nordea Bank Finland plc, while Simple's partner is Bancorp, the US-based diversified financial services holding company.
In some ways all that Holvi and Simple are doing is overlaying the old-fashioned personal banking experience with marketing more appropriate to the digital generation – why shouldn’t banking be like that? It’s technology at the service of marketing. No branches, paper statements or human interface.
Yet there are some older established banks that not only survived the recent maelstrom but thrived – none more so than the Swedish bank Handelsbanken, which has been around since 1871, and where the human interface is at the core of the bank’s operations. Even in 1990, when Sweden experienced its own credit-fuelled financial crisis, Handelsbanken was one of the few Swedish banks to avoid a government bail-out.
According to Ulf Riese, Chief Financial Officer with Handelsbanken, the bank's success is "dependent on being an extremely decentralised organisation in which employees are happy with their jobs. A typical Handelsbanken employee stays for 33 years. Our culture is built upon our focus on total client satisfaction; easy to say, difficult to achieve unless you get the culture right."
Handelsbanken is a traditional, branch-based bank, with today almost 800 outlets around the world. More than half of those are in Sweden but it has a strong and growing presence in the UK, the Netherlands and the Nordic region. Unlike Simple or Holvi, Handelsbanken places enormous emphasis on meeting with and building a relationship with a branch manager. It’s a large, full-service bank but with completely decentralised decision-making; the branch manager is king. At Handelsbanken there are no budgets, no bonuses, no sales targets, no trading in tricky complex derivatives.
"We don’t lend money to projects we don’t understand," says Henrik Westman, chief press officer for the bank. Handelsbanken distributes profits to its employees on a flat rate – all staff get the same – and these profits go into a savings fund that is only accessible on retirement.
Three different types of banks, all trying to do the same thing – restore customer confidence. Banks are now so tightly regulated that risky ventures of the kind that brought low Lehman Brothers et al should be a thing of the past. Here’s hoping that Holvi and Simple emulate Handelsbanken’s work, and go on to build a well-satisfied customer base.
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