The Times really don’t like fintech. Still, there’s both good and bad in this article:
(Sorry for paywall link )
Initial thoughts:
revenue remains a problem - but was if ever going to be otherwise?
interesting point about government having taken away barriers to start new banks but not to scale them
Revolut really is in danger of spoiling it for everyone
Monzo’s “zealous fans” get a mention.
After explaining that the big banks aren’t really scared of the digital competition, unnamed sources then try to throw the digital competition under the nearest bus
It’s not clear what has triggered the article, but it’s worth a read.
“__There’s no chance that the iPhone is going to get any significant market share. No chance. __It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”
(Also, the big banks are definitely scared. They wouldn’t put up anonymous sources to brief against the challengers if not).
One of the issues I have with the article is that they have lumped all Fintechs together: They’re all different with different ethics(Whether that is good or bad is up for debate) but also two of the Fintechs mentioned have had serious compliance issues(Revolut and Metro).
Also this quote:The key question is whether you trust them with your salary or your mortgage. Would I really trust them with my life savings?”
No one bank should have all your life savings: put up to 80K in just in case the bank closes.
This is a traditional “handling” approach though. Lump your competitors together and imply that an issue with one could affect all.
It’s particularly powerful when there’s a problem with one of the cohort but which isn’t endemic to the rest. This is why Revolt’s currently woes are dangerous - they could lead to significant reputation issues for the sector, even if the problems are unrelated. (Tom and Anne really need to give Nikolay a stern talking to. No coffee. But I digress).
As for the salary / savings issue, that’s a carefully calculated media line, which has been repeated by big banks before. It’s intended to create worry about the stability of new banks and to pigeon-hole them as spending money cards (the other line is usually that Monzling are good enough for your coffee money or for TfL - but that no one would really consider them as proper banks).
All totally wrong, of course. But that’s how the dark arts work…
Totally Agree, I think Dozens had issues where people were worried that the trust account might not be actually be a trust account after a similar type of investment company basically ran away with the trust money(I can find the reference if you want).
I was talking to my parents about this. They have found it incredibly hard to diversify between banks due to one being a wrapper of another (FCA protection doesn’t carry over). I was talking to her as using it as a cash account to start with.Little risk and you can easily see the benefits.Then go from there, people are afraid of the unknown and its breaking that which is difficult. Especially as I think Banks are one of the last things you inherit from your parents.
EDIT: Upon thinking about it more I reckon two things would have to happen to capture that generation:
Amex intergration
and Ipad intergration
General point I wonder how much of these articles is to do with fintech fatigue? Seems like there’s a new one popping up every other day, and they seem to be the same as what we have from fintechs with perhaps a new interface.
Legacy banks are certainly worried about Monzo, Starling, and Revolut. You just have to look at the way they are changing. Some of that is good, but on the other hand it’ll be poor if all the banks are too similar to tell apart.
This is great though, let people try Monzo for their small spending, then they’ll realise the extra information it provides is convenient/valuable so they’ll switch to using more. Anecdotally I’ve actually seen this with people I’ve recommended Monzo to.
I think a big issue with the salaries being paid in is you either have to ask HR to change your account, or switch to full Monzo. Both cases require extra work, but I’m sure in another few years it’ll start changing as people change jobs, or their old bank feels like it’s providing less value.
Very good point, there seems much like Battle Royales(Apex legends etc.) that every week there is a new Fintech trying to get a slice of the market and in some cases completely failing
Oh I wasn’t making a value judgement, just saying what press lines the banks use to dismiss the likes of Monzo. As you say, that particular approach can backfire.
I think this might be a problem. Take a look at this Twitter exchange:
The key question is whether you trust them with your salary or your mortgage. Would I really trust them with my life savings?”
Given Monzo doesn’t operate a fractional reserve, and most deposits are just sitting there unlent, it seems a much safer place to store money, even above the deposit protection limit? Monzo itself going bust wouldn’t affect client deposits.
Apparently 2008 was a little too long ago for financial journalists to remember, but if they cast their minds back they might recall that several high street banks went bankrupt…
I think this is that folk who have been deep in the industry just don’t understand - and which is probably what’s underpinning the article. To them, if you’re not operating a traditional model - and, moreover, are showing no signs of wanting to - you’re a renegade on a path to certain failure.
Monzo (especially, but the others too) are rethinking not only the user interface but the fundamentals of the industry. The jury is still out on whether this will work or not - but I think it’s unsettling people who aren’t quite sure what the “rules” are anymore.
Anyone else thinking a 2008 style banking crisis might make it easier for people to understand the Fintech model of business?
EDIT: WE DON’T NEED NO EDUCATION(We do and especially on FCA etc ((would love a Monzo post on FCA and what the different types of license and what it all means)))
Investors will be monitoring companies they have and have not invested in… it was an idea… may not be a feasible one … PS the slightly negative post is not aligned to Monzo in my opinion
Customers of fintech banks shouldn’t lose money as long as FSCS protection is there for deposits. Of course this presumes consumers know what the protection entails.
)
