Mapa Research is part of the Business Intelligence Division of Informa PLC

This is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Challenger-Fight

Pick your battles: how new banking entrants can compete

Gaby Mancero test drives offerings from two challenger banks to assess how successful they are at removing pain points, focusing on customer experience, and offering valuable new services.

With an upsurge in the number of new entrants to the UK banking market, challengers are threatening the incumbents with their digital-only offerings. Digital-only services eliminate many of the unavoidable overheads associated with traditional bricks-and-mortar banking, while their single-minded focus on web and mobile services has led to slicker customer experiences. As well as providing the same basic services as traditional banks, the new banks offer additional value-add services, such as suggesting new products and apps to save money every month.

According to Tom Blomfield, CEO of Mondo, the goal is not to automate or digitise all traditional banking processes, but rather to eliminate the pain points that the banking industry has created for consumers: opening a bank account should be as easy as creating a new email address and bank statements should not take two days to be updated.

For this article we’ve dipped into our large portfolio of live accounts to compare two of these new entrants, Loot and Mondo, with traditional banks. Loot and Mondo are seeking to differentiate themselves, focusing on the customer experience by removing pain points, offering great usability and design, and making better use of data to provide new features or services.

Pain points in traditional banking

Here we consider the well-reported pain points of:

  • Opening a bank account
  • Contacting the bank
  • Managing hidden account fees

The minimum identification checks require two utility bills, a photographic proof of identity and that you are a UK citizen or have been resident in the UK for at least 3 consecutive years.

This obviously causes significant problems if you don’t have any bills in your name or if you aren’t a UK citizen. Opening a new bank account in the UK, especially for the first time, is not straightforward, regardless of your nationality. It involves paperwork and time, and the account doesn’t activate immediately, with the account information and debit card arriving by post.

Contacting the bank can be a slow and frustrating process. In a worst case scenario, before you even get to speak to someone in a call centre, you must authenticate using the unique telephone code that they sent by post (which is different from any other passcode you might have with the bank), enter your card number, enter your date of birth, sit through a long list of press this and press that, and then wait to actually speak with a staff member. God forbid, the person answering may not be able to help you out; so you get transferred to another department. You might have to go through the authentication process again, you might need to verify your identity again and, more often than not, you will have to repeat the description of the problem. This doesn’t reflect the whole industry and the process is rarely this catastrophic, but most bank customers will be able to relate to some of these frustrations.

Finally, the fees remain unclear or hidden and many times costly. Since 1 January 2016, basic bank accounts have been free of all charges for the first time. However, if you have a different type of account, management fees, overdraft fees, foreign transaction fees or charges for refused direct debits can mount up quickly and become expensive. These fees are not always clear nor easy to remember.

Traditional banking usability and design

Most mobile interfaces are extensions of their desktop applications and do not take advantage of the mobile device capabilities. Traditional banks can take a long time to implement features that other, more responsive industries embrace more quickly, like live chat functions or fingerprint authentication.

Many apps are clunky and slow. Some banks take a couple of days to update bank statements with the most recent transactions and therefore cannot show a real time balance. They have poor graphic design with transactions presented in a long list, which looks only slightly better than Excel.

On the other hand, in an attempt to keep the customer informed, some traditional banks offer free SMS text alerts for when the account balance moves under or over limits set by the account holder.  Push notifications have become more frequent but they are normally focused on marketing messages or displaying your balance at a glance.

Use of data to provide new features and services

Few traditional UK banks offer categorisation of spending. Those who do, cannot offer it in real time since they do not update transactions and account balances automatically, but rather a few days later. Of the few that offer spending categorisation, they offer it as a separate app that provides categorisation only and it is not integrated with the other services the bank offers. Despite the amount of processing time that it might take, traditional banks have vast amounts of data that could be monetised or better used to provide forward-looking spending analysis based on historical transactions.

So how are Loot and Mondo disrupting retail banking?

Loot

Loot is a new banking service created especially for students, with a particularly strong focus on international students in the UK. They are not a bank and will not apply for a banking license. They offer a mobile interface linked to a pre-paid debit card that will help customers manage their money and offer the same services as any other current account.

Removing the pain points

Opening an account
In order to open a Loot account, one must download the app first. They require a passport or driving license for identity verification. This process uses JUMIO’s scanning technology and can be quite fiddly – don’t try opening an account if you’re in a room where the lighting could cause glare. However, if you manage to get the lighting right and the scanning processed correctly, you will have a bank account ready to go in 5 minutes. Once the verification process is completed, the debit card is sent by post within two weeks.
Contacting Loot
If you have a problem with your Loot account, you can contact the team through the live chat feature. You log in to your app, they already know who you are and the card linked to your account. When you send them a text message, they provide prompt replies, even on a Sunday.
Hidden fees
Loot is almost free. They charge very small fees for ATM withdrawals, ATM balance enquiries and foreign transactions however in-store cash withdrawals are free. But since you have the app at your fingertips, why would you need an ATM balance? While transferring money from another account is free, cash deposits require PayPoint, incurring a fee of £1 plus 2.5% of the top up value.

