We call U the UK’s first ‘unbank’. It’s a current account aimed specifically at those who want or need an alternative to the banks. Our smartphone-based account offers many of the services you expect from your bank account, such as direct debits and contactless but we do not offer overdrafts. Instead, we help our customers to manage their budget and set money aside for bills.
My customers fall into two camps. The majority have a standard bank account but, because of their poor credit record, their bank won’t give them an overdraft. Of course, that same bank will give them access to unauthorised borrowing but when they do that they get fined. The banks are making £1.2bn a year out of these fees. The customers want to get out of these accounts because they don’t have the discipline to avoid getting overdrawn. If you’re only earning £15,000 a year and the bank charges you £50 for being overdrawn, it can be crippling. People can’t put food on the table. So we save them money.
The other pool of customers only have access to a basic bank account: a debit card and access to few banking features. They can’t get overdrawn and aren’t incurring charges, which means they get a pretty shit service from the banks, which can’t monetise them at all so they ignore them, and these people end up coming to us for a better experience.
No, we charge up to £10 a month, depending on what services the customer uses. Many of us don’t understand what it’s like to have no money. If you are on low wages or benefits, life is extremely tough. The system allows these people to enter a spiral of debt that they can never hope to escape. We give them a bank account that helps them to save and builds discipline – they pay for the service because it adds value.
We have a feature called an overdraft buffer, which is an extra account. Customers can put money into this account and build up a rainy day fund. We also have a 365 budgeting product for automated saving. It puts 1p into a savings account for you one day, 2p the next, 3p the next day. It goes up by a penny a day, and you barely notice you’re saving. But after a year, you have £600 in that account. We’re also about to move into low-cost lending.
I’m not an altruist; I’m an entrepreneur. I charge for a service that my customers value. Banks aren’t allowed to charge people for a current account so they rip customers off with hidden charges. I don’t use subterfuge, we ask for a fair monthly fee instead. I have an ambition to make this company succeed and we can only make a lasting impact if our model is sustainable - and that means it has to be profitable.
“The incumbents will stop looking at the banking market as ‘one size fits all’ and begin segmenting all the markets, offering something different for each group. I predict that these big banks will buy a Moneze for immigrants, a Monzo for hipsters, and U Account for the underbanked etc. They will have a portfolio of brands that will sit behind their firewalls but they won’t interfere with their technology or operations.”
Right now, there are six major banks in the UK, with a market share of around 90pc. In the US, there are 8,000 different banks, and here we have 20. That makes them incredibly hard to dislodge. Despite the CMA’s attempts to break up the market, the odds of a new challenger replacing one of these banks within 10 years are very slim. Anyone who tells you otherwise is a dreamer.
So we are all basically creating new operating models, platforms and ways of working that these banks may or may not buy one day. The incumbents will stop looking at the banking market as “one size fits all” and begin segmenting all the markets, offering something different for each group. I predict that these big banks will buy a Moneze for immigrants, a Monzo for hipsters, and U Account for the underbanked etc. They will have a portfolio of brands that will sit behind their firewalls but they won’t interfere with their technology or operations.
I’m on a mission to get to 1m customers. No-one ever can be sure what the future holds. Our job here is to balance the books and prove banking the underserved can be profitable, fair and sustainable. The rest is just what comes.
PayPal is trying to launch a bank in the US right now. I anticipate that PayPal may struggle in Europe but could make it over here. This will be revolutionary.
As we move to blockchain instead of old legacy infrastructure, costs will come down. But change happens so slowly in this industry. It’s like wading through treacle. Changes will arrive much faster on the customer/value/experience end, rather than in the back office. Blockchain is seriously interesting but as yet people don’t understand it enough to implement at scale. Even the Bank of England is looking at it. But we mustn’t assume that things will change. Banks control this market and if they don’t change what is going to change? They may have digital heads but their bodies are cemented in concrete. It’s old and it’s regulated. Also we’re talking about people’s money and if something goes wrong, it’s an absolute catastrophe.