How RBS Group is Keeping up with the Digitisation of Banking

Of all the industries affected by the last decade’s shift to digitisation, perhaps none have been so completely turned upside-down as banking. Thanks to changing consumer preferences, the rise of challenger banks and FinTech initiatives, brick-and-mortar banks must race to keep pace with new developments. Some have managed these changes more effectively than others.

One organisation that has done an exemplary job of managing the migration to digital is the Royal Bank of Scotland Group, encompassing RBS, Natwest and Coutts banks, among others (“Our brands”, 2019). Just a decade ago, the banking group was at the centre of the 2008 recession in the UK, being bailed out by the government for a cool £45 billion (Davies, 2018). In 2018, RBS’ CEO Ross McEwan described the group’s progress since then as ‘the biggest turnaround in corporate history’ (Arnold, 2018). So what’s changed?

RBS Group has taken the digitisation of banking seriously, staying ahead of the curb with digital initiatives designed to keep it relevant in the face of digital challenger banks like Monzo and Revolut. RBS has responded by investing heavily in its own digital banks. Currently under development are at least 6 stand-alone digital banks with varying focuses (Arnold, 2018). Already in beta is Mettle, a digital-only bank account for SMEs. Among the other projects in the works is Bó, a customer-facing Monzo competitor which is set to take on 1 million current Natwest customers upon its launch (Smith, 2018).

In addition, RBS Group has launched a number of innovative digital services for its current clients. Natwest recently introduced Esme Loans, a digital lending platform for small businesses. Even private bank Coutts, the seventh oldest bank in the world, is taking a leap of faith into the digital world with Coutts Connect, a social network for its’ high-end clients (Rach, 2018). The network facilitates online networking between clients who share business interests. If proven successful, this could mark a significant shift in banking, traditionally a very private industry.

As well as developing new technologies in-house, RBS Group places itself in an ideal position for acquisition of promising FinTech projects. The group does a lot to support entrepreneurship, from its Entrepreneur Accelerator offering mentorship and funding to early-stage startups, to its conversion of a cash delivery centre in London into a tech start-up campus, complete with a networking space inside the old vault (“RocketSpace to open London campus for tech startups thanks to RBS”, 2016). These initiatives keep RBS Group current and up to date on trends in FinTech, allowing them to stay ahead of the curb.

Of course, digitisation does present challenges. In 2012, a major computer failure descended Natwest into chaos, causing weeks of disruption to services including viewing account balance, foreign cash withdrawals and making mortgage payments (“RBS fined £56m over computer failure”, 2014). In response to the digital crisis, Natwest deployed human power: 1,200 branches extended their opening hours and phone staff was doubled in an attempt to manage customers’ access to their cash (Adetunji, 2012). Some failures are inevitable in the introduction of new technologies. Although costly, incidents like this are likely to continue to become less common as banking continues to shift its core focus to digital. However, they do also call into question the reliability of mobile-only banks, who do not have physical branches to fall back on in the event of a disruption to online services.

Another challenge that brick-and-mortar banks are facing is the impact of digitisation on the physical side of the business. In 2014, RBS announced that its branch transactions had fallen by 30% in the previous 4 years (“RBS to close 44 branches across UK”, 2014). Like most other high street banks, RBS is in the process of dramatically cutting its physical locations in the coming years. However, the approach they are taking is different from most.

Lloyds Bank recently announced that it is axing over 6000 jobs in its shift to digitisation (Hawker, 2018). It defended its decision with promises of over 8000 new digital roles; however, this will inevitably leave its current employees, who lack digital training, in the cold. In stark contrast, RBS Group plans to cut fewer than 800 jobs, despite 162 branch closures planned for the coming years (“RBS to cut 162 branches and 792 jobs”, 2018). How is that possible? RBS plans to retain the vast majority of its current employees, re-training them for digital roles. Natwest has already launched its Data Academy, a programme open to all of RBS Group’s 70,000 staff, designed to train them to understand and harness the power of data (“NatWest becomes first UK bank to launch Data Academy”, 2019).

Time will tell whether RBS Group’s ventures into digitisation will pay off, or if the 50-year-old banking group is doomed to lose out to the industry’s new entrants. However, it’s safe to say that RBS has made a calculated move to embrace digitisation in a bid to not get left behind.

References

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Arnold, M. (2018). RBS’s Ross McEwan on ‘the biggest corporate turnaround in history’. Retrieved from https://www.ft.com/content/d5ca31da-cba7-11e8-9fe5-24ad351828ab

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Davies, R. (2018). RBS pays its first dividend since £45.5bn bailout 10 years ago. Retrieved from https://www.theguardian.com/business/2018/oct/12/rbs-pays-its-first-dividend-since-bailout-10-years-ago

Hawker, L. (2018). Lloyds Bank: 6,000 job cuts announced in £3billion digital investment. Retrieved from https://www.express.co.uk/news/uk/1041535/Lloyds-bank-news-city-latest-UK-financial-news-job-cuts

LOM. (2017). RocketSpace – The Vault [Image]. Retrieved from https://lom-architecture.com/work/rocketspace-coworking-tech-campus

Mettle. (2018). Mettle, RBS’ digital-only bank account for business[Image]. Retrieved from https://www.mettle.co.uk/?campaignid=1620944280&adgroupid=67056248368&gclid=Cj0KCQiAtP_iBRDGARIsAEWJA8iz5oU7rvL3R9sRDBPNuNuxSAIq1m4Ay0cIhePZgC63h5WB-AA5z1QaApLVEALw_wcB

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Rach, S. (2018). Coutts launches social network for clients. Retrieved from https://portfolio-adviser.com/coutts-launches-digital-platform/

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