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So how would you build a new bank?

If we were creating a bank today, how would we create it?

This is a question that comes up regularly and I haven’t tried to answer it for a while, but thought I’d give it a go this week, as it’s timely.

The reason it’s timely is that the last time I asked such a question, the focus got into an IP-based bank, where everything would be built upon Internet-Protocol rather than bricks and mortar.

I would still take that approach today, and still believe that a bank would focus upon what IP can do for them, but would go further as mobile IP is the focal point today, along with apps.

Now, let’s be clear, building a bank today requires many things and so the first thing I’d start with is what sort of feeling I want my bank to convey.

Are we a technobank or a human bank?

Do we want to encourage human interactivity or remote interactivity?

How do we believe we are different and what can we deliver to clients to show we are different?

Where are the weak points in the current bank offer, and how do we exploit those?

And so on and so forth.

These questions cannot be answered with a simple yay or nay, but need to be pondered individually so that they are not imponderables.

So my first point of focus would have to be how to deliver something the current banks do not.

And what is that?

Current banks deliver secure deposit taking, transaction processing, branch access, an ATM network, facilities for loans, credit and mortgages, and more.

They deliver such capabilities primarily through branches, with call centre and mobile internet as an adjunct.

The only banks that differ from this are the online only and banks without branches like First Direct.

But these banks are owned by traditional branch-based banks, and use the parent’s capabilities to offer the branch and ATM services they themselves lack.

So, if I were opening a new bank, the first thing I would focus upon is opening a bank without branches whilst doing a deal to get access to the ATM network, which is easy in the UK thanks to Link, now Vocalink.

The second thing I would think about is how to create a bank that was cool.

Vernon Hill, the founder of Metro Bank UK and Commerce Bank USA, recently presented to the FSClub and said that Metro Bank are often referred to as the Apple of banking … I beg to disagree a little.

Metro Bank is a great new innovative bank for Britain, but their model is based upon branch-based banking.

Their branches are good, but not cool like Apple.

So if we wanted to create a new bank for Britain that was cool like Apple, I would start with an amazing online user experience designed for mobile and tablet computers.

A snazzy app store financial offer.

Now we’ve had some of those already, like Mobank, but they are not mainstream and not designed for core banking.

Most new apps for banking from new entrants have purely been to dance around the edges of deposit taking but not to go for the core.

Now if I designed an IP-based bank with mobile net focus at its heart, what would that mean for the deposit taking area?

It would be a challenge, as a cool Apple-store style app bank would be too weird and funky for some.

So it would need some gravitas somehow.

Does that mean investing in branches?


As mentioned, Britain’s best loved banks today – Smile, Cahoot and First Direct – are banks without branches, so branches are irrelevant in launching a cool new bank.

What’s key to a cool new bank is to be 21st century and heavily into mobile, social and online.

So my first tenet of my new bank is to launch an IP-mobile differentiated brand that is cool.

What does cool mean in banking?

Offering apps that are PFM – Personal Financial Management – capable and making them simple to use online and on mobile.

Making it securely cool by authenticating me using my geolocation and signal.

Making it simply cool by never asking me for names, account numbers and passwords, but simply giving me a personal space where my voice activates the services.

Making is way cool by offering me gifts and goods for loyalty, such as flights and iTunes based upon account usage.

And making it cool by relating to me based upon how I want to relate to you … talking to me as a human when I call you and making me feel you really understand me because you’ve understood my data.

Then, to give it gravitas, I would invest in one helluva marketing campaign – both viral and mainstream – with a character or characters who everyone would find believable.

Someone they could trust.

Someone who is not easily bought but needs to be impressed.

Someone like the UK's leading consumer financial expert, Martin Lewis, who I would convince of our cause.

Having a leading advisor on board in our advertising would be a coup, and it would only be an endorsement Martin would give if he really believed we were different and better.

With that as my start point – a cool Apple style bank offer that is mobile IP app-centric and celebrity endorsed by a trustworthy figure – I would then move to  thinking about how to organise the bank and our cultural approach.

I’ll carry this theme through the next few days and would be interested in any perspectives or critique …


About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Sounds great, where do I sign up? 😉
    How far do you think BankSimple in the US goes to meet some of these goals/provide these features? Or is BankSimple just a stylish layer on top of traditional banking infrastructure?

  • Another dimension that I would factor in would be designing a bank that didn’t appeal to customers that I don’t make money out of.
    One of the difficult challenges for the Big 5 banks (you have to include Santander now) is that they have a lot of customers that they don’t really want, who they don’t make any money from and who are, for a variety of reasons, difficult to get rid of. So if you were starting a new bank you would want to make sure that you weren’t attracting that type of customer. That may mean that you have to ban cash withdrawals at the counter for all but SMEs, that all current accounts have a monthly charge (even a low one) and that you don’t pay the highest deposit rates in order to avoid the rate chasers.

