Brett King: «Movenbank to Revolutionize Banking Industry»

Brett King is the author of the best-selling book BANK 2.0 and the founder of the mobile-only bank Movenbank. With Movenbank, the US’ first mobile-direct banking proposition, the founders are planning to revolutionize the day-to-day banking experience: there are no cards, no paper work and no physical branches.

Movenbank is planning to launch this year. There are many banks in the US – why should customers choose you as an additional bank?

Brett King: Our service is unique. We are a totally new way of connecting with your money day-to-day. Right now, no bank is equipped to provide this level of service.

Most banks make their money through customer ignorance on fees, and how much they are charged when they use credit facilities like overdrafts and credit cards. As a result, banks don’t really help you save – beyond providing a savings account. At Movenbank, however, we help you understand how you use your money everyday, and help you find opportunities to save a bit more each day. And when you do, we reward you. The more you save, the better your financial health, the lower your fees and cost of banking is with us.

Movenbank is mobile-only. Are there enough retailers and ATMs that are contactless-enabled to get Movenbank into the profit zone?

There are around half a million contactless point of sales (POS) in the US, but that is growing very fast. Three cities are already very well catered for – namely New York, Austin and San Francisco. Originally, these locations will be our primary focus. New York will have around 900 ATMs with contactless capability by the end of this year.

We expect that half of the retailers in the US will have contactless capability by 2014. We know we are a little ahead of the game, but we are not a follower. We know mobile payments are coming fast, and we are specifically building a customer experience around that reality.

How many customers do you need to be profitable?

We only need around 30,000 customers doing one transaction a day. We have already got a great head start on that with pre-registered customers, and we expect that within the first year we will be profitable.

Which advantages and disadvantages do you see in banking without a banking license?

The advantages are that we are investing primarily in the customer experience rather than in a charter, so we are able to do a lot more for our customers than if we went the traditional route. A banking license is not a differentiator, there are after all over 7,000 of them in the US. What makes us different is our engagement model.

As we grow and scale we may need to consider a banking license to provide the most competitive pricing, but our partners have an excellent core banking capability, so we are happy to outsource the core banking activities to them for now.

Movenbank plans to use Facebook and other social media channels in a variety of ways. Even your own credit scoring system CRED will be influenced by the userʼs social media behavior. Could you briefly explain to us your social media strategy?

What we look at is behavior as an indicator of financial health. Primarily, we are looking at the way you spend, save and live and the way that informs risk. You can influence your CRED score the most by being careful about paying your bills on time, and by improving your savings to spend ratio. However, we also reward customers with strong social networks, primarily because of referral potential.

Customers who tweet about us, or refer us to their friends networks should be rewarded. In days gone past we have often referred to mechanisms like this as «member-get-member» promotions or similar, we have just turned that into a real-time mechanism which has direct influence on the rates you get and the fees you pay.

In Europe, there is a fierce debate about Facebook user data being used to decide on usersʼ creditworthiness. Do you fear an opposition to your social media integration plans because of data security reasons?

I think it is a mistake to think of Facebook data as a threat to security, it can actually be the opposite. The reality is that the type of data exposed on social networks is already pervasive, it is out there and no amount of warning customers about the risks of identity theft and so forth is going to actually reduce the data footprint of customers today. The question really is how is identity shaped in a data rich world?

The reality is that the old mechanisms of identifying an individual like date of birth, mother’s maiden name, address, social security number and so on are just no longer as secure as they once were. Any financial institution who is solely reliant on this type of data moving forward will be inviting identity theft, fraud and security exposure. What we need is actually a more robust identity framework.

At Movenbank we are able to tell by the number of friends you have, the type of activity and interactions you have on social networks, correlating this with your normal financial activity and your traditional identity data points, whether or not a customer is «real» or a synthetic identity. In fact, our use of social networks makes Movenbank far more secure than a traditional bank’s identity verification process. Of course, we only use the data internally and never share it, so the end result is simply that we are a safer banking experience.

As an internationally invited speaker, you know the retail banking industries of many countries. Where do you see the greatest progress and innovation?

I can’t single out one country who is a clear leader. In many ways the emerging economies of China, Indonesia, and so forth have the opportunity for faster growth around mobile and tablet banking, which will be the dominant form of banking in less than 5 years. From a regulatory perspective, the EU, Hong Kong, Singapore and Australia are a little better prepared for progress. The US is now over regulated in many areas, and significantly behind in other areas like credit card infrastructure to support chip cards (EMV). Generally I would put Australia, Singapore and Brazil as having the best mix of technology innovation and regulatory involvement overall, but even then results are spasmodic.

Globally I would point to Philippines and Kenya as great examples of unbanked transformation. Around 40% more of the Kenyan population have been «banked» in the last 6 years as a result of M-Pesa – this is phenomenal progress and the fastest growth in core banking capability for the population at large that we have ever seen.

With 50% of the world not yet banked, the real growth in the next 10 years will be banking through simple, cheap smartphones. This will be the world’s bank account. Economies heavily reliant on branch infrastructure, physical customer due diligence (KYC: «know your customer») and other such holdovers from the traditional banking world will find themselves heavily penalized in the growth stakes.

How innovative are Swiss banks in your opinion?

One of the biggest problems in Swiss banking is the perception amongst Private Banks that things like Internet banking and Mobile banking are for general retail banks, but not for Private Banks. The shift in consumer behavior is happening across the board and in many ways high-net-worth individuals are amongst the earliest adopters of new technologies like tablet and mobile. In this way, the Swiss banking sector at the top end is now in real trouble from a customer engagement perspective. The old days of the private banker are under significant threat.

Where do you see Movenbank in five years?

I hope by then we can claim to be one of the fastest growing financial services companies in the world, with an extremely loyal and delighted customer base.

July 5, 2012

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