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First Direct, UK’s original challenger bank set for revamp

First Direct is to be relaunched by its owner HSBC. The UK’s original challenger bank was launched as a telephone banking service in 1989 by Midland Bank. Fast forward 30 years and its telephone and online offering is now facing competition from a new breed of challenger banks but with one key difference: First Direct makes a profit. Although the brand does not publish its own financial results separately from its parent, it claims to have been consistently profitable since 1995.

The bank has already been adding to its functionality this year. At the start of 2019, First Direct launched fdpay, a service letting customers make peer to peer payments within social media apps such as WhatsApp and Facebook Messenger. Customers use the in-app PayKey technology to tap a payment icon on the phone’s keyboard within a conversation and manage a payment within seconds without having to open the banking app. fdpay uses the UK banking industry’s Paym service – where no account details are required to make the payment – just the beneficiary’s mobile phone number.  Immediate payments up to £350 a day are possible. fdpay was built in partnership with the FinTech PayKey.

Also, in Q1, First Direct introduced fdesign Mobile to its banking app, enabling customers to test new ideas, prototypes and projects, and provide feedback. fdesign Mobile means First Direct is able to share updates with ‘fdesigners’ in a continuous two-way conversation; reviewing the feedback they provide and making decisions based on what they think and feel.

Now the bank is planning further changes over the coming 12 months. First Direct had already hinted at plans to bring a new banking model to market late this year, by integrating financial management tools and third-party products and services from across the market into the First Direct app.

Now The Financial Times has reported First Direct CEO Joe Gordon as saying, “We have a proud heritage of being the original challenger bank back in 1989… now we’re making a real digital pivot to tackle the environment as it is now.”

The bank, which has 1.45 million customers, is working on an AI-based ‘financial autopilot’ capable of making personalized recommendations and an in-app marketplace. First Direct also plans to let customers with troubled credit histories open accounts. Gordon said the bank is working with a number of FinTechs including open banking specialist, London-based Bud.

In the meantime, HSBC is working on a separate digital business banking project, known as Project Iceberg, which was made public in September 2018 when press reports surfaced claiming that HSBC had recruited more than 100 people to work on the project. The new project is reportedly targeting SME customers while a revamped First Direct will continue to have a consumer focus.

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