You wait years for one new bank to launch and then a whole bunch tries it at once. However, Mondo Bank feels it will be the only one to stand out from the crowd. Patrick Brusnahan speaks to its CEO, Tom Blomfield, about the mobile-only bank and the path to launch
Atom. Fidor. Starling. These are just a few of the new challenger banks attempting to enter the British market. A common differentiator is the focus on being a ‘mobile-only’ bank with no branch presence. Why are so many new entrants taking this approach?
Tom Blomfield, chief executive and co-founder of Mondo, believes it to be a combination of several different factors.
Talking to EPI, he says: "The thought process behind Mondo was really a combination of three or four trends. Massive smartphone penetration has led to customer expectations of digital services transforming. This is an age where you can click a button on your phone and a black cab turns up in two minutes or you can go onto Amazon, order any product in the world and it’ll arrive the next day. This real-time access to information and total control has transformed the way people think about everything. Banks have not reacted to that in any sense whatsoever and, to be frank, they suck."
As an example, Blomfield describes how his bank statement has changed over the years. He describes it as a ‘static list of transactions’ which was first delivered via post, then the bank’s website then smartphones. He considered that to be ‘not transformation’, but merely the same product on another channel.
Another crucial factor has been the shifts in the regulatory practices in the United Kingdom, shifts that Blomfield sees as ‘positive’. Becoming a bank is ‘not a simple process, but achievable now’.
However, the key factor according to Blomfield is the ‘personal frustration’ that banks can cause.
He says: "The only time I heard from my bank was an e-mail a month ago saying ‘Here is your pre-notification of charges. The e-mail says to go to the website to view it and it said two weeks ago, I exceeded my overdraft. It waited two weeks to tell me and now it’s charged me.
"In a world where we have these smartphones where we can send information in milliseconds 24 hours a day, why are they waiting two weeks to tell me they’ve charged me? Why aren’t they telling me three days before? I can speculate why they do that, but I think we deliver something that really pulls banking into the 21st century."
So how is Mondo different?
Mondo is fully incorporated within a mobile app and a debit card. After any transaction, a notification comes up on the consumer’s smartphone and your bank balance is updated.
Blomfield says: "There’s no ‘Balance’ and ‘Available Balance’. Imagine if Gmail made you wait overnight to see the e-mails you received that day."
Transactions are displayed on a graph within the app to show your expenditure and income over each month. Based on spending patterns, it can predict if you will overspend in the month.
Every transaction, whether it is a purchase or a payment, is tagged with various forms of information, such as where you spent the money and into categories, such as groceries or transport. Utilising this, the app can tell you how much the consumer has spent over time on certain things and in certain places with the touch of a button.
According to Blomfield, this can lead to crucial insight into your spending. He says: "Insight is suing smart analysis of the data to tell you something. Say a transaction with an energy company, it can tell you that the bill is 30% higher than normal. Maybe I’ve been overcharged. Maybe it’s a water bill that’s leapt 100%, maybe there’s been a leak. It’s that kind of insight that can vary from that to things like you’re spending more on coffee and bagels this month.
"If it’s ten days before payday and you’re running out of money, we can turn your account or card off for free or we can give you an extended overdraft."
Data is a key area of concern for many consumers. While it can be used to the consumer’s benefit, it can also be sold off to their annoyance.
Blomfield says: "Fundamentally, it’s the customer’s data. A lot of people have got very sensitive about what data people are collecting and for what purpose. We’re very cognisant of that. If they don’t want to have that collected, it’s absolutely their choice. Secondly, once it’s collected, their own data is their own property. We might do stuff on an aggregate level, but we will not sell personal data to third parties.
"The future of personal data is not flogging it. If banks become a conduit for selling adverts, we will lose customer trust."
Mondo Bank’s system is built from scratch to ‘be fit for purpose’, something that large retail banks cannot do.
Blomfield says: "Banks cannot do this stuff. Their systems date from the 1970s. A smartphone is more powerful than the mainframes from the 1970s. It’s not surprising they can’t deliver this stuff. They are creaking under the burden of that legacy. Many banks spend over a billion a year to keep their legacy software alive."
Ready to launch?
There a few hurdles left before Mondo fully enters the market. If all goes well with the regulators, the bank could be in the palm of consumers’ hands within six months. This is if the funding is there, Blomfield stating that around £15-20m more is needed.
However, who will join Mondo Bank? Switching bank is easier than ever in the UK, yet the switching rate was a dismal 2.4% in 2014.
Blomfield says: "The reason I think people don’t switch is twofold. There is no differentiation between banks. Even with the new challenger banks, I don’t think they’re truly differentiated. You’re going to get screwed by NatWest or Lloyds, choose your poison.
"Also, getting a bank account is an incredibly painful process when you compare it to installing Whatsapp or signing into Facebook. If you can make a product that is truly differentiated and loveable and you can make signup 30 seconds, you’ll see a very different changing rate. Our biggest focus is making something people want."
Blomfield concludes: "We’re really focused on making something that a few people love rather than something mediocre that people will be ambivalent about."