What Is Bo? Royal Bank Of Scotland Introduces Digital-Only Bank To Challenge New Fintechs

NatWest, a subsidiary of Royal Bank of Scotland (RBS), has introduced a cloud-based digital bank designed to compete with other British fintechs and start-ups.

Called Bo, the digital service went live on Wednesday on both Apple’s App store and Google Play.

New customers will receive a Visa card and will be able to access their accounts through Bo’s mobile app.

“As we’re part of NatWest, people can rely on Bo to keep their money safe,” CEO Mark Bailie said. “But as a digital bank, built entirely on a separate cloud-based technology, Bo is also able to harness new technology and develop rapidly in line with our customers’ needs and expectations.”

Bailie added: "Our data suggests that three quarters of people in the U.K. are living financially unsustainable lives. We want to help change this."

The launch, he noted, will "help people build the habits and routines that will allow them do money better day by day and week after week so they can fund their lives and lifestyles in a more sustainable way."

The Bo app will help customers monitor their spending, allocate budgets and maintain adequate savings.

However, new online digital banks like Revolut (with 5 million users) and Monzo (2 million users) have already established a large footprint in Britain and Europe. Monzo has already entered the U.S. market, with Revolut planning to follow suit.

Another big lender, HSBC (HSBC) launched its own standalone digital money management app in 2018, which gained 300,000 subscribers in the first year.

Raman Bhatia, HSBC’s head of digital for the U.K. and Europe, told CNBC that trust remains the biggest issue for bank customers.

“Customers do have a very high degree of trust when it comes to money, their deposits and their identity with respect to established banks,” Bhatia said. “And banks need to work harder than ever to preserve that trust.”

Moreover, the new fintech entrants have failed to make a profit. Indeed, Monzo, Revolut and U.K. digital bank Starling are all expected to generate losses until at least 2021.

The Consumers' Association of the U.K. noted Bo doesn't pay interest, lacks the ability to pay bills or offer direct debits and cannot accept direct deposits from employers.

Bailie acknowledged that to be successful, Bo would have to have low margins, high volumes and would need to attract a large number of customers.

In addition, Royal Bank of Scotland needs the business. The Current Account Switching Service revealed the bank suffered a net loss of about 10,000 customers in the third quarter of 2019 while Monzo achieved net gains.

The Telegraph recently reported that Royal Bank of Scotland wanted to acquire Monzo in 2017 but scrapped the idea because it would be less costly to create its own digital brand.

Royal Bank of Scotland spent some £100 million ($129 million) developing Bo over two years.

Royal Bank of Scotland, which received a huge bailout during the financial crisis, remains about 62% owned by taxpayers. As such, it has spent much of the past decade restructuring and selling off assets.

Earlier this month, Alison Rose, the new CEO of Royal Bank of Scotland, said the bank will have to make “tough choices” regarding cost cutting.

“Continuing to reduce the bad costs across the bank, safely and at pace, will be critical, so we can invest further in our technology,” Rose said.