Lendable joins the neo-bank MVNO revolution, leaving high street banks for dust.
This week, Lendable made a bold claim, setting out its stall to be, as it claims, the first UK finance brand to launch a mobile network.
Keeping it simple with a £20 monthly plan, is a clear message to the industry that it means business and wants to join the mobile and MVNO revolution. I really do think this a big statement of intent and worth reflecting on, especially if you’re at the helm of a high street bank.
I think it underlines a pivotal trend in banking and mobile, and any high street incumbent that doesn’t have a plan, could be left for dust.
Super app generation comes into play
When Reuters reported the news, it referred to the ‘super app’ ecosystems that neo and digital banks are creating. It’s something we have been tracking for a while at Graystone Strategy – you may recall my blog on Revolut.
I think Revolut is one of the best examples of a brand that is successfully extending its value to the customer by diversifying, in the shape of eSIMs for VIP customers.
Revolut has a loyal customer base that likes using digital services to manage their money when abroad. This makes the strategy to pursue other services a ‘no brainer’. Revolut customers want an alternative to paying the all too often confusing and hefty roaming rates, so why wouldn’t they buy an eSIM that is super flexible?
What’s telling, is the scale and speed of growth. 600,000 people have taken up the service, marking a significant step on the road to evolving the brand into an MVNO in Europe.
We’ll see more plays like this in the coming year – Monzo, which has 13million banking users, announced in August that it intends to join the pack, whilst Klarna has big plans in the US.
None of this is happening by accident.
At the risk of repeating myself, I think we’re witnessing a global phenomenon with banking and financial institutions across the globe identifying the opportunity to grow revenue, improve retention and loyalty, and improve efficiency by selling more to the existing customer base.
Initially, the movement started with banks in Africa leveraging their physical footprint to make it easier for people to transfer money and access ‘micro’ loans.
Equitel in Kenya led the way and pioneered the MVNO, whilst Vodafone and Safaricom launched a banking service, M-PESA. They all set the bar for solving acute problems for African communities and the innovators in finance and mobile haven’t looked back.
Trust is at the heart of things
The disruptive model we’ve seen in Africa worked then, and continues to work today, because the brands involved are trusted. And it’s trust that sits at the heart of the new MVNO phenomenon.
If you trust a bank with your money, then you’ll trust them to deliver a mobile service. Throw digitalisation and eSIM into the mix and you have the perfect set of ingredients for redefining a market.
I also think, in general, banking brands are good at selling multiple services. Cross selling current accounts, mortgages, savings, insurance, loans, travel money is the norm, so adding an additional service, such as your mobile connectivity, to the portfolio makes for a simple and cost-effective way to drive revenue and margins.
Yet, if that’s true, why have none of the UK’s leading high street banks joined in?
There’s certainly scope when you look at the customer numbers. Barclays has 48m customers compared to Metro that has 3million.
So, if it’s not the size of the base that’s preventing a strategic move, what is holding them back? I suspect that answer is related to the technology constraints and I can see why that could be argued.
Given many of the banks on the high street have been around for hundreds of years, the technology they will be using will be clunky to say the least. Hard to mould and likely to encourage risk. Whereas in comparison, neo banks, like Monzo, are more agile with digital tech stacks that are easier to develop, manage and integrate with mobile.
These numbers illustrate the point well: Metro has got 3million users on its app each month, while Starling bank has 2.4million monthly users (from a base of 4million). In contrast HSBC, with 42milion customers, has only got 3.8million using the app monthly.
Are risk averse companies also shy to mobile integrations?
It would be reasonable to infer that large and complex projects are not what risk averse institutions want to pursue, or that its customers don’t want the digital service. But I think that’s a misnomer. It is possible to move people into digital, and it’s equally as possible create new brands, using legacy stacks when you use the right technology partners. I’ve done it and there’s a whole industry dedicated to taking these very headache away.
Tech companies of the MVNA / MVNE variety, all over the world, have developed solutions that will plug new into old, at scale and crucially they will do it compliantly.
And don’t forget, it’s not like neo banks are developing the mobile infrastructure themselves. They too use MVNAs and MVNEs to support their mobile launches, and companies like Gigs (used by Lendable) offer simple API access to systems. It’s proof that it is perfectly doable with the right ambition and proposition.
If established banks were to tap into the MVNO ecosystem, they’d soon realise the potential for growth, and understand there are MVNO experts like Graystone, that can help set up and run an MVNO – from finding a tech stack partner to developing propositions that work, to using insight to keep a brand fresh and relevant. In short, the MVNO industry is full of talent, and if banks tapped into just a small part of it, they’d fly.
Of course, the business model must also stack up.
There’s good reason to take a look. Firstly, there’s a market ready to switch. Research from Enders Analysis (2024), showed that UK MVNOs, including Tesco Mobile and Lebara gained 1.6 million customers, while the four largest traditional operators recorded a net loss of 180,000 subscribers.
The economics are worth exploring too. Mobile is a relatively small proportion of monthly outgoings yet considered a very valuable service by its users. That’s a big plus for any brand that wants to create a ‘sticky’ service.
Conversely, in the highly regulated banking world, selling more banking services is costly, and highly competitive. Yet if banks offered mobile as an incentive to take multiple banking products, then I think it’s feasible to unlock the door to more long-term customer value.
You can picture the pitch: “Got a current account, take advantage of our exclusive mortgage rates… and then our exclusive savings rates on ISAs, and why not take unlimited mobile too?”
This formula of multi-product, progressive discounting has worked very well for brands like Utility Warehouse and it’s a model that suits the banking world. If you need any more convincing about how telecoms can help grow a business, then look into the rumour that Octopus, which owns Octopus Energy, is also considering its telecoms strategy.
Banks need to move now
But the reason why banks do or don’t launch mobile services is, frankly, immaterial. Bottom line, if banks don’t consider mobile, then it’s clear their neo competitors will. For any banking brand grappling with making itself relevant to the latest generation of consumer, it makes sense to think about digital and mobile services NOW.
Because, let’s face it, if banks don’t take on the challenge of adapting to the future and diversify the offer, then they will likely go the way of Blockbuster and Kodak. These brands became irrelevant as digital became the norm. History will repeat itself as AI and virtual solutions come to the fore. We don’t need a crystal ball to reach that prediction.
So, if you’re working in a bank and reading this, thinking ‘we need to get our strategy sorted’, then I urge you to act on the thought. We can help. We’ve done it numerous times before, all around the world, so we can help you enjoy success too. Just drop me a message and we’ll get you a plan.
