A Vision for 'Frictionless' Banking
A former (and sometimes current) critic of banks, Brett King is hanging out his own financial services shingle.
Author and company founder
Latest breakthrough: The author and bank critic's financial services startup has developed a new scoring product called CRED, which uses social media as part of its credit and other pricing decisions.
Much like the 19th-century railroad developers who built in uninhabited regions in anticipation of boom towns that had yet to arrive, Brett King's Movenbank is a mobile-heavy financial services startup that's still waiting on the technology and marketplace to catch up to its vision. That market evolution is not guaranteed, making Movenbank and its future performance one of the most compelling stories in retail finance over the next year.
King, a frequent lecturer, bank critic and author of the bank-skewering book, "Bank 2.0," is not only happy with the mobile technology lag, it's his new company's ace in the hole. "We're a little bit ahead of the curve and will be waiting for the mainstream and public to adopt contactless (near-field communication smartphone) transactions," King says. "If we wait until contactless is mass-marketed to everyone, we've missed out on our opportunity."
As Movenbank moves closer to launch later this year, it's being closely watched by at least three different industries - banking, mobile commerce and payments - even though it's not a bank, telecom or card company. What's put Movenbank in the spotlight is its fully digital model. Movenbank is an online and mobile-only company whose motto is "no paper, no plastic, no hidden fees." It is using social media and expanded data to build its own scores that will help inform credit and pricing decisions.
King hopes the company's mobile banking interface will put it in frequent touch with customers for relationship management, and will allow the startup to charge lower fees than banks because Movenbank won't have a national branch network to maintain. King contends 50,000 customers doing a few transactions per week - its goal for early 2013 - will allow Movenbank to break even while being more nimble than traditional banks. "What's happened with Borders, Blockbuster and other retail businesses that have been disrupted by tech will happen here," King says.
Much like Simple (the former BankSimple), Movenbank, of New York, will control the front end of the customer relationship and will store deposits with banks. Movenbank has signed a deal with Bancorp Bank in Delaware and is in talks with additional banks. And much like Simple, that deposit relationship with banks isn't stopping King from criticizing traditional banks' service capabilities.
"The role of the banker is to give you advice. The reality is banks don't advise customers these days," he says. "The primary goal of Movenbank is to give consumers advice on a daily basis, to help them understand the impact of their spending in making daily decisions."
Movenbank this summer will release its banking application, which uses NFC-enabled phones or phones with an NFC sticker, for closed-loop testing, with a broader public release to follow the tests. Movenbank eventually hopes to offer its service internationally. NFC-enabled phones are still thought to be a year or so away from wide availability, and while mobile payments are starting to catch on, they're still fairly new and have volumes that are far below credit and debit card payments. King is betting on that changing as NFC phones become widespread and mobile payments become mainstream.
"We're heavily relying on our mobile platform. There are going to be some consumers that don't necessarily feel comfortable with that early one. But this will be a short-term problem. In two or three years, the tech will catch up," he says.
What's also drawing attention is Movenbank's alternative approach to scoring. Called CRED, it combines traditional scoring elements and a person's standing on Facebook, Twitter and other social networks to help determine a consumer's track record in paying bills and engaging in other healthy financial activity as well as to gauge their ability to help sign up friends for the company - all elements that can inform credit decisions and pricing of financial products.
Movenbank, which develops most of its technology in-house and partners with Geezeo to provide some personal financial management capabilities, will track transactions and ask customers questions on how they save and spend on a daily basis. All of this information will build a profile that the company will use for credit decisions, pricing and know your customer efforts as well as a means to help customers manage risky financial behavior.
Movenbank also uses elements of gamification, such as badges, rewards and incentives. For example, if the goal of Movenbank is to get a consumer to keep a certain balance in his or her account, it's easier to encourage that behavior by representing it visually or incorporating elements of an online game to help guide the person.
"We're creating a system to help you understand your financial help," King says. "It's a 'Weight Watchers' score for financial services. The object is to help understand financial behavior over time."
Ron Shevlin, a senior analyst at Aite, says what makes the Movenbank model interesting is that as the CRED score improves, consumers will earn the right to move from an entry-level prepaid account up to a checking account with overdraft protections. "Movenbank reinvents the bank account structure in concept to make it simpler, transparent and fluid between accounts," he says.
King's move to start a new finance company follows up on his book, "Bank 2.0," which says that the financial crisis is just beginning for retail companies. In the book, he writes that the use of the Web, automated teller machines and smartphones are accelerating among consumers, but banks are not keeping up with commenserate applications, and still classify digital venues as alternative channels as branch banking dominates strategy. King writes that mobility, social networking and new mobile apps will dilute the impact of checking and branch transactions and will allow mobile phones to replace wallets within the next 10 years. Movenbank is the manifestation of King's argument that mobility will drive the future delivery of financial products, and that innovation will come from outside the banking industry.
"Over the next three to five years, many of the innovations that we see in banking won't be done by banks at all," King says. "In payments we see Square, PayPal and the Google Wallet, for example. We will find a new layer of technology or business coming into the customer experience area. There will be a fragmentation of banking. You'll have manufacturers of bank services, but more fragmentation in the way that consumers interact with banks."
One of the challenges for banks in the new mobile tech environment is their lack of control over the delivery channel, King says. "The primary driver will be the mobile phone. And banks don't own the networks, apps, devices or operating systems."
Movenbank is also launching at a time of popularity of PFM sites such as Geezeo, Mint and other firms that are helping consumers manage spending and debt in a tough economy. Movenbank's CRED is an attempt to link PFM to real-time decisions that consumers make on purchases or saving.
"Today's consumers are more aware of impacts from credit scores; they are looking for new ways to manage money to avoid paying overdraft fees," Shevlin says.
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