Neobanks shake up banks’ brand values

Image result for Neobanks shake up banks’ brand values

In the wake of the rise of the neobanks, it is perhaps no surprise that the brand values of eight of the  big high street banks, such as HSBC and Barclays, have dropped by a massive 75% over the last year, according to data from Kantar, reported by Business Insider.

This amounts to a collective $2 billion in lost brand value, Kantar revealed, which uses financial data and survey results to determine brand value.

Significantly, NatWest was the only major bank studied to see an increase is attributed to the rise of popular challenger banks like Monzo, Revolut, and Starling, because they are taking business away from the established banks.

How are the neobanks posing a threat to big bank brand values?

The short answer is that they are more successful at managing their brand across all their product offerings. Here are some points from Gregory Magana, writing for Business Insider, that explain the situation more fully:

  • Neobanks are physically recognizable. For example, Monzo’s coral-coloured debit cards are easily recognized and highly visible. This helps to keep the neobank in consumers’ minds when they see others using the card. And this tactic seems to be catching on across the banking sphere.

 

  • The neobanks’ banking tools are high-tech and intuitive. Successful neobanks excel at impressing customers with their online banking offerings and giving consumers features that offer them intuitive control over their finances, plus they’re continuously increasing and upgrading their suites of tools. For example, Monzo recently announced that it was beta testing a feature that lets consumers block their own spending at specific retailers.

 

  • Neobanks also market themselves extremely well. Earlier this year, both Monzo and N26 delivered major ad campaigns designed to accelerate growth beyond what word of mouth was providing. Both campaigns use minimalist, eye-catching imagery designed to draw attention and are located in high-traffic areas like the London Tube.

 

The heritage banks could revamp their marketing strategies, but they should be careful in creating “edgy” campaigns that mirror neobanks’, because that won’t win them customers. They could improve their marketing, by employing edgy strategies like those used by the neobanks. However, it does require a subtle approach. Just last February, Revolut was ‘shamed’ on Twitter for its Valentine’s Day ad that suggested ‘singletons’ were sad, lonely people.

But will marketing be enough to stem the tide of customers flowing towards the neobanks, or does it really require a major rethink on the part of the banks with regard to their products and customer service. Smart marketing and funky advertising campaigns will not be enough alone.

Investing in Stock Exchanges: a novel idea

Related image

 

The world of investing centres on investing in stocks. However, Jon Markman writing at Forbes offers up a new idea: investing in stock exchanges. How does that work, you may ask. Markman points to the Intercontinental Exchange (ICE), an operator of commodity and stock exchange, which posted exemplary financial results on 1st August and suggests that as its managers plan to disrupt lucrative markets, such as the new digital ones, it is worth looking at it as a potential investment.

ICE “builds, operates and advances global markets through information, technology and expertise,” according to its website. It’s a relatively new set-up that was only founded in 2000. In 1996, Jeffrey Sprecher, a mechanical engineer from Wisconsin, bought Continental Power Exchange, an Atlanta electronic energy trading company for $1,000. He saw an opportunity to take advantage of a move to electronic trading.

The company launched as ICE in 2000 when Sprecher gave up 80% of the business to investment bankers Goldman Sachs and Morgan Stanley, according. It immediately became a competitor to Enron, one of the biggest electronic trading platforms at the time. However, it wasn’t long before the Enron scandal broke and in a very short time ICE became the market leader.

Sprecher had no experience in financial markets, nor had he ever traded stocks and shares, but he “could see how slow, traditional financial markets were about to be disrupted by fast, low-latency software platforms,” Markman says. Sprecher recounted the story of how flying back from London he spotted a story in the Financial Time about credit default swaps (CDS), and while he had no clue about what they were, he intuited that there might be an opportunity for ICE to leverage its platform to build an electronic marketplace. Today,  ICE currently clears 96% of all CDS.

He also used his creative thinking to engineer the $8.2 billion buyout of the New York Stock Exchange in 2012. In a little over a decade, this small Atlanta company went from obscurity to being in the vanguard of financial markets.  Today ICE currently operates 12 regulated exchanges and six clearing houses. The company logged $6.3 billion in revenue in 2018.

Its success is down to a great strategy based on seeing the transformation of financial markets early on. It has continued to make interesting strategic acquisitions, including the Chicago Stock Exchange last year, and as Markman says, “Getting ahead of the digital transformation of the $11 trillion mortgage market is another multibillion-dollar opportunity for ICE.”

Furthermore, as it is based in regulated financial markets, the company is the logical intermediary for this emergent digital ecosystem. It appears ot be firing on all cylinders, and as Markman says, “Growth investors should consider using broad-market weakness to accumulate shares.”