  • Chris, when you’ve run a little further with your thoughts for a new consumer bank, please have a go at defining the new SME bank as this hugely important area for UK development gets very little attention. There will certainly be some read-across, but perhaps some important differences too. Happy to join the debate.

  • How do you find starting a bank process?
    Easy or durable?
    Maybe it should be easier and faster to find a small bank, perform a proper due dilligence, write off all the doubts and restructure it in a mobile bank.

  • Kathleen Tyson Quah

    My new bank will be for mortgages only and will not take deposits. Funding will be through matched issuance of covered bonds on the Danish model – exactly the same term, interest rate and amount as the mortgages. A small percentage fee will cover overheads. This model obviates interest rate risk, maturity mismatch, liquidity risk, etc. which have eroded the capital base of UK banks and bankrupted Northern Rock.
    As mortgages are 70 percent of private UK credit, this would be the most important bank in the UK pretty soon.
    My bank will also be wholesale only, with other banks and building societies using it for originating and servicing mortgages and mortgage bonds. No retail means low compliance costs, low overheads, and low risk.
    I’m developing the model and plan now if you’re interested.

  • Rik Coeckelbergs

    Half a year ago, I tried to answer the same question, but I guess from my Belgian point of view, and I got here:

  • My concern would be how you make money… I can understand that it’d be great to use for a current account etc, but you won’t make money there. To make cash your cool “neuerbanco” has to sell financial products, given that these are increasingly if not already commodities and easily accessed via price comparison sites, then your tech savvy audience is only a click away from a cheaper deal. All the incumbents have to do is target you on price for a short while and you’re out of the game..
    So to make cash, being cool isn’t enough… Companies like Apple have great products, not just a good shop. You’d need the product innovation to go with the delivery channel, e.g. lifestyle insurance : travel, home, car in one product… So if the products are right, and you combine these with your cool front end, then you’ve a chance.

  • But perhaps “Neuerbanco” should just be a cool ‘portal’ within which you offer everyone else’s finacial products instead, but tailored to the individual. i.e. a supercharged version of “mint.com” with the portal taking away the hassle of account opening and switching etc. You simply keep offering the best deals for deposits, savings, cards, investments and mortgages, with the option to even atomatically switch where it makes finacial sense for the client. This way you simply leverage the existing providers, making them less relevant whilst providing that “cool” and wow factor over the top.

  • An irresistible challenge!
    Some other ponderables:
    who’s your target market and what services do you aim to offer them? Are you going to do much the same as others have done before, but better? e.g. major on offering fantastic service (Metrobank – Fans not customers, hence the Apple comparison)
    Or find a proven model for a niche problem and bring it to a new country (see Kathleen Tyson Quah’s comment above)
    Or serve an underserved market segment (Cambridge Bank http://www.cambridge-news.co.uk/Business/Cambridge-Bank-gets-big-welcome.htm; British Enterprise Bank http://www.yourpropertyclub.com/educate/-announcing-the-british-enterprise-bank-beb)
    If fastest growing economy http://experience.fedex.com/gb/en/#/data/microfinance_loans/topic/business_growth is important, would you base it in Africa?
    But then again, if trust, transparency and accountability are CSFs, perhaps not…..http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

  • In the current state of technology take up I think you would have to launch with branches staffed by Customer Service Representatives who will be true advocates of new banking. Their functions like Apple stores would be to help train new customers to use the new tools and get the network effects that access to new ways to move money will generate. They will take away the inevitable pain and fear that getting rid of cheques will inevitability deliver.
    You will find the CSRs where your customer can easily reach them so a mixture of traditional and new will occur.
    Traditional: Building or buying a 200 to 300 branch network will simply not be affordable. The new branches will be located where customers go in significant numbers so don’t expect them to be on every street corner. They may even be mobile mounted on the back of articulated lorries.
    New: If its face to face contact you want does it have to be in a branch or in the comfort of your own home ? I had a meeting yesterday with the CEO of vee24 .http://www.vee24.com/
    They have been working over the last few years on a new way to help online customers get face time with CSRs. No avatars , no delayed Instant Messaging experience .Real people and stunning results with very good customer service feedback.
    Banking management will be very different from the silo structures of current establishments. The new Bank will have 360-customer view built in and therefore start with a considerable advantage.
    These new banks will charge for providing transaction accounts.

  • You’ve hit the nail on the head – it’s essential to have an online user experience designed for mobile and tablet computers. However, I see this also playing out within the branch. Key to this is table-top technology in branches; the software interface on these surface devices provides additional usability and simplicity – I’ve even seen some banks use them in their windows to encourage customer footfall. Ultimately, engaging the customer in a channel they want to use makes their daily interactions much more personalised and immersive than traditional branch banking methods. I echo the findings of a recent blog and report written by analyst firm Celent that mentioned that “the branch isn’t dead, just different.” (http://bankingblog.celent.com/?p=2023). Essential to future banking environments is a combination of technology and a shift in culture and organisation. The bottom line is that satisfied customers are loyal customers – a necessity for every bank.