Anne Boden, chief executive and founder of challenger bank Starling, has some sympathy for the management at TSB.
A computer science graduate, Boden herself had to co-ordinate similar system transitions in a thirty-year career spanning numerous high street banks that culminated in straightening out a badly-damaged Allied Irish Banks.
Doing a changeover between sets of bank systems is very difficult, she told Proactive, before confirming the TSB mess has given Starling a healthy customer boost.
Applications to switch from account holders at TSB have quadrupled recently, she says, adding it was legacy issues like this that prompted her to set up Starling in the first place.
“I was protecting a business model that was passed its sell-by date and this was an opportunity to do something really different.”
Hence, four years ago she established Starling Bank, one of the pioneers of a new breed of mobile-based challengers to the UK’s big five.
Alongside rivals such as Monzo, set up by former colleague Tom Blomfield, and Loot they are using app technology to make banking simple and quick.
Time ripe for mobile apps
Others have tried to change the established order (Egg anyone?) but timing and tech is the reason Boden believes the mobile-based banks can succeed this time.
After the financial crash of 2008, the major banks turned inwards just as technology was moving ahead.
Add in tighter regulatory constraints and the situation is ripe for change.
Low cost base
The low cost base of Starling is a huge and potentially critical advantage over the established players, she says.
“We have the same revenue per customer per product but our advantage is we have a cost base that is radically different.
“Our cost of delivery is very low. We only employ 170 people compared to thousands for the banks with their legacy systems.”
While the market share of Starling and its rivals is still modest compared to the big five, the mobile challengers are making headway.
Starling now has hundreds of thousands account holders says Boden, who admits to being a bit shocked by the rapid pace of its growth.
At the start, she envisaged Starling would be competing in the same market as the established banks where effectively you pay customers to move accounts.
But the speed of the markets’ development has taken both her (and her online rivals) by surprise.
“I never envisaged we would be dealing with hundreds of thousands of customers so soon.
“And I never envisaged we would have global aspirations and chief executives from around the world would be visiting us.”
Clever innovations such as a card lock on mobile phone if you misplace your card, no overseas fees and a three-minute application process have helped fuel the demand as has making the mobile phone and up-to-date technology the linch-pins of the offering.
Starling has a full banking licence and is a member of European bank group SEPA and the BACS UK clearing system.
The group also handles the faster payments service for other banks and provides the interface for the Department of Work and Pensions.
No need for incentives
But the challengers are dealing with entrenched and powerful opponents and there are signs that the high street banks have recognised the threat.
This year Starling ousted First Direct from top spot in the British Bank Awards, a position the HSBC arm had held for the previous three years.
Maybe it’s a coincidence that First Direct has just started a new customer switching programme with offers such as free headphones worth £150 and lifestyle courses valued at three times that amount.
Boden says Starling does not have to go down the ‘bribe’ route.
“The only thing that differentiates the big five is the colour of the carpet in the branch," she quips.
“People switch [to us] because of the service. There’s no red tape. Download the app, supply photographic ID and get an account.”
There are no exorbitant fees for overdrafts, she adds.
“People like that we offer a choice.”
RBS payout a target
Ironically, one of the things that might help take Starling from challenger to contender is a legacy of the financial crash.
As part of its settlement for being rescued by the UK government, Royal Bank of Scotland has set aside £425mln for rivals to promote business bank competition.
Who gets the money has yet to be decided, but Boden is keen to receive one of the major awards of more £100mln, adding that would have a huge impact on its development.
Starling has just launched a business account and if any significant chunk of the RBS cash comes its way, it would help build market share and allow Starling to become a significant SME-focused bank.
Why give it to banks that have enough money as it is, she says.
If the money goes to the right areas that would mean instead of the five now, six or seven banks including Starling would be offering business services by 2025.
Long term the endgame
When asked about an exit, Boden replies the bank gets plenty of approaches but adds for her this is a long-term project.
“Where we are at the very start of this journey and the excitement comes in doing something that moves the needle for financial services.”