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Why Banking Should Be in the Palm of Your Hand

Bank 2.0

Bank 2.0Brett King was an author before becoming CEO and founder of Moven (pronounced like moo ven). In 2009, he penned Bank 2.0, which he calls a manifesto for the future of banking. In that book, he explains how technology was going to change banking. While he had thought about starting a bank similar to what he was describing in the book, he hadn’t done so until he began promoting the book.

“I was on the road doing the book launch in the U.S. in July 2010,” he said. He had already promoted it at the Asia Banking Summit before going to New York then Los Angeles. He met with Josh Reich and Shamir Karkal of Simple, who invited him to work with them on a simiar project, but he turned them down. “The idea for Moven crystallized in August while I was in Los Angeles for a book signing.”

King’s idea was to put banking in the palm of customer’s hands, so he created a mobile app that allows them to open a bank account and manage it right from their smartphones.

Why Go to a Bank?

Bill Gates famously opined, “ banking is necessary, banks are not” in 1994. King’s mantra is similar: “Bank branches are not necessary. The utility of banking is required.” With that idea in mind, he asks, “Why go to a bank when you can just dowload it into the palm of your hand?”

When he presented his idea for a mobile banking application to venture capitalists, they told him that banks wouldn’t go for it. That only confirmed for him that mobile was going to disrupt banking. A few hours later, he started Moven Bank. A year after that, the company dropped “bank” from its name and simply became Moven. In 2011, he put a team together and got going. Two years later, the app launched and immediately became the No. 1 app at Google Play.

Moven raised $2.5 million in its initial seed round. A second seed round produced another $2 million. Series A raised $8 million, and Series B netted another $10 million. To date, the company has raised $24 million.

Last year, the company signed a deal with TD Bank to license its technology. Since launching, Moven has reduced customer spending by four to eight percent per month, and attrition is near zero.

“The mobile tech we’ve licensed as a mini-app that complements their own,” King said. “It bears the distinction of being the No. 1 mobile app in Canada with 1.4 million users.

The Smart Bank Account

Moven falls into the category of neobank, a terms devised for banks with no physical branches. Other neobanks include Portland-based Simple, Canadian neobank GoBank, UK-headquartered Atom Bank, and Monzo, also based in the UK. Moven was the first bank of offer an in-app account opening process. Users download the app, sign up for an account, receive a debit card in the mail, and then start banking.

Beyond that, the way Moven helps its customers save money is unique. By giving immediate feedback to customers on transactions, they see themselves affecting change in behavior. Before they’re done signing a merchant receipt, they’ve got a notification on their phone that tells them how much money they’ve spent in the current month on similar transactions.

For instance, if they’ve used Uber several times in one month, Moven will let them know with each transaction how much money they’ve spent on Uber rides.

“The best way to change spending behavior is to make people aware of how they spend,” King said.

By contrast, many banks and finance apps will provide similar metrics on a monthly basis. With Moven, customers get it in real time. King says this subtle change in reporting makes people more aware of how they spend their money, so instead of buying daily lattés, they’ll skip the latté two days a week and save that money instead.

Customers use Moven to pay bills, spend money on retail purchases, find ATM machines and withdraw cash, and almost anything they can do at a traditional bank. As I write this, the company is rolling out its first two credit products:

  1. Emergency Credit – Looks at customer behavior and, if a customer normally spends $400 when shopping at Whole Foods, if they only have $200 in their account, Moven will front them the other $200 in what King calls “contextual credit.” The terms include a fixed fee for 30 days, which is less than what the average customer pays for an overdraft fee, King said.
  2. Wish List – The other credit option is when a customer wants to buy an item on their wish list. So they can create a Moven stash and put money aside for a purchase – let’s say an iPhone. With built-in intelligence, Moven encourages the customer to save money toward the purchase. When the customer has saved a certain percentage of the necesssary purchase price, Moven will offer the rest on credit at competitive rates King said are better than credit card terms. At present, customers can’t buy real estate or automobiles, but they can consolidate debt, pay for student loans, and make retail purchases.

Moven is working to expand its list of merchants for in-store credit arrangements to help its customers make their wish list purchases. King said they’re not trying to be a bank. Rather, they offer a smart bank account that helps customers save more money long-term.

How Moven Assesses Creditworthiness

People most often use their credit cards when they go to the doctor or the grocery story and don’t have enough money to pay for the bill. They know they’ll have the money in a few days, so they use their credit card to make the purchase and pay it off when the money arrives. Or keep it revolving and pay the interest rate. But King said 45% of American consumers are declined for a credit card. He calls it a broken system.

Another difference between Moven and traditional credit cards is that Moven doesn’t judge creditworthiness by looking at the customer’s FICO score.

Instead, they look at spending behaviors.

“If you’re a higher credit risk,” King said, “you won’t see an offer for emergency credit. If you fit our credit profile, you will.”

Customers who are approved can save a lot of money on overdraft fees and credit card interest, he said. Interest on a $250 grocery bill, for instance, might only be $7. King said the average overdraft fee in the U.S. is around $30. Customers who pay their bills on time, have good cash flow, and have regular salary deposits into their accounts get approved for credit more often. Those are the signs of a good credit risk with Moven, King said.

Where the Real Money Comes From

King said most Moven customers use the app five times or more per day. The most active users are using it at least twice a day. While interest on customer purchases is making the company some money, it’s making its biggest returns on licensing the technology to other banks. That includes TD Bank in Canada, Westpac in New Zealand, and banks in Indonesia and other parts of Southeast Asia.

Through licensing and other revenue, Moven has a recurring revenue of $5 million per month with a quarter million end users in the U.S., 1.4 million in Canada, and another quarter million in New Zealand. King said there will be 5 million users in Indonesia by the end of the year. There are 10 million total users on the platform on a geographically distributed basis, and King expects that to double next year.

“Relationships with banks speeds up adoption,” King said. “We can license our technology to banks at a fraction of the cost it would take them to build it for themselves, and at a fraction of the time.”

Banks would have to spend $15 million and take two or three years to build their own smart technology. With Moven, it can be deployable in six weeks and costs much less.

The Future of Banking

Since starting Moven, King has written other books. His ouvre includes Bank 3.0, Breaking Banks, and Augmented. He is working on Bank 4.0 right now.

“If you look at the development of banking in the last 100 years, people are being pushed further away from needing to physically go to a bank.”

King sees that in the development of self-service ATMs in the 1980s, the rise of Internet banking, and mobile banking apps. In the future, he believes banking services will be deployed through Amazon Echo, smartglasses, other wearables, and similar technology. It will eventually be embedded as a technology layer in everyday devices people are currently using.

“In the past, when banks deployed a solution on technology, they owned it. Today, the major technologies customers use are not bank-owned technologies,” he said. “Mobile is the No. 1 technology people use for banking today, and banks don’t own that technology.”

In other parts of the world, like China, King said they’re a decade ahead of the U.S. because they don’t have legacy banking systems to build upon. So they’re going straight to the non-bank technology and creating more agile customer-centril solutions faster. In the use, most customers are still inserting their credit card numbers into their smartphones. He sees the U.S. catching up to the rest of the world by the end of the next decade.

“All banking products we have today will disappear and be replaced by behavior and contextual experience-based products,” King said.

When that happens, consumers will be able to buy a car, a house, save for retirement, and virtually everything else financial through an app in their smartphones. It’s already happening on a small scale today, but it won’t be long before it will be ubiquitous.

Authors:

Allen Taylor
Allen Taylor

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Allen Taylor

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