“You Say You Want a Revolution”
… in Your Bank?

The Financial Times was good enough to take a break from wall-to-wall Covid-19 reporting to pen an article on Revolut, the fintech startup from London. The thrust of the article was that Revolut needed to “grow up,” but what caught my eye was the lesson that many industries can learn: Competing on the basis of being the least hated company in your industry has its limits. There’s an NPS lesson in here too.

Banking is a heavily regulated industry. The theory, of course, is that such regulations are designed to protect customers, but often they simply stifle new entrants into the market. It’s hard to remember the time when cities regulated taxi-cab licenses to “protect the public” and NYC shifts changed at the customer-convenient time of 4pm in the afternoon. If it was raining. I’m not here to promote anarchy, brother, but we should certainly be clear on the reasons why open competition isn’t a good idea. From the success of these upstarts, it certainly looks like many people wanted something new.

“More than a decade after the financial crisis, most banks count themselves lucky if their customers view them with indifference rather than abject hatred,” claimed the article in the Financial Times. Concentrations of market share don’t usually work out well for customers. Regulation-driven concentrations are usually even worse. (They result in absurdities like the requirement that I have my tray table in the folded and upright position, in case in the “unlikely event of a crash” I experience the “unlikely event of surviving landing.” Is that because I’d feel pretty stupid dying because I’m pinned in by my tray table?)

But while they may fail to protect customers, many regulations succeed at creating significant barriers to entry. The presumption is that the public interest is better served by government rules than by crazy competitors offering new and innovative services. There are, no doubt, risks to the changes brought about by new categories of company – for example, AirBnB imposes social costs on neighborhoods – but we need competition and innovation to even understand these risks.

One of the fundamental principles of CX is that NPS performance is all relative. A score of 80 might be required to win in one industry, whereas a score of zero might make you a market leader in others. As the old gag goes about two hikers stuck in the woods in peril, you don’t have to outrun the bear, just the other guy. Not surprisingly, industries with low average NPS tend to be characterized by high capital or regulatory barriers to entry (think cable TV) low availability of substitutes, and very low levels of competitive differentiation. The retail banking industry in the UK checks all the boxes. Forty years ago, you had your choice of four brands and logo color was probably the biggest difference. You chose your bank based on your parents’ choice – and never changed. The problem with “winning” in a very low NPS industry, is that sooner or later some entrepreneur decides to take a swing at you with a radically superior customer experience. And then, it’s too late.

It remains to be seen if Revolut can win the day in retail banking, but from a customer perspective, the signs are already good. For a generation of customers, a bank isn’t a building on the corner of the high street with guys in suits who treat you like they are doing you a favor, it’s an app on a mobile phone. In parts of the world, most notably in Africa, the telco is to all intents and purposes a bank. You can conduct transactions through PayPal or Venmo, exchange currency through TransferWise. I don’t know the NPS performance of these companies, but startups usually show dramatically higher performance than incumbents (they don’t have the luxury of competing any other way).

The moral of the tale is this: If you are the leader in a low-NPS industry, fixing your sights on incremental change or matching your known, understood competition leaves you exposed. In an era where startups break rules, and governments are willing to let innovation play out before slapping down with regulation (polite applause) companies like Revolut don’t have to win for the customer to win. These industries will never be the same again. Talk about a revolution.