My new business bank

Last year I wrote about the lack of innovation in business banking and someone must have been listening! Last week my Tide Business MasterCard arrived.

Tide is technically a prepaid account but operates like a business bank account with a sort code, account number, direct debits, Business MasterCard and many other trappings of business banking (you won’t get an overdraft because it’s a prepaid account). The big difference is that the whole customer experience is app centric. From sign up to daily use, the app is how you manage the account.

Sign up was easy via the iOS app with identity verification based on taking a photo of driving licence or passport plus background electronic checks. Charges are reasonable; there are no monthly fees, MasterCard transactions are free and other transactions incur small charges.

MasterCard transactions appear instantly in the app with none of the delays associated with legacy bank apps. All transactions are categorised and card transactions can have comments and attachments added to them. I would like to see more transaction metadata, along the lines of Monzo.

The app has a tab called Toolbox which so far contains two interesting features you don’t see in a legacy bank app – invoicing and API access. Invoicing lets you create simple invoices for billing your customers and API access is for developers to add third party apps. The Toolbox tab will be one to watch to see what else appears here.

Another nice feature is no FX loading or surcharging on foreign currency transactions (similar to Monzo) which makes card transactions in other currencies much cheaper than those with the usual suspects.

Tide is still in beta so there are a few rough edges – I’ve had a couple of card validation problems and card transactions coded as continuous payment authority are not yet supported. However any problems are easily resolved via an instant messenger interface in the app. Overall it’s a great start and another reason for the legacy banks to be very afraid of the future.

I won’t be closing my legacy business bank account yet but the day of reckoning for legacy banks is getting ever closer.

Originally published on DisruptiveViews.

Who’s going to pay for bank branches?

The relentless decline in the number of bank branches in the UK and elsewhere features regularly in the press. In May 2016 BBC News stated that 600 branches had closed in the previous year. It’s no surprise that customers are using apps and online for managing their banking and using branches less and less; it’s more convenient, it’s immediate and the service is often better.

So who still uses bank branches? The declining number of people who don’t have smartphones or computers, retailers who still handle cash, customers when the bank insists on a personal appearance, e.g. to open an account. I only ever use a bank branch when it is impossible to complete the task in app or online, like when someone inconveniently send me a cheque.

So what does the future hold for bank branches? For some banks, especially the new digital banks, it’s no branches. Another model that works well for Handelsbanken is small branches without counters that deliver a personal service without the overheads of traditional full service branches. Where new banks want to offer a limited counter service, some of them are looking at using Post Office branches.

The challenge for the legacy banks is how to pay for the overheads of their branch networks when only certain groups of customers are using them. Subsidising the cost from non branch using customers risks making those customers’ products uncompetitive against new branchless challengers. Loading the costs onto branch using customers will in many cases hit the less well off, as the branch closure programme already does.

My view is that the banks are avoiding tough decisions and ‘banking’ on the decline of cash and the increase in smartphone and online usage to solve the problem over time. This will eventually allow them to close many more branches and run all branch based activity through a small number of branches. It will be interesting to see which legacy bank is the first to accelerate branch closures to get to a much smaller network and accept the loss of some customer segments.

Originally published on DisruptiveViews.

Where’s my new business bank?

One of the tasks on my to do list is to look for a new SME business bank for day-to-day transactions. Currently I use one of the legacy banks and its products and service are, well, legacy. It’s lacking in both service and innovation and offers a dreadful mobile app.

What I want is a bank I can rely on, with a decent app that lets me open an account and manage everything from my iPhone and iPad. I’m not interested in switching to another legacy bank; that just feels like rearranging the deck chairs on the Titanic.

In consumer banking there is some activity with a number of new digital banks launching current accounts soon. However business banking has been very quiet; although a recent conversation with an acquaintance eluded to something interesting and innovative in this space but unfortunately not imminently.

One ‘bank’ that caught my eye is Holvi. The team there is doing some interesting things in other European markets and plans to launch in the UK soon. Holvi is technically a prepay account but operates like a bank. In addition to payments, Holvi provides invoicing and business reporting – no more wading through a pile of receipts each month. The account comes with a business MasterCard for everyday spending.

A key area for banks to fix is customer sign up which needs to be close to friction and frustration free. My recent experience of having to fill in a long signature mandate form and then put in a branch appearance armed with passport and driving licence is not the future. The work that Veriff is doing with face comparison algorithms to create a simple identity verification process is a useful pointer to a customer centric process that simplifies and speeds up customer acquisition.

The ideas are out there – it just needs people to start pulling them together in the UK.

Originally published on Disruptive Views.

The opportunity for ‘new’ banks (and don’t try doing business on a bank holiday)

There’s lots of talk about how big the opportunity is for new banks to do banking differently but what really matters is the experience for customers day-to-day.

My colleagues at Disruptive Views have first hand experience of the pain and obstructionism in opening a new business account with a legacy bank. Recently I was reminded how bad customer service can be, from another legacy bank; and this is one that likes to think of itself as a challenger (the only thing that’s challenging about this bank is using them!).

An elderly relative had asked me for some help with a bank account because they wanted to transfer some funds to another bank. They had phoned the bank to discuss this and the result was two letters with instructions to set up online banking. Presumably this was the bank’s suggested way to transfer funds from the account. It wasn’t what my relative wanted but as it seemed a way to resolve the problem they duly set up online banking and made the payment to the other bank. All seemed well and the transaction was confirmed, however a couple of minutes later they were presented with a bland message stating the account was now locked and to call the online help team. Puzzled they duly called the number, experienced the ‘standard banking telephone wait time’ and eventually spoke to an advisor. The advisor took them through security which consisted of asking for their name and date of birth (bit worrying that one) and then stated the account was now locked for fraud checking. Frustrating but it’s good the banks try to keep an eye on these things.

