Banking needs to change. And it won’t come from within. In the same way that the inventor of the motor car wasn’t the best horse breeder and the refrigerator didn’t come from the best ice transporter. Often, it’s the outsiders who have the best ideas for the future. The genesis for our product came from this very belief. How do we get banks to operate more like a utility and get new providers to focus on customer choice and customer experience? And so Banked was born.
Fundamentally I believe in the power of start-ups. Entrepreneurs with little more than an idea and a dream, but with a bucket-load of energy, enthusiasm, can-do attitude and, most critically, completely new thinking. Their focus from day one is getting a customer. They will do everything they can to get you to use their product and so strive for something much, much better than the status quo. It’s hard to do that in banking because the barriers to entry are so high. Regulation and capital are two enormous hurdles before you can engage with a single customer. It makes it impossible to fail fast, innovate and iterate. These regulations are also designed to constrain behemoth organisations, so companies starting out can be swept up and trampled.
Most companies are subject to normal market forces that for the most part ensure the customer is the focus; a constant pressure to delight the customer lest they go elsewhere. Yet this does not apply in the banking sector to the same degree. Nobody switches their current account, so banks don’t care about customers. Instead, they care about their balance sheet, and the regulator, but little else. Anything they do for the customer is because the regulator has told them to do it, Open Banking being a case in point. There may be more than the big four banks out there, but there may as well not be. Banking is undoubtedly an oligopoly.
It is well documented that current accounts cost a significant amount of money to run. Yet the banks give them away for free, transferring those charges to other products. If your local shop gave away milk and bread for free, you’d be more likely to stick with them. But how do you start a bakery if the shop is giving bread away for free? It’s anti-competitive, so it wouldn’t be allowed. And how do you get funding to start the bakery when you need a license before you can sell a single bread roll? Then you need a team, a final product, and money before you can even apply for that license. If you don’t get your authorisation, what then? Few other industries have walls this high.
For banking to change, it needs to be unbundled. Banks currently occupy the entire vertical: capital, regulation, technology and customer experience. Banks do some of these things well. Capital and regulation, for example; technology and customer experience, not so much. We need new technology providers for new products and services to be built, critically by new firms and, more importantly, by more firms. There must be choice for the customer and pressure on everyone in the supply chain to do better. We need true competition. ‘Open Banking’ is the regulatory force needed to start this change. And no matter what anyone tells you, the impact is going to be huge.
We get asked all the time about what the killer use cases are for Open Banking and our platform. We have some. Indeed, we’re building some and I think they’re game changing. But what I’m most excited about are the things we haven’t even begun to think about yet, from someone out there with an idea that is just about to burn bright.
As a better writer once put it, we are all in the gutter, but some of us are looking at the stars.