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The crowdsourced bank

I’ve been thinking about how to build a bank for a while, and have been partly inspired by the examples of (bank)simple and movenbank.

Both new bank startups began with a call to interested commentators to give their two-penneth worth of input about how a bank should operate.  I never saw results of this input but assume that the simple startups demo gives us a few clues:

The theme of crowdsourcing expands further as we see new startups like CivilisedMoney's launch in the UK, with all of its funding from crowdsourced channels and all of its offer based upon crowdsourcing peers.

Launched in October 2011, CivilisedMoney’s goal is to make it easy “for people to invest, donate, lend, borrow and transact money with each other directly at fair and transparent rates” without the involvement of banks.

Sounds good in principle but with only £100,000 of funding to start with, all from crowdfunding, it may struggle.

And it doesn’t necessarily have to be a new startup as many incumbents are using crowdsourcing of customer views to grow business.

A good example is Barclaycard Ring, which I blogged about recently.

The Ring MasterCard is run by a virtual cardmember community, where cardmembers have visibility into the card's financial profit and loss statements, as well as an online framework that gives them the ability to influence decisions about how the card is managed and serviced.

Using social media, the community will also provide a forum where cardmembers can exchange ideas, share knowledge and provide direct feedback to Barclaycard US to help determine future features of the product.

There’s the First Direct Lab, where HSBC’s UK remote bank has tried crowdsourcing customer ideas to see if they can improve their offer.


It’s quite nice because you can see customer suggestions including:

“It would be great if you could give your accounts in Internet Banking a descriptive name (e.g. if you have more than one of the same account)” from Henry on 11th April, and

“Not so breaking news (but everyone seems to know it except FD): Android market share exceeds that of the iPhone.   In the UK, between Jan 2011 & Jan 2012, Android had a 36.9% share while Apple's iPhone had 28.5%. And the Android share is only going 1 way – up!  Why don't you have an Android app? Surely it'll be a cinch to develop & launch compared to the obsessive compulsively controlled iPhone.” from toonarmy on 10th April.

It’s also nice to see that First Direct respond to such suggestions too.

For example, flipshot laments: “When will you start offering Contactless cards, you changed your terms and conditions to state you would be offering them from December 2011. However your customer services still state they are not available yet.”

And First Direct immediately replied: “we did change our terms and conditions in December 2011 to include information regarding contactless cards. This was done in preparation for contactless cards being introduced in the future. We have no timescales for the release of these cards at the moment, but we will update our customers before their introduction.”

Nice, and all completely transparent and open.

Commonwealth Bank in Australia implemented a similar approach with IdeaBank.

… as has Danske Bank although, as can be seen in the latter case, the suggestion box approach has a limited timeline.

Then there’s the call from Citigroup CEO Vikram Pandit to crowdsource risk management.  Writing in the Financial Times in January, Vikram says:

Regulators should create a “benchmark” portfolio and require all financial institutions, not just banks, to measure risk against that. The benchmark portfolio would not actually exist on the balance sheet of any one institution. Rather, it would be a collection of real investments that stand in for the kinds of assets that most financial institutions actually hold at the time. What is more, its contents would be 100 per cent public.

Institutions would be required to produce, on a quarterly basis for that benchmark portfolio, a hypothetical loan/loss reserve level, value at risk, stress-test results and risk-weighted assets. Right now these measures are run only against an institution’s actual portfolio and only a limited number of the results are disclosed. Worse, those results have no common frame of reference. The benchmark portfolio would supply that needed frame of reference.

In other words, rather than using credit ratings or self-determined risk metrics through Basel III, use a regulatory driven database of  bank sourced knowledge to assess and view risk.

This is exactly what Dan Tapscott has called for on numerous occasions, and seems such a no-brainer I don’t know why it’s not here (yet).

With so many bright people discussing the idea, it’s time will come however (obviously).

After all, if we don’t do it, then customers will work out how to crowdsource a robbery:

In perhaps one of the most ingenious uses of crime-sourcing seen to date, a bank robber in Seattle utilized Craigslist to recruit a crowd of unwitting participants to facilitate his escape. In the days leading up to the robbery, the perpetrator placed an ad on Craigslist seeking workers for a purported road-maintenance project paying $28.50 an hour. He instructed his “contractors” to show up at a street location at the exact place and time an armoured car was to be delivering cash to a local Bank of America.

The robber instructed all those showing up for the promise of work to wear their own yellow vest, safety goggles, respirator mask and blue shirt — the criminal’s exact outfit the day of the robbery. After overpowering the armoured car driver with pepper spray, the suspect grabbed a duffel bag filled with cash, ran past a dozen or so similarly dressed innocents and made his escape 100 yards away to a local creek where he floated away in a pre-positioned inner tube. 911 calls reporting the robbery described the suspect as being a construction worker in a yellow vest. When police arrived on seen, they had numerous robbery suspects from which to choose.


Postscript: this post is not about crowdfunding which is why it does not delve deep into crowdfunding sites such as ArtistShare, Sellaband, Hyper FundingIndieGoGo, Pledge Music, KickstarterSponsumeViper FundingFunding4LearningFondomatRocketHub … 


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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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