Reformation or refactoring of banking is the Holy Grail of the Fintech Revolution. Do that and the revolution is a big deal. Get nowhere near and its all rather marginal. So-called challenger banks have ended up rather same-y. Will “App-only” banks end up going down the same route forced my micro-regulation and micro-supervision into the same tight mould. Or will they somehow remain within the constraints of the mould but somehow break it at the same time?
Its that paradox that faces Tom Blomfield CEO and founder of Monzo Bank. (and co-founder back in the day of GoCardless who were on the show in LFP046) A long way towards full authorisation as a bank will they become merely “me-too” or will they refactor banking as we know it?
I have been an interested spectator on the sidelines for come time wondering which way the ball will bounce. At Lendit Europe 2016 I finally succumbed and took one of Tom’s pre-paid Mastercards – not least as which they offer wholesale exchange rates abroad and I was just off on holiday. It’s actually quite cool and more useful than expected. Certainly one gets a clear idea of what its like to feel like the business is really focusing on you as a customer-centric organisation with great design and service.
But back to the big picture – will Tom change the mould or will the mould change Tom?
Topics discussed include:– espresso martinis
– Tom’s long relationship with the internet and business from early teenagerdom through university and onto founding two successful modern Fintech startups
– the importance of the Social Network as an inspiration for a generation who were the last to have been told that the interweb was kind of a hobby not a career – Oxford University Entrepreneurs were only 10-15 people in mid-2000s [’03-’08]
– Silicon Valley and Y Combinator
– Monzo started February 2015
– B2C versus B2C banking decisions – “how to do 10x better” – pros and cons of choosing one or the other for a Fintech target market
– “people don’t switch consumer banks as there hasn’t been a viable alternative to date” – “removing the warts of retail banking may give a 1.5x improvement in experience”
– “what does the future of retail banking look like?” is the larger part of the equation
– doing financial stuff for folks can be fitted in to non-regulated structures, into being an e-money issuer as well as being a bank – this progression is increasingly expensive and onerous. So why choose a bank?
– Tom’s rationale for getting a banking licence – “an incredibly onerous process” – theory vs practice, multiple benefits of being a known form, clarity of constraints (versus eg more opaque restrictions from commercial banking partners who tend to gold plate the regulations) – cf Simple and Bank 26 in this context
– “having your own licence puts you in control of your destiny”
– emotional benefits of being a bank with journalists and customers
– relying on partner banks implying you are only ever a reseller
– “banking is broken due to a misalignment of interests (between customers and bank”
– the switch in mentality from the current producer-based banks (sell their products, gather assets) to consumer-based bank – not so interested in traditional approaches to banking but “offering a financial control centre to solve customers [financial] problems”
– the importance of data in doing this well
– the oligopolisation of the microeconomy as leading to increasingly producer-based organisations; the interweb/smartphone as flipping that around to empower consumers
– a case study of business expenses as an example of solving a friction point and the potential for automating it even more
– loyalty cards – “what is Monzo went and collected your points automatically and refunded them for you without you having to any admin whatsoever?”
– this model as “consumer financial support” rather than “monetary creation and maturity transformation” as the core of this new concept of banking
– “we want to utilise the data and identity to help solve peoples’ problems” – the Googles, Facebooks and Amazons aren’t really leveraging this yet
– there is no term for their model yet – all terms don’t fit the bill
– the new technology leading to the opportunity to solve new problems in new ways
– making profits as a new imperative in the Fintech world
– Monzo’s card freezing visuals in the app as very cool [ha!]
– Monzo’s roadmap:
- prepaid mastercard – 80,000 customers – from zero a year ago (!!) – they expected 4-5,000 customers; the current demographic (“the unifying characteristic is they live their life on a smartphone”)
- early 2017 a current account – this should take them to break-even
- 2017-18 the marketplace model
– time of interacting with a provider (“convenience”) as being as important as price (Amazon qv)
– they are eyeing 1,000,000 customers as their key target
– detailed focuses for 2017: price comparison as a focus; retailer loyalty and discounts; investor products
– they are recruiting for a Head of Partnerships/Marketplace – see Monzo Careers for this and other career opportunities
– international expansion thoughts inc. the recent announcements of the US regulator to give Fintechs full banking charters
And much much more 🙂
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