For David Duffy and the Clydesdale and Yorkshire banking group (CYBG) that he leads, the future is digital, with a capital 'B'.
B is the name of CYBG’s recently-launched current account, instant savings account and app that is designed to change how customers manage their money. Using artificial intelligence, it learns how your manage your money over time and builds the capability to warn you if you have insufficient funds in your account or to tell you about ways to avoid unnecessary charges.
It's at the heart of CYBG's plan to use digital as a means of attacking the market share of the four big banks in the UK – Barclays, HSBC, Lloyds and Royal Bank of Scotland.
On a trip to Dublin last week, Duffy told The Irish Times that customers could open an account with B in just 11 minutes. "It's the fastest in the UK," he boasted.
“We want to change the face of UK banking. It sounds grandiose but it’s not meant to be. Banking is a push-product, volume model that charges customers for a lot of things it shouldn’t. What if you create a customer-pull model in a relationship where technology is just servicing that model?”
Studio B is an offshoot of this brand – a physical hub that is designed to act as an incubator for new technologies, an advisory centre for retail and SME customers, while also providing transactional services, sometimes with tellers, sometimes not.
CYBG is spending £300 million-plus over two years to fund its IT systems capability to support its digital push. “It’s a significant investment in our capability,” he said.
Partnerships
Duffy is also keen to explore partnerships with fintech companies and suggests an announcement on a deal could come as early as the publication of its half-year results in May.
“It would offer a national product capability . . . a new revenue stream. “We’re not buying it, we’d plug it in to our platform. We are looking at two others where it might be their name and we are connected. They originate assets but they don’t have the capital, so we’ll buy their assets on commission. It’s a brilliant partnership model.”
On broader issues, Duffy is sanguine about the implications for Glasgow-based CYBG of Scotland voting for independence in the next few years.
“If there’s a move to take Scotland out of the UK we have to move our headquarters to England,” he said. “We said that in the public domain at the last referendum and we have reiterated it since. It’s about access to the Bank of England window for liquidity. Our position is absolutely clear.”
He also noted that 80 per cent of its growth opportunity is outside of Scotland, so the “material advancement of the franchise is not dependent on Scotland”.
And Brexit has not had a major impact on the business yet. CYBG responded to the result by bringing forward the target date for it to achieve a double-digit return by one year to 2019.
“We are positioned as a bank that is the only credible alternative to the big banks. We have SME and retail in scale and with deep history, and we’re a clearing bank, and we weren’t bailed out, and then we have digital. That’s the magic. We have three million customers and we can deliver everything that the new digital players can. We can be faster and better at digital than they are.”
AIB’s normalisation
Duffy ran AIB from 2011 until his departure for the UK in 2015. He set the bank back on the path to normalisation.
On the proposed sale of shares in AIB by the Government, possibly between mid-May and early July, Duffy said: “First off, I think it’s very important that it gets done. Becoming a private bank again and competing on the quality of the executives and the board is a necessary step to remain successful.
“The bank appears to be ready and so it is a question for the Government. It would seem that there’s a reasonable external environment to go but longer term I really believe that . . . in a fast-changing model of banking you need to be able to move at speed all of the time and make decisions that are supported by your investors. Majority private ownership.”
He reckons the Government needs to “go twice” with share sales to get to a majority private ownership position. How long to get to that position?
“Hard to say. In a highly receptive world you could go again next year. I wouldn’t see any reason why not. Maybe middle or late next year.”
With the Government planning to open up the share sale to retail investors, might Duffy be interested in buying some AIB stock?
“It’s such a brilliant bank and if I was to believe at all in my legacy then of course I’d have to buy shares,” he said, with a chuckle.