Better usability and design

The interface for the Loot app is clean and easy to use. The app’s homepage shows the balance, account number and sort code and PayPoint locations near you. The main menu is at the bottom of the screen.

Transactions are shown in a separate tab as a list that is colour-coded in red for credits, green for payments (although this colour-coding seems counterintuitive to me).

Balance updates are instant but transactions are displayed a couple of days after they have occurred. No notifications are sent.

It is intuitive to use, each tab offers only the necessary information and presents it very clearly.

I would like to be able to change my profile photo ,which is a standard avatar image for now, but at least it knows my gender. Hopefully, that will be unlocked in the next Loot update.

Use of data to provide new features and services

Loot does not offer spending analysis yet, but it plans to in the future.

The app has placeholders for several features that have not launched yet or not been unlocked. They claim that the app will (eventually) enable you to compare your spending with that of other people in your area, set saving goals, and categorise transactions by tagging. Stay tuned!

Loot

Mondo

Mondo is not a bank yet but has applied for a banking license. While it is waiting for approval, it has launched the app in test mode and given away debit cards at events and on its website. It is currently planning to test a maximum of 3,000 cards.

Removing pain points

Opening an account
Opening a bank account with Mondo was much simpler than with Loot (possibly because they are currently only in test mode). Once you provide them with your email address, you receive an email with instructions to download “Test Flight”, which allows testers to install and beta test apps on iOS before they go live. Once in Test Flight, you can download the Mondo app. I was at an event where I was given the Mondo debit card, once I had downloaded the app. When opening the app for the first time, I was prompted to scan another debit or credit card to top up Mondo. The recognition of the card was almost instant and the money was immediately available in my Mondo account. They don’t offer any way to deposit cash into the account yet. Total time to get a Mondo account with money in it ready to be spent – 10 minutes.
Contacting Mondo
Contacting the Mondo team was a joy compared to experiences with some traditional banks. Their live chat feature is robust and easy to use, and they are very responsive. Their response time on a Sunday was slower than during the week but it was no longer than 15 minutes from the time I texted them to the time they responded.

Their live chat feature provides the ability to attach pictures from your mobile. For example, if you receive an error message, you can easily send them a screenshot so that they can diagnose the problem.

Finally, Mondo is absolutely free (at least for now). Even international transactions are free and converted into sterling pounds using that day’s exchange rate.

Better usability and design

Mondo’s first page is the list of transactions. Their system grabs the merchants’ logos from Twitter or Foursquare and places them next to the transactions. It groups the transactions by day and provides a line chart that monitors the balance of your account. It colour codes credits in green and payments in black font.

The first few transactions on the Mondo card were displayed with a few days delay but the more I used my card, the faster the transactions seemed to be processed. Now I get an instant notification of each transaction, regardless of whether it was successful or declined. The balance is by default immediately updated.

Mondo also allows you to save pictures of receipts and attach notes to each transaction. The app saves the merchant’s location and this is displayed on a map at the top of the page with additional transaction details.

The Mondo app has a well thought out structure, is visually compelling and is easy to use.

Use of data to provide new features and services

Mondo has 10 transaction categories to select from and provides the average transaction value by category and by merchant. The categorisation is an automated process but it is possible to make manual changes to these. Furthermore, the app learns from every change so the next time, it will show the right category.

Mondo

Frequent app updates means that Mondo can gradually add new features and functionality. Account holders must however “earn” access to these through increased usage of the app i.e. the more you use the card, the more features you unlock. For example, the ability to search through the spending history and a chart that indicates the variation of your account balance by day were unlocked within a few weeks of using the app.

In conclusion, new digital banks without the overheads inherent in traditional bricks-and-mortar banking are already boosting engagement and customer loyalty by offering digital personalised tools and services that are simple and easy to use.

Loot and Mondo, albeit at different levels, have made it easy to open a bank account, to provide real-time account balances and to respond to queries almost immediately. A traditional bank might not be able to respond this quickly but they should be able to make use of the vast amount of data and resources they have to simplify processes, provide real-time balance and transaction details, and offer spending categorisation and personalised advice based on transactional history.

Mapa Recommends

If you already have a bank account then Mondo is better. It is faster, provides a slicker interface, includes gamification techniques that unlock features and provides spending analysis. If, on the other hand, you have been keeping all your money under your mattress, you’re going to have to fork over 2.5% of it just to be able to spend it in Loot, since Mondo has no option to deposit cash.


Mapa Research is the market authority in online banking.  We have been immersed in online banking since its inception and have tracked every innovation and evolution since then, providing our clients with unparalleled perspective and context. If you would like to know how your bank is doing against the disruptors or for more information on our Insight Series reports and Dashboards, please contact us today.v

Like what you see?

Subscribe to our newsletter to receive a regular summary of our latest articles


Sign Me Up

Fill Details Below

We only use your details to send you information about Mapa.