Royal Bank of Scotland Launches Bo to Boost Digital Banking

The Royal Bank of Scotland Group plc RBS launched its digital bank, Bo, in a bid to compete with online start-ups like Monzo and Starling, and meet the rapidly growing demand for online banking. Notably, Bo is a stand-alone digital consumer banking platform, separate from Royal Bank of Scotland’s other subsidiaries — including its biggest brand, NatWest.

Bo, which was officially launched on Wednesday, has features such as user budgeting, and saving and spend analysis, which will target users with less than $128 in savings.

Management at Bo wishes that current Natwest account holders switch in their millions to the new digital bank and use mobile phones to open accounts. Also, if customers deposit their money at the digital bank, Royal Bank of Scotland will be able to use them for mortgage lending.

The progress toward digitalization is expected to help Royal Bank of Scotland lower costs because if more customers start using Bo for banking needs, the requirement of branches and call centers will decrease, which might result in the closure of the same by the bank.

However, this might serve as bad news for traditional Natwest customers, who still use branches and call centers to carry out banking functions.

Bo’s chief executive, Mark Bailie, said, “Our customers can serve themselves and don't need to use services like call centres or branches.”

Although there has not been much time since the official launch of Bo, it has already become the target of fraudsters that seek to take advantage of a weakness, if any, in the new platform’s digital defense system.

Nevertheless, Bailie said that while such attacks are expected, they are blocking them at the front door.

Millions of young customers have been attracted to other online start-ups off late. However, because of Bo’s association with an already established bank like Royal Bank of Scotland, it is expected that the platform will even appeal to customers, who have been shying away from using a digital-only bank till now.

Like Royal Bank of Scotland, HSBC Holdings plc HSBC is also progressing toward the launch of a digital banking platform named Kinetic, which has been developed for small businesses. It is still in the beta testing phase and its launch is expected to take place in the first half of 2020.

Despite the ongoing economic uncertainty in the U.K., HSBC’s head of U.K. small business banking, Peter McIntyre, stated earlier this month, “I think this is the best time to do it, to bring more financial insight to customers at a difficult time.”

In fact, amid several geopolitical tensions, HSBC along with some other companies like Deutsche Bank DB, Nomura Holdings, Inc NMR and a few more are engaged in rigorous cost cutting to improve operating efficiency.

So far this year, shares of Royal Bank of Scotland have gained 6.8%, outperforming the industry’s growth of 4.2%.

Currently, Royal Bank of Scotland carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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