Why legacy banks cannot compete with the agility of start ups

legacy banks
Image credit | Eivaisla/bigstockphoto.com

Legacy banks seem doomed. We regularly publish articles that compare the agility and ability of legacy banks to the new, app based competitors. And our conclusion is, generally, that they cannot compete.

An anecdote

Here at Disruptive.Asia we decided to change our bank account from an established bank based in Hong Kong, with a global presence, to a start-up that could cater for all our needs online.

After many months, many forms and many charges for who-knew-what, our account with the Hong Kong bank was closed. Relief all round.

Several months after closing the account, we were contacted by said legacy bank and told there was an outstanding credit card charge, could we please pay it, together with a raft of made-up charges.

We pointed out that we did not have a bank account with them and that they had let this transaction through after we had closed it so it was their fault.

After several minutes of, er, reasonably full and frank discussion, we agreed to pay it, but there was no way we were paying the charges as it was not our fault.

We were then transferred to a supervisor. He agreed that we should just pay the amount. Please pay the money into the relevant account and we will not speak of it again.

We do not have an account.


So, could you pop into the branch, with a cheque?

No, we do not live in Hong Kong.


Could you send us a cheque?

(After stopping laughing) No, we don’t use cheques. Just tell us where to send the money and we will transfer it instantly from the clever app on the phone that our modern bank supplied us with, at no charge.

Ah. I need to transfer you to somebody else for that.

(No more laughter, much waiting).

Hello, yes, you can transfer the money and there is a HK$65 charge for the transfer.

(Definitely no laughter). No. As we told you, we will pay the outstanding amount but no charges. In fact, after we have transferred the nett amount, you can sue me for the HK$65 – it will cost you a lot more to do that, than just accepting the transfer and drawing a line under it.

There is more detail to the story than that (such as what account to send the money to since our account was closed). But it all proves that legacy banks need to radically rethink their customer service or lose out (which these guys did – we closed the account).

Maybe they don’t care. Maybe most of the old incumbents are repositioning themselves as big banks for big business. Maybe they prefer sitting in panelled rooms discussing the redistribution of billions of dollars of debt, rather than providing instant, seamless customer service for consumers.

Perhaps we should redefine our thought that legacy banks cannot compete to legacy banks cannot compete at a retail level. And maybe they are right not to want to.

PS: We closed the account because we were regularly inflicted with demands to prove our identities, legal status, tax abodes, etc. because this particular bank and its antiquated systems and checks was subjected to a multi-billion dollar money-laundering debacle. So all customers were then considered to be potential money-launderers, including us. Add to that the incessant and inexplicable range of charges and you can see why so many people and SMEs are flocking to the fintech-fired virtual banks.

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