IBS Journal May 2016
41
TB: This is the best analogy I can give you. I was talking to a banker recently, about how Facebook has become such a large part of the lives of a certain demographic. When I was at university and it launched it was a tool for a very large part of your life; it was your entire social life, and now it’s your contact list. Your contact list never really did anything; Facebook became this huge ecosystem around it.
Mondo has a similar relationship to your current account; your current account is a static list of debits and credits, it’s three or four days out of date. Mondo is trying to be everything around your money. For example, in time it should automatically accumulate all your loyalty points from shopping at Tesco, Sainsbury’s etc. You won’t need to do a single thing. It will be able to record where you’ve been on the TfL network and will tell you if you forgot to touch in or touch out, so you can claim a refund. If you go for dinner with friends, you can split the bill with a single tap.
Traditional bankers think about products and interest rates, normal people don’t think like that. They want to get on with their lives, only a small proportion of people switch accounts for the switching bonus. It’s under 2% of the population who do that; the other 98% don’t care enough. Mondo is trying to appeal to those people, to give them a tool that helps them live their lives. It’s almost not a bank at all; the banking bit is critical but all the stuff around it is really important.
ST: How will you make money?
TB: The only thing the customer will pay for is an overdraft. If you are running short of cash, you need £500 to fix your boiler, we can give you an overdraft, the difference being we can tell you up front how much it’s going to cost. Contrast that with my bank; I went overdrawn last year and three weeks later they sent me a pre-notification letter of charges. How is it a pre-notification when it’s three weeks later? We’re honest and transparent and put the customer in control.
ST: In terms of technology, you’ve built a platform from the ground up. You have been openly critical of challenger banks that are building off established, commoditised banking IT
systems.
TB: We’re sticking to our vision. If we have a problem we can fix it in an hour or so, and we will have problems. Whereas if you
have a problem on an old third party system, you have to wait for a three month release cycle before you can get an upgrade.
I see the challenger bank market splitting in to two. You have the Metro Banks and Aldermore Banks, using a lower cost channel to sell the same old financial products more cheaply; let’s use a mobile phone to flog some mortgages. And that’s fine, you will IPO in three or four years and make a couple billion pounds. It’s a fairly well trodden path, it doesn’t change very much. There is another breed of banks who are rethinking what a customer’s relationship with their money really is. And I put ourselves in that category, along with the likes of Number 26.
ST: Is this the beginning of the end for big banks? A recent Economist Intelligence Unit report, for instance, says that by 2020 the FS sector will be shaped strongly by tech startups and non
traditional competitors.
TB: That’s a really interesting question. I was at a dinner with a bunch of the big banks recently, talking to the CIOs and innovation people about digitisation, turning old manual processes into technology driven processes. I asked what is the imperative here, do you believe you have to do this or else you won’t survive? No, the imperative today is cost cutting, rather than thinking about their whole business model. By the time they realise the threat is existential it will be too late to address that threat. It’s not too late as things stand. I think if a bank reacted now, they have huge amounts of capital and an enormous incumbent customer base. But if they do nothing, there is an existential threat on the horizon and by the time they realise it’s there it will be too late. We’ll see. It will be an interesting two or three years, I think.
There aren’t many industries where the incumbents have transformed; take Netflix and Blockbuster for instance. Branches have become an albatross around the banks’ necks. Then you have the likes of Apple coming in, who have built something really interesting on the existing Visa/MasterCard rails using NFC terminals already in place. They’re a design company ultimately.
ST: You’re one of a number of challenger and digital-first banks launching in the UK, looking to shake up the market. They’re making a lot of noise about how they do things differently. But when it comes to switching banks, there are a lot of apathetic customers out there. The Current Account Switch Service has been
something of a damp squib.
www.ibsintelligence.com
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