Like quite a few big banks, the Royal Bank of Scotland (RBS) has been messing about with doing digital by launching a number of new initiatives. The two of most note are Bó, a new retail bank, and Mettle, a service for small to medium enterprises (SMEs).*
What fascinates me here, however, is the headline that came out this week saying that RBS tried to buy Monzo and, after that failed, realised they had to launch their own digital bank. They could have looked at Atom I guess, although that’s run by BBVA. They could have had a chat with Anne Boden over at Starling Bank, but a massively significant amount of her funding came from private investor Harald McPike and that wasn’t for sale. They could have paid a nod to Tandem, but that’s run by the Qatar Harrods folks. So, no Monzo, no alternative but to do their own thing.
In an interview with Oliver Wyman, who consulted on the set up of the bank, Bó’s story is explained by Mark Bailie, CEO.
We didn’t wake up one morning and decide, "let's build a new greenfield bank," or, “we're going to spend X, go away and come back when it's done.” This was done in measured but quick, incremental steps.
One of those steps was to make the whole thing cloud native through Mambu, also used by N26 and OakNorth.
In another interview with The Financial Times:
“Mr Bailie said he is hoping to attract ‘a few million’ current accounts to Bó over the next four to five years — compared with its current 13.8m across the UK — with a focus on the 17m UK residents who have less than £100 in savings. It will analyse customer spending data and use techniques developed with the government-backed Behavioural Insights Team to try to ‘nudge’ people towards ways of saving money, he said. Eventually, it is aiming to be able to recommend other ways of saving, such as switching to a cheaper utility or phone contract. In this way it is comparable to Monzo, which has said that in the long-term it wants to base its business model on helping customers manage their money by giving them access to a ‘marketplace’ of different providers — from rival financial services companies to energy companies.”
So yes, it is comparable to Monzo as that’s who the bank is based upon. And what about that deal to buy Monzo? In The Telegraph, they report:
RBS informally approached Monzo around two years ago, sources say. No formal offer was made. One person aware of the talks said the bank would have had to pay a “very big number” for the fast-growing app, and concluded it would cost significantly less to start its own outfit from scratch. Monzo now has a valuation of around £2bn – had RBS swallowed the start-up when it was worth around £100m, it would likely have picked up a bargain.
So, does Bó have any similarities to Monzo?
Like Monzo, Bó breaks down daily spending into categories to help customers budget. It also has a bright yellow debit card to rival Monzo’s hot coral ones.
Interesting. Meantime, there’s one other nugget about Bó that bugs me a little bit. I was hugely disappointed to see the failure of Loot, a student banking app, earlier this year. The reason for my disappointment is that I used Ollie Purdue, founder of Loot, as my poster boy for digital change in all my presentations.
Ollie, then 21 years old, dropped out of university to launch the bank.
Now you don’t hear that every day, do you?
RBS owned a 25% stake in Loot via an investment made by Bó but, when it came to the latest funding round which was thought to be good to go, RBS decided no further investment would be forthcoming. Hence Loot failed.
According to TechCrunch:
The fact that Ollie “Purdue and almost one-third of the Loot team is joining the RBS venture is particularly intriguing, given that RBS was an investor in Loot and was thought to be close to acquiring the start-up before ultimately pulling out of the deal. This led to Loot scrambling for additional funding, which it was unable to obtain in time before running out of cash entirely after existing investors decided not to follow on.
“Specifically, Royal Bank of Scotland Group indirectly owned a 25% stake in Loot via an investment by Bó! In January this year, RBS announced that Bó had invested £2 million in Loot following an Initial investment of £3 million in July 2018.
“It was also presumed by many fintech insiders that Loot had been white-labelled and was powering the Bó product. Clearly that was never the case, leaving questions unanswered around why RBS/NatWest would invest in a competitor, only to see its demise six months later. Now we know that it wasn’t for a lack of talent at Loot, as there appears to be little bad blood between Purdue and RBS. There are always multiple parties and dynamics involved in an acquisition.
“To that end, one source tells me that Bailie was the main champion for Loot within RBS and that he was likely a draw for the Loot founder and other members of the Loot team. I also understand that Purdue and team feel they have unfinished business within the consumer digital banking space and that with the full resources of RBS they’ll have an opportunity to continue what they started at Loot.”
It still seems a shame that Ollie was so dependent upon an investor tied up in internal wrangling but, hey ho, guess that’s the way the cookie crumbles.
* Mettle is one of a number of big projects delivered by 11FS
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...