Digital banking: Mondo hopes to become the Google or Facebook of the sector
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Version 0 of 1. It was 21 May, and a historic moment for Tom Blomfield. Stood at a cash machine in Clerkenwell, central London, the ambitious young entrepreneur withdrew money from a brand new account with a new bank at which he was the only customer. Five weeks later, Mondo has 30 customers testing its prototype account. Blomfield – a former management consultant now on his third business startup, all before the age of 30 – said a crunch meeting with the Bank of England on Wednesday would determine whether Mondo gets the formal go-ahead to apply for a banking licence. The full process would take another six months. Mondo is one of a number of startups trying to tap into customers’ increasing use of digital technology. Ahead of it is Atom, a Durham-based outfit that received its banking licence last week. Blomfield and other members of the Mondo team have come from Starling, another would-be digital bank. They are all eyeing the statistics trotted out by the main high street banks, Barclays, Royal Bank of Scotland, Lloyds Banking Group and HSBC. Branch usage has fallen 36% since 2010 , according to one, while the industry lobby group has predicted this will be the year customers use online technology more often than branches to access their accounts. At the same time, the high street banks are hoping that the new pretenders will show competition is thriving at a time when the industry is being investigated by the Competition and Markets Authority. Digital banks, however, are not for everyone. “My granny knows her bank manager by name,” said Blomfield. Mondo, by contrast, is “for people who get frustrated if they have to wait more than two seconds for things to get done … It’s for people who live their lives on their iPhones”. Based in a loft-like space in Clerkenwell, Mondo shares an office with Passion Capital, a venture capital firm that has pumped £2m into the new business. Lady Kingsmill, the competition lawyer and former adviser to the Royal Bank of Scotland, has been signed up as chair. The business model clearly relies on a low-cost base. No branches and, Blomfield acknowledges, customers who will need to borrow. “If you’ve got seven days left before payday and you’ve got £50 left in your account, it’s not difficult to predict you are going to go overdrawn,” said Blomfield. Mondo aims to let customers block their account until funds become available or borrow a sum, say £200, at prices in the middle of those being offered. At today’s rates that suggests a 20% annual equivalent rate – roughly equal to that on a typical overdraft, but with no other fees to pay. The startups could offer notifications to customers such as warnings about going overdrawn, reminders of bills to pay and information about how they spend their money. Swiping his Mondo app, Blomfield finds he has used his card - which operates on the Mastercard system - in Pret A Manger 11 times in the past month. For people prone to losing their bank card, the app allows them to put an instant, temporary block on their plastic until it is located. To prove the point, Blomfield blocks his card using his iPhone, just as he puts it in the self-service till at his local supermarket. The card is declined. Moments later he swipes it back on from the phone. The card is accepted. The purchase – two bananas for 40p – shows up on his iPhone before the self-service till can print the receipt. Digital banks also face the issue of opening accounts and still complying with strict anti-money laundering rules with which banks must comply, and finding ways to let customers pay in cheques. Links with the Post Office and other banks are being considered while a cheque imaging service under development by the industry gets off the ground. Blomfield reckons there is huge potential. “I think that in the next two or three years a bank will be launched that will become the scale of Google or Facebook.” Is that what Mondo hopes to become? “We hope so,” he said. |