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Musings of a FinTech: The Banking Revolution will be Digitised

Whilst it may not have made the news here in Australia, earlier this month Holvi, a completely digital bank catering to small business owners and entrepreneurs in Finland, was acquired by BBVA. It’s the latest in a string of acquisitions and investments by the Spanish banking giant in digital banks. It started back in early 2014 with a $117 million acquisition of Simple Bank in the US, and now there are a raft of new digital banks in the process of being launched around the world with backing from them.

 

Much like other established industries, the banking system is sitting on a complex patchwork of technology and platforms that have been built upon over many years. What this creates is a costly infrastructure to change and update, and often small, customer-centric enhancements are so costly that they get de-scoped. Whilst some banks have forged ahead with building out a “digital first” experience, in Australia I’m thinking ING Direct and UBank (powered by NAB). Because they are still built atop the existing bank frameworks, limitations exist as to how far they can push the envelope.

 

The UK is the country that looks set to benefit the most from this new push into digital banks. With a low barrier to entry (you only need £1 million capital to get your banking licence vs $50 million here in Australia), and a nation that has adopted doing things online faster than most (the UK are some of the most prolific online shoppers in the world). There is now a slew of digital or mobile banks set to launch imminently.

 

Mondo Screens

Image credit: getmondo.co.uk

The most well known of these banks is Atom, they started 2 years ago with a vision to be a mobile bank with a heavy focus on personalisation – one of their early campaigns was to get 1.4 million logos designed, so every member can choose their own. They are the first of these digital banks to get their licence (in 2015) and have received £135 million funding to date. Mondo is another UK digital bank that has a good news story with their funding – they famously raised £1 million in 96 seconds via crowdfunding platform, Crowdcube. Two other names to watch in that market are Starling and Tandem. Brits are soon going to be spoilt for choice with new digital alternatives to the traditional banks.

 

But what about here in Australia? We know conventionally there is a lag in new tech developments reaching these shores, and this coupled with the aforementioned high barriers to entry makes it harder to break into this market. But it’s not impossible. Whilst at Huffle we are initially looking to introduce new home loan products, there are some logical steps we could take to build this proposition out to become a digital bank. Without the constraints of complex legacy systems, and fresh thinking from founders with experience both within and outside of Financial Services, it’s not a stretch to see Huffle making moves to create one of Australia’s first truly digital banks… But one step at a time, first we want to shake up the home loan industry with our great new mortgages.

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