So presumably the fraud team were actively on the case and the account would be unlocked shortly? But no, they don’t work on bank holidays (well why would they, it’s a bank holiday). Apparently they would look at it by the end of the next day and if they needed any further information they would be in touch. I shared my ‘disappointment’ at the slow response times and was asked if we’d like to register a complaint, except that the complaints people don’t work on bank holidays either. Anyway, the next morning the account was mysteriously unlocked with no communication from the bank and the transaction was completed.

One thing that struck me about the whole experience; the most secure part of the process, using online banking, was the bit that caused the problem. The least secure bit; the phone conversation, was what apparently resolved it. The whole experience left me with an uneasy feeling about doing business with that bank and their overall level of (in)competence.

So yes, there’s a huge opportunity for new banks that can get the customer experience right.

This post first appeared on Disruptive Views.

A week with Mondo

Last week the nice people at Mondo signed me up for the alpha of their new payments product. Mondo is one of the new generation of companies applying for UK banking licences who aim to fundamentally change the way we bank.

Mondo iconWhat makes Mondo different from other ‘digital challengers’ is that rather that wait for their banking licence application to be approved and then launch a product on an unsuspecting public, they have launched their ‘banking’ app in parallel with their licence application. Mondo wants to use customer feedback to help build and evolve their product before they formally launch as a bank. Mondo has done this by launching a prepaid account with a contactless MasterCard via the prepaid card issuer Wirecard Card Solutions under Wirecard’s emoney licence. When Mondo’s banking licence is approved and they become a ‘real’ bank they will provide their own bank accounts and issue their own cards.

Mondo notificationMondo’s aim is to put consumers in control of their spending using the power of their iPhone (Android et al is coming later). All transactions appear instantly in the app whether it’s a debit card top up to add funds to the Mondo account, an ATM cash withdrawal, a contactless transaction, a chip and PIN transaction or an online transaction. Transaction data includes merchant details, geolocation details, plus historical spend data for that merchant. There’s also the option to add extra data including a note and a copy of the receipt to each transaction.

Mondo cardAlthough the app is currently in alpha it works amazingly well. As soon as I make a purchase I receive a push notification on my iPhone or Apple Watch with confirmation of the transaction details. Over the past few days as I’ve used the app, additional features have been unlocked – a nice way to introduce the user to more functionality. Despite being an early release the app is considerably more engaging than legacy bank apps. A neat feature is the ability to ‘freeze’ my card temporarily so it can’t be used; great for people who mislay their cards and then find them again. When I freeze my card the app image of the card is covered in ice and the button underneath offers to defrost it!

Mondo defrostSomething else that appeals to me is the ability to add funds to my account using Apple Pay, making topping up friction free. If you haven’t yet paid in app using Apple Pay, you really haven’t seen the future!

Mondo is definitely one to watch and if they keep up their momentum the legacy players need to be looking over their collective shoulders; it’s not looking good for them!

Originally published on Disruptive Views.

The decline of the bank branch

According to the Campaign for Community Banking Services the rate of UK bank branch closures has accelerated, with banks on track to close around 650 branches this year, following 500 in 2014 and 222 in 2013. The report uses a number of different metrics to suggest that the decline in branch numbers is a completely negative phenomenon.

The banks are closing branches because their usage is declining in favour of technology. Whilst banking apps tend to be quite limited in their feature set (legacy banks have yet to work out how to transform their businesses into digital centric organisations), they do enhance customer engagement. As the banks improve their online account sign up processes the need for branches declines further.

Cash handling for shops is an issue when branches close but also an incentive for shops to focus on card payments. In smaller towns many retailers are reluctant to accept cards because of their perceived cost to the business (I’ve had many conversations with small retailers about the benefits!). However the fall in interchange rates should reduce this concern, provided retailers understand it.

A quote from the CCBS report is telling:

“Neither Santander, TSB nor new entrants like Metro, Handelsbanken UK and Virgin seem interested in filling the voids being created by the Big 4’s closures.”

The reason is clear; the challenger banks are not interested in opening lots of branches because branches are not the opportunity in retail banking.

From the perspective of helping banks reduce their cost base and reorientate their business towards a digital engagement model the closure of branches is both logical and a positive reflection on the move to digital. New app centric challenger banks will put increasing pressure on the legacy banks and unless the legacy banks adapt to the digital world they risk being left with an increasingly unprofitable customer base.

So now everyone’s a payment expert!

Last week I received a letter from Capital One regarding my cashback credit card. The letter indicated I would no longer receive cashback on my card; something of a disappointment as it was worth a few hundred pounds last year. The explanation of the change read “Changes in our industry mean it is no longer sustainable for us to offer cutback on your card. This is because the fees we receive when you use your card are reducing”. Seems fair enough; Capital One are earning less money so something has to give and it’s my cashback!

However, heading over to the EU website things start to become a little clearer; “The European Commission welcomes the adoption by the European Parliament of a Regulation capping interchange fees for payments using consumer debit and credit cards and improving competition for all card payments.”

In fact I was aware this EU proposal had been under discussion for a couple of years and we can now see one result of this market intervention. The intention is apparently to encourage merchant adoption of card payments and reduce the prices merchants charge consumers but my cynical side questions how well this will work in practice!

  • Am I really going to pay less in stores or will those stores keep their savings?
  • How can the EU possibly know the correct rate for interchange?
  • How does cutting card margins help banks offer attractive and competitive products in the market?
  • How long until banks impose annual fees on most credit cards?

As an aside, apparently the change still requires formal approval by the Council of the EU but Capital One clearly thinks it’s inevitable.

Most American Express cards fall outside the terms of the cap as they don’t use interchange fees. Here’s hoping the cashback on my Amex card survives!