We sat down with Aritra Chakravarty, CEO at Dozens to talk about the future of banking, customer incentives and providing a platform for use by banks and emerging FinTech companies at FinTECHTalents 2019.
Watch the video now.
Do banks play a central role in our future?
In the debate I sort of differentiated between banking and banks. So I think the service of banking where people with excess money need a place to safeguard their money get some returns by lending out the money to people who need the money. That service is going be in vogue for a very long time.
I differentiate that service, however, from the financial institutions that we call banks that offer that service currently. I think if the banks are not careful then there is a potential of a future world where banking is still around but banks as we know them are not.
There are many reasons for that not least among them is incentive alignment. So, the fact that banks today are structured in a way where they make more money from the consumers borrowing – that alone, as a business model is really peculiar. There’s no other industry that has that. It’s as I said in the debate, it’s like a car manufacturer doing better when they have more accidents.
I think incentive alignment is going to be key in defining the future bank.
Is technological advantage enough to stay ahead in financial services?
No, I think that’s a big not-at-all for me. But having said that technology is a big cost base for banks and technological advantage should transfer itself to better cost bases, lower cost bases. The hope is that then along with business model innovation, which gives banks more money to give to their consumers. Eventually, the consumers are better off. If we can’t finish the sentence with the consumer being better off, it’s useless.
What are you trying to fix in the banking sector?
You know what struck me was there’s hundreds of billions of dollars that’s gone into FinTech. I think just FinTech alone is now 100 plus. Meanwhile, the conventional banks have spent another two three hundred billion on new technology. This is not them spending on their mainframes like keeping them up to date, this is banks spending on new tech.
So, there’s three to four hundred billion that’s gone into this space in the last five to six years and you would think consumers should be better off. You know that no bank is yet fully modernised. The B2B side does not work. The consumer side – if you look at a country like the UK, our savings rate is lower than ever before. It’s less than zero percent, taking pensions into account. Consumer credit in the UK/US, most Western economies, has gone through the roof. Consumers are borrowing more and saving less. Yet you’ve got four hundred and five hundred billion dollars in this space. That just seems disconnected.
What we’ve done with Dozens is, we’ve got a business model that is sort of more like wealth management. We make money when our consumers save more and invest more. We get a tiny amount of margin on many many people’s balances and therefore we are incentivised to help them save. So, we say spender to saver and then saver to investor journey that we take them along.
Today we launched Pi1, which is the platform product. This is the platform that Dozens runs on. Now we’ve made it available for other banks and FinTechs because we don’t think there’s going to be a winner takes all in this space.
We’d like to enable other banks and FinTechs to sort of leverage the technology that we built as a clean sheet of paper. So FinTechs can go live in less than three months and banks get over their issue of having a single API, single contract, which is really important for procurement so often for banks. Pi1 can be used by one, maybe to just experiment with KYC – they can do their KYC, 90 seconds on the phone rather than the branch stuff and they don’t have to go through it again when they want to then experiment with authentication or something else. So, we try to cater to both the audiences there.
You are providing a holistic platform, then?
Every different service that you integrate with has a different scheme out of the API, has a different procurement process even for someone as small as us. So by taking both procurement and integration schemas away from it, by having a single unified language of integration. What it enables, for the B2B client, is to keep adding services or keep adding vendors. So, both vertically and horizontally they can keep experimenting until they find the one that they want to take in-house and build something bigger around.