RBS launches digital-only offering
(28 November 2019 – United Kingdom) After nearly two years of preparations, RBS has launched its new digital bank Bó in response to the rapid growth of start-ups such as Monzo and Starling.
Bó operates on a separate IT system to the core RBS and NatWest brands and will offer customers an app-based current account with similar features to those offered by its new rivals.
Mark Bailie, Bó chief executive, said RBS needed to respond to the rapid growth of digital challengers because “regardless of what people think of those business models . . . customers clearly like them.”
RBS reportedly considered purchasing Monzo in 2017, but Mr Bailie said the bank decided it was “clearly much better value” to build its own business.
While new challengers have attracted predominantly young customers, RBS is hoping Bó’s associated with a well-established bank will help it appeal to customers who have so far been cautious about trusting a digital-only bank.
RBS is also counting on its large scale to make its business model more sustainable than those of its venture capital-backed rivals. Monzo, Starling and Revolut, the largest of the UK’s digital-only banks, are all expected to remain lossmaking until at least 2021. One of their biggest challenges has been encouraging customers who use their accounts for budgeting and discretionary spending to begin using them as their primary bank account. However, Mr Bailie said the returns from lending deposits would allow Bó to be profitable even when used as a secondary account.
He acknowledged, however, that Bó’s model relied on being “low margin [and] very high volume”, and said it would need to attract a significant number of customers to be considered a success.
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