Over the weekend, many in the FinTech Twittersphere mourned the end of US digital bank – Simple.
People ask about the impact of @simple on the industry, but the people who know @shamir_k @i2pi — even those that have had just a few conversations from time to time — know that it was these two founders that impacted what fintech’s next decade was to become. Thank you both. https://t.co/RJiXexVtfu
— Bradley Leimer (@leimer) January 8, 2021
(For those in need of a quick history lesson. Simple was founded in the US in 2009 with the purpose to ‘build a bank that didn’t suck’. It was sold to Spanish banking giant BBVA in 2014 for $117 million. In 2018 co-founder and CEO Josh Reich left the bank to go live in a farm in Oregon – which is something of a mini trend for FinTech founders. This weekend, BBVA informed customers that the Simple accounts were to be closed, and accounts migrated to BBVA.)
Simple is one of the first ‘all digital’ challenger banks – the forerunner to FinTech darlings to come from Moven to Monzo and N26 to Starling. These new banks were young, hip, digitally savvy, easy to onboard and, at founding, exclusively a current account offering. At the start many of these new FinTech entrants were sneered at, by the banking establishment, as ‘payment cards’ or ‘pre-paid offerings’.
Many FinTech entrants fell (and still fall) into the ‘app’ category – offering the front end, customer facing aspects of financial services. Hold your money in a regulated, incumbent bank – but use TransferWise to send money cross border. Deposit your salary in a current account – but use Monzo to support your day-to-day spending and budgeting.
FinTech gurus smugly strutted in front of vague PowerPoint presentations discussing the ‘unbundling of the bank’ and the siphoning of customers from old, creaky traditional institutions. ‘Ownership of the customer’ was then left in the hands of the new FinTech upstarts, reducing the ‘banks that suck’ to highly regulated, deposit holding commodities.
Fast forward to 2021 and we now have the likes of Starling offering loans to SMEs. The most reputable FinTech startups have or are applying for a regulated banking license and incumbent banks are launching their own digital offerings (at varying levels of success)
When we launched FTT Lending 3.0, we reminded our community that a bank is a regulated entity that takes deposits and offers loans. <==It was always the ‘offers loans’ portion of that description that was the most lucrative for banks. With long term low levels of interest rates, unbundled customer facing services, changing customer behaviour and advanced technologies that the world has changed.
New entrants to the financial services space can offer lending solutions that are not only cheaper and less complicated but use more sophisticated data points redefining the very notion of who and what is ‘credit-worthy’. However, many incumbent banks continue to cling to outdated credit models and are unprepared for true personalisation. Most crucially, they are unable to bridge the divide between lending and payments. The ‘Funds to Wallet’ approach often touted in this lending environment, could reduce the importance of the banking partner within the transaction.
This isn’t simply offering a bank account ‘that doesn’t suck’. The next generation lending model threatens to remove ‘the bank’ from the payment and lending activity entirely.
Over a decade later, as the industry closed a door on one of the first current account challengers, could starting with lending offerings offers the ‘disruption’ we were promised?
This is the core idea that frames our signature ‘Big Question Debate’ at FTT Lending 3.0 on February 24th. Our Rockstar Speakers will take the stage to answer the question:
Will Lending 3.0 bring the disruption FinTech promised a decade ago?
Join Alison Harwood, Head of London Branch, Varegold Bank, Daniel Drummer, CFO, auxmoney, and Veronika Lovett, Co-founder and CCO, Esme Loans, as they each get the chance to state their case to our community. Be with us at 12 noon GMT for your chance to watch the debate and cast your vote for who answered our Big Question the best.
This is Lending 3.0 – where the power of lending is realised in a 21st Century World.