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RBS' Plan to Launch Digital Challenger Bank in Progress

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Per a Sky News article, The Royal Bank of Scotland plc is working actively on its plans to become digitally advanced in order to compete with other FinTech companies.

The bank has invested millions of pounds in the project which is still in the nascent stage. Moreover, Royal Bank of Scotland is said to have made deals with other FinTech lenders, such as Funding Circle, with which it works, to direct customers to lenders and other providers of alternative finance.

Certain decisions regarding date of the digital platform’s launch and its branding are yet to be taken by the bank.

The British lender seeks to create a “standalone digital bank” to help it deal with the changing banking preferences that has pushed many banks in the U.K., such as Barclays (BCS - Free Report) , HSBC Holdings (HSBC - Free Report) , Lloyds Banking Group (LYG - Free Report) , to close their branches as fewer customers are turning up. Further, it would enable the bank to catch up with other digital challengers such as Monzo and Revolut, which have been performing well, of late.

The bank is said to have confided with only a few employees on this matter. Per the article, Mark Bailie, former chief operating officer of RBS, is heading the project.

A RBS spokeswoman told Sky News that, “We're focused on using automation and technology to deliver a more efficient banking experience that better reflects the changing way our customers now bank."

Having reported full-year profits for the first time in a decade, Royal Bank of Scotland’s CEO had underlined digitization as the bank’s top-most priority. Last month, the bank made settlement with the New York regulator over a mortgage mis-selling probe dated prior to the 2008 financial crisis. Though the bank has kept aside $4.4 billion as provisions for legal settlements, the impending deal with the justice department is expected to be a costly affair.

Shares of Royal Bank of Scotland have gained 24.9% over the past year, outperforming 13.5% growth recorded by the industry.

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space is ING Group, N.V. (ING - Free Report) , carrying a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has been revised 2.4% upward, over the last 60 days. Also, its shares have gained 12.9% in a year’s time.

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