Is white label the future for the UK banking market?

Originally published on Total Payments.
Unlike other sectors of the financial services market, we rarely see new entrants in the UK banking market because the bar to entry is so high. Obtaining a new banking licence is a massive challenge (ask Metro Bank!) and developing the systems required to support a range of banking products takes a significant period of time (ask Tesco Bank about their yet to launch current account!).
The UK banking market needs more competition from providers who can deliver customer centric services in the way consumers want to consume them. This means products from people who understand consumers and who are not driven by protecting legacy products. So far new competition has been very limited; examples include Metro Bank who went down the banking licence route and Virgin Money who bought Church House Trust and then Northern Rock.
An interesting alternative is the model followed by Marks and Spencer who got to market very quickly by offering a M&S branded, HSBC backed, account. M&S Bank is part of HSBC but operates under the M&S brand, in M&S stores, thereby leveraging the brand values associated with M&S.
What the UK banking market needs is a white label enabler to help brands and new providers get to market quickly by providing the banking licence and banking systems that act as a barrier to new entrants. In the US, Bancorp Bank offers what they term ‘private label affinity partner programs’. New providers can offer their customers branded banking services that are actually provided by Bancorp Bank, i.e. deposits are held and protected under Bancorp Bank’s licence. M&S Bank benefited from the existing financial services relationship between HSBC and M&S, however there is no evidence that either HSBC or another bank will start actively marketing this wholesale business model.
A white label banking provider would enable both providers along the M&S Bank model and new providers who see smart, mobile device based services as the future of banking. In the US, Movenbank is bringing their unique customer proposition to market via this model. In the words of Brett King, Movenbank Founder and CEO, banking is no longer somewhere you go, but something you do. So which bank will go for first mover advantage in the UK? Anyone?

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