More than a decade after pioneering the direct banking model of offering high-yield savings accounts exclusively online at ING Direct, Arkadi Kuhlmann is trying to reboot international banking for the smartphone.
Despite its serene-sounding name, Kuhlmann's startup, ZenBanx, aims to deliver the kind of immediate gratification that users, particularly younger consumers, have come to expect on their mobile phones and tablets.
"It's not like reading a book," said Kuhlmann, the chief executive of ZenBanx. "That's called Kindle."
At ZenBanx, a person can sign up for an account in less than 10 minutes. Unlike other so-called neobanks, ZenBanx is focused on improving foreign currency exchanges and international transfers as well as introducing something quite novel: letting people park money in up to five currencies.
ZenBanx began offering its digital-only, multicurrency savings account to Canadians on wait list late last month with plans for a broad commercial launch later this year. It intends to expand its service into other countries including the U.S. (the company is headquartered in Wilmington, Del., with offices in Toronto and Silicon Valley). It's a familiar playbook for Kuhlmann, who started ING Direct in Canada before expanding southward.
Kuhlmann continues to work within the confines of the legacy financial system; his startup has partnered with DUCA Financial Services Credit Union in Toronto, where the Canadian accounts reside.
But in an intriguing move, ZenBanx's model includes no physical cash transactions. While the startup plans to add mobile deposit capture for checks, it has no cash deposit venues on the agenda. "In a digital world, cash is obsolete," Kuhlmann said. "Payments can be made with your debit card; cash can be withdrawn with your debit card."
Avoiding cash, and its ever-steeper anti-money-laundering compliance requirements, will also reduce some of the regulatory burden that serves as a barrier to entry to innovative financial firms.
"There are huge costs to complying with regulations around the world," said Tristan Hugo-Webb, an associate director of the global payments advisory service at Mercator Advisory Group. "It's hard to get off the ground."
Mobile-first banking outfits like ZenBanx and BankMobile, an offshoot of Customers Bank in Phoenixville, Pa., are emerging at a time when consumers are clamoring for mobile interactions more than ever. Fintech startups like Simple and Level the first now owned by BBVA and the latter now owned by Capital One have helped set the pace.
In the U.S., 52% of consumers say they are doing more mobile banking than two years ago, according to a recent study by Carlisle & Gallagher Consulting Group. Ventures like ZenBanx support the belief that "branches will only be in the Smithsonian artifacts of history," said Byl Cameron, digital practice lead at Carlisle & Gallagher.
That type of thinking, however, often triggers a spirited debate. On one hand, data shows consumers join banks with nearby branches. On the other hand, digital onboarding has been difficult at best.
Regardless, most have come to accept that mobile is much more than regurgitated online banking. And the new crop of upstarts is betting that a healthy number of consumers are ready to embrace branch-free banking. Direct banks are also betting they can compete with big banks that have branches in addition to online and mobile banking.
That entails creating experiences that will stand out to consumers unfamiliar with their brand names.
ZenBanx sees itself competing on mobile features that cost consumers less than rival banks'. In sending $600 to another country, ZenBanx says its fees are a fifth of the average of the Big Five banks in Canada. Currently, ZenBanx supports sending money from Canada to Australia, India, Great Britain, Netherlands, Hong Kong, Japan, Singapore and the U.S.
Part of the plan is creating an intriguing design.
"It's hard to get banks to look cool, you know," said Kuhlmann. "We are trying."
ZenBanx is seeking "global citizens" such as students and others who have close ties to other countries. Its early research showed that of the 35.3 million residents in Canada, 6.8 million are foreign born while 5 million are Asian. In the U.S., of the 316.1 million U.S. residents, 41.3 million are foreign born and 18.2 million are Asian.
Under Kuhlmann, ING Direct which purposely left "bank" out of its brand name had a number of self-service features that made it innovative for the pre-iPhone era. These included automatic savings; easier-to-use bill payment; and the ability to set up unlimited goals, such as paying for a wedding or a college, within a savings account.
It's early yet for ZenBanx. Kuhlmann's startup, which formed in 2012, just hit the app stores in mid-January and announced the product last week.
Even Kuhlmann realizes its appeal will have limits. He happily acknowledges how some people will continue to want to use paper cash and chit chat with branch experts over coffee.
"Not everybody is totally happy to do everything digitally," said Kuhlmann.
ZenBanx joins other aspiring disruptors in using technology to improve international transfers and exchanges. TransferWise, for example, uses crowdsourcing to lower the cost to exchange currency. WorldRemit, which operates online, aims to offer low-cost remittance transfer services as well. And, of course, there are cryptocurrencies that make sending money much quicker and much cheaper.
ZenBanx sees itself as different: it works within the banking system and lets people save their money in multiple currencies. International transfers made through ZenBanx could take two business days, and will also be subject to any restrictions a receiving financial institution has in place.
Remittances are a fractured market, which opens the doors for startups to try to find ways to lower the cost and improve the experience, said Hugo-Webb. In so doing, however, they're taking on the burden of regulations.
Another challenge is making the brand known to consumers.
"You have to start somewhere," said Mark Schwanhausser, director of omnichannel financial services at Javelin Strategy & Research. A new company "can't clap your hands and become BBVA overnight."