CYBG: Challenging the Challenger narrative?

No stranger to podcasts and a fan of many, CEO of CYBG, David Duffy came on to the Fintech Insider podcast to talk with Simon Taylor about banking in the age of fintech.

CYBG are owners of Clydesdale and Yorkshire Bank, along with their digital brand B, and

they’ve been hitting the headlines over the last 12 months. Its recent acquisition of Virgin Money sent shockwaves through the industry. Challenger brands were supposed to be the disruptors of incumbent banks, not a service to be bought.

It shows just how difficult it is to keep a challenger brand going and how the incumbent services aren’t as easy to challenge as startups and industry commentators have suggested.

It’s a lot easier than people think

David Duffy, CEO of CYBG

Integration is, quite rightly, often portrayed as a difficult journey, but Duffy is adamant that’s not the case this time around. It’s usually focused on systems and platforms with a degree of complexity, but no real systems integration is going to occur.

Duffy’s focus is to transfer customers to existing platforms. Virgin Money had a great credit card platform, one larger than Clydesdale’s comparative offering so customers are going to shift from the Clydesdale Bank credit card platform to Virgin Money’s. And the opposite will happen with the mortgage platforms. So while the companies are going to be integrated, the platforms won’t be.

Great, but what about the people? Two organisations rarely have the same culture and that leads to issues down the line. Duffy is positive this won’t be the case and highlighted the first management meeting of the newly merged entity where the cultural focus of the members was so similar it was near-impossible to tell who came from where.

Customer obsession and cultural DNA

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Tangible and achievable

The goal is simple: create the best possible bank.

Revamping banking so that it’s fit for the modern era is no easy feat. The Virgin brand has become synonymous with being a disruptor and the upstart in other industries but wasn’t capable of doing that with banking. CYBG is planning to succeed where Virgin failed by creating a lifestyle brand, rather than banking as part of an extant family of brands.

Our growth will be faster than the neobanks

David Duffy, CEO of CYBG

David Duffy shares the vision for the new banking entity as a platform for over 60 group companies, offering a range of activities that go beyond banking, complete with a loyalty programme unique to banking. The number of customers doesn’t really matter. It’s about being the primary bank and the profitability of those customers that makes a difference.

The opportunities from combining

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Getting physical

David Duffy is no stranger to brand accounts. B, CYBG’s digital banking product has been around since 2016 and there are plans to launch a ubiquitous brand using the lessons from B in addition to the national presence CYBG has with Clydesdale and Yorkshire. David Duffy’s certain that the bank is positioned to move faster than the challenger brands and take charge of the market.

However, going against the GAFA and ‘techfin’ narrative, he suggests there’s wariness around the purely digital offerings, that there’s a customer need to still have a physical touchpoint with their bank.

The importance of a physical presence

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The SME banking space is becoming a more competitive space with challenger brands and the RBS Remedies fund injecting new capital into the sector. Duffy believes it will be some time before they can fully capitalise on that market. It’s going to take a fine balancing act between price, convenience and service to be attractive to customers.

Big banking narratives have one core fallacy for David Duffy, they ignore the position that SME owners are really in. SMEs are owned by individuals who have retail, property and business needs to be serviced, that’s mainly accounting for the S part of that acronym.

What’s key about understanding this sector of the market, he argues, is that small business owners often go to physical locations to speak to their bank. Not to ask for a loan, but for advice on how to grow their business and scale. Banks operate as business advisors as part of their services.

There are also interesting discussions around Brexit, the future of the industry, how fintech and banks can partner together and what role the big tech platforms can play.

Listen to the episode for the full story here.