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App Banks are following many courses with many motivations. Who better to guide us through this ever more complicated maze of motivations and destinations than Ricky Knox, Founder and CEO of Tandem Money/Bank and serial entrepreneur sans pareil.
inter alia (alia being things like Insead) Ricky founded GSM Systems in 2003 (where he remains non-exec chairman) which now has partnerships with >170 mobile operators in >70 countries.
In 2005 he founded Small World Services taking it from inception to a Top10 global money transfer businesses with nigh on $5bn annual turnover.
Not content with these laurel leaves he founded the well-known Fintech Azimo in 2012 which does remittances to 198 countries globally, has half a million customers and more than 270,000 cash pick-up locations worldwide.
In 2015 he founded Tandem Bank, which (another inter alia) bought Harrods Bank – which certainly makes it a standout in Fintech as a whole, let alone in the App-Banks sub-sector.
All of which background (and more not included!) makes him ideal to discuss whether the current crop of App Banks are going to turn into real businesses – you know those businesses that are self-supporting and whose revenues are higher than their costs 🙂
Topics discussed include:
- the genetics of entrepreneurship; Ricky’s grandfather having eg founded the Cincinnatti Bengals (!)
- in the 80’s entrepreneurship was just starting to become respectable
- the early 90’s in strategic consultancy and Silicon Valley
- blockchain cf 90s internet bubble
- the Pareto distribution and does success make success easier? “It definitely gets a lot easier”
- VC-ship being a great education in pattern recognition re good businesses and seeing mistakes other people make
- INSEAD and value of the network there
- GSM systems started with his brother
- Clarity FX, the sale of which led to funds to start other businesses
- the necessity of learning
- when Ricky enters a new industry he tries to find the one, rare, person who can explain how the industry works in 5 minutes
- what keeps a serial entrepreneur going?
- the value of a rest in the middle
- “entrepreneurship is a bloody difficult way to make money”
- “it’s definitely one of those things where you have to enjoy the game”
- the immense value of seeing it all as a game – this as a motivation plus more recently driving social benefit
- Small World remittances, now a $5bn turnover business
- UK retail banking is the largest single industry in the UK with revenues of around £53bn
- banking is not very international – eg with HSBC you have to start from scratch to open a bank account in different countries
- the lack of a truly international bank – cf tech giants where one platform fits all – is a huge opportunity
- in the UK 86% of all current accounts are owned by the Top 5
- not that many bank licences in the UK are actually aimed at the UK consumer
- most “challenger banks” founded ~5yrs ago that successfully built big businesses and IPOed are not challenging at all but rather filling niches that the big banks left behind
- the importance of differentiating between “oldskool banks that happen to have tech” and “tech businesses that happen to do banking”
- Monzo, Starling, Tandem and Atom make up the App Banks with Revolut essentially in the same category (and there are hundreds of pre-paid card providers). cf N26 in Germany (similar to the Monzo model). Revolut is the furthest ahead
- the motivations strategies and directions of all these vary – you’ll have to listen to the show to find those 😉
- Ricky’s analysis of each of the 5 app banks…
- the ratio of developers:total staff as a good measure/proxy for how “tech a bank is” [Tandem is 67/104 compared to an old bank where the ratio is faaar lower]
- “In terms of strategic advantage the mobile interface bit is only a 2-3yrs advantage”
- “in a normal business you have 90% BAU and 10% change; in tech it tends to be more like 90% change and 10% BAU”
- thus tech businesses are able to move much faster
- Revolut has the fastest development cycle having teams of 8 people implementing different products in an agile fashion in parallel
- a discussion of the bottleneck imposed by the small size of a phone screen – how much functionality can actually be fitted into it without it being overloaded. Context dependent/analysis-prompted content
- Tandem can already switch broadband, mobile phones, energy providers to improve your Finances..
- Money-making models –
- Revolut – freemium fee for service
- Monzo advertise “free and always will be free” (Tandem will not be free forever)
- Monzo/Starling’s marketplace model and challenges with that over conflicts of interest as with price comparison sites
- sell-out to a buyer esp if there is no real profitability in sight
- Starling making money from payments services
- “old-fashioned” spread between assets and liabilities – the importance of balance sheet size in this context
- Tandem’s balance sheet compared to Monzo/Starling in this context
- Ricky’s belief that balance sheet or a fee will predominate over marketplace as a revenue source in the future
- the ease of copying anything from feature to strategy
- the juju of how an app bank buys Harrod’s Bank
- insights into Harrod’s Bank and it’s integration into Tandem
- “We essentially raised money and got a bank with it”
- Tandem’s margin arithmetic and importance of the credit card product cf debit card that the other App Banks use
- “The truth is all these businesses will need to move towards balance sheet if they are going to keep a banking licence”
- Tandem as being a step ahead in this game (other than Atom who are not such a tech business per se)
- customer engagement (“The digital Nirvana”) – Revolut 30-35% customers engage on a monthly basis; Monzo 60-70%; Tandem 82%monthly active users. Atom, selling mortgages one might only look at it once a year.
- a shoutout for the new LFP sponsor Capital.com and Blue Motor Finance who have recently been named in the FT1000 as the fastest growing FS company in Europe!
- an outline of the Tandem products that might be of interest
- 0.5% cashback on any expenditures abroad
- Tandem has a marketplace and is always looking for partners as well as new customers
And much much more 🙂
Share and enjoy!