Issue link: https://maltatoday.uberflip.com/i/1215405
27.02.2020 10 ANALYSIS The fightback against Monzo and Revolut BANKS always seem to be doing some- thing to upset us. Lately, for instance, they have been getting pilloried for shutting branches and taking away cashpoints. But in reality, banking is just going the way of CDs, high street travel agents, or standing by the road- side in the rain trying to hail a cab. e world has changed. e upcoming gen- erations don't see the same need to visit a physical branch, let alone use paper money. To satisfy this demand, a rash of digital-only banks has sprung up in the UK in the past five years, such as Monzo and Revolut. They have no branches; operate via apps with 24-7 live support; and offer services such as real-time spending notifications, free payments abroad and virtual deb- it cards that can be used immediately through Apple Pay or Google Pay. It is often incredibly easy to become a customer, signing up for an account online without even talking to any- one. In a short space of time, this has begun to threaten the incumbents. Market leader Monzo, for instance, has signed up more than 3m UK cus- tomers since launching in 2015 – al- beit such operators are still making losses which seem to be ever growing. At any rate, now comes the fight back: RBS has just become the first major UK bank to launch a compet- itor into this space in the form of Bó, complete with a money-managing app and snazzy yellow debit cards. Other incumbents such as HSBC and Santander have digital designs of their own. So how well placed are these banks to defend their patch? The starting gun Banking took longer than most in- dustries to take advantage of the fourth industrial revolution, mainly because of regulation. Until a dec- ade ago, regulators would not au- thorise new banks unless they were completely sure they would be "safe". They would not permit bank software to use cloud services or to be bought in rather than made in-house, both of which massively reduce the cost of opening a new bank. This changed when the Financial Conduct Authority (FCA) took over as regulator in 2013. The government was keen to shake up banking in the wake of the financial crisis of 2008- 09, and explicitly required the FCA to not only protect consumers but to encourage competition, too. This put the UK at the forefront of the new digital banking industry. A similar trend is taking place else- where, such as the US, Germany and Hong Kong, where even traditional players like Bank of China have ac- quired a "virtual" licence, and will learn from operating a digital-only bank whether to import the idea to the mainland. The challenge for so-called lega- cy banks everywhere is that altering the course of a tanker is difficult. The very name "legacy" comes from the fact that their IT, though it works well in many regards, is outdated. Their systems are underpinned by IBM-type "big iron" mainframes that run on COBOL, an old programming language that is difficult to integrate with the innovations that customers now want and expect from digital banking. It costs a high proportion of bank IT budgets just to keep the old computer code working – yet it is too difficult to replace old systems while keeping a bank functioning. This problem of traditional banks stuck in the past goes further than tech. They also often have issues with organisational structure. The old way of running a bank was – and still is – to have silos for IT, operations, marketing, business/products and of course HR. When a new product or feature is required, the business side will usu- ally "throw the specifications over the wall into the cage" of the IT side and