Insightive.tv: Can you start by giving us an overview of the customer contracting process at Monzo?
Jonas: It is fully digitised. There is no paper in anything we do other than the letter in which the plastic card for your wallet comes in. In the signup process on the mobile phone you can read the terms and conditions, and then you agree by tapping a button. We ask for your name, address and date of birth, and then for you to take a video of yourself stating your name. We also ask for a picture of your ID document. We then verify that document with a third party databases and confirm manually that the person in the video is indeed the person on the ID.
There is no real reason for the process to be any more complex than that. And this is actually going above and beyond what is required by the LSG money laundering guidelines. The fact that we make people take a video is one further step we wanted to go because it is very difficult to forge a video. It is possible that technology will allow this process to be further simplified while remaining as secure. But it is important to error on the side on security and verification — our commitment to this is seen in our processes.
Insightive.tv: What do you see as the main drivers for a change to digital banking? Is it all about consumer demand?
Jonas: Let me put it this way — if I appeared, out of context, here on Earth, and was slowly learning about the way of the world I would quickly come to understand that everything I wanted to do could be done with this magical device called a smartphone. If I lived in London, within one hour I could have almost anything delivered to me from Amazon. I could order food, a car, I can sign up for these things effortlessly. These are not unimportant services or services where nothing can go wrong. They are just services where everything works that way, and there is some competition that makes sure it is really really simple.
When I eventually came into contact with banks I would be really surprised that these banks don’t work that way at all. It is totally different. I have to go to a bank branch, make an appointment, wait, give them tonnes of documents. If I go travelling they might block my card. These things are not good for the customer, and the only reason they are the way they are is that it has been very difficult to break into that industry. Now, I think, the generation that has grown up on all of these new services just finds the situation unacceptable. They are willing to experiment even with their financial service provider.
Insightive.tv: Are there additional business drivers, such as operational efficiency, that influence moves towards digitisation?
Jonas: It is much cheaper. But we are opening up an avenue into a market really based on consumer demand. And the fact that this business model is cheaper is just an added value. But it is undeniable that it is a more efficient process.
I am originally from Germany. I recently went back there because I had entirely locked myself out of my German bank account. I sent them a letter to enable online banking, which was already a hassle. They sent a letter back to my parent’s house in Germany saying that they could not accept my signature because it looked different from the way it looked when I was thirteen — when I signed up. The only way to unblock my account was to go in person to the retail branch. I then had to fill in four different forms with the exact same information. They then put that information in envelopes and sent them to different parts of the bank branch where they were presumably taken out of the envelopes, and, hopefully with as few errors as possible, digitised into their system so they could be ‘actioned’. As you can imagine, if that was all digital, neither I or the company would have had to go through any of that. It would have been both a better experience on my end and a cheaper and more efficient process on theirs.
But everything is digital — that is the status quo, the assumption. One step beyond that is to make the digital processes as efficient and smooth as possible. We can use software to make the people we have that conduct processes even more efficient by building, even more, software. For example, if we want 24-hour customer support with a one minute response times — which we are already offering — instead of hiring a thousand people to do that, we could hire fifty people and fifty engineers. You can assist the human with artificial intelligence, and make them able to work with many interfaces, and multiple customers, at the same time. You can automatically measure which bits of customer feedback take the most time, and then automate them, or address them in the product.
I think part of this, and this is a strategy we have taken, is to integrate these solutions internally. You could have everything digitised and outsourced to a third party, or you can have everything digitised and treat Operations as just another software problem. Having engineers and non-engineers working closely together — that is where you get another 10x increase in efficiency, even within a digitised company.
Insightive.tv: Does that mean you build all of your tech solutions in-house, or do you work with third party suppliers?
Jonas: We build all of the software ourselves. But that is not to say we invent all of these concepts. All of these concepts are generally well-understood things, such as putting every bit of manual work that occurs within the bank through a centralised task management system that then gets routed to a responsible party. These kinds of systems have been well researched and are well understood. The perspective we have taken is that if you consider software development to be a core competency, then, in the end, you will be better off just writing these things yourself because they will, inevitably, have to be highly customised to your domain. If you really want to be efficient then you don’t want to spend all of your time trying to work around issues in some software that was initially designed for a slightly different use case.
However, we use third parties for a few things. For example, where data is concerned you cannot invent data. To do an address verification check against an identity — we cannot do that without a third party. But, whenever it’s just software that needs to be written, that is something that we want to keep doing.
Insightive.tv: Do you think a digital business model introduces new levels of risk into your organisation?
Jonas: I would actually say that most business models are digital business models, and the question is just whether or not this is fully embraced. Any company that runs software, either internally or outsourced, opens themselves up to the risk of security breaches or data loss. This is not something that is specific to use. This is something that could happen to any business that uses software, regardless of whether or not they also use paper.
The same goes for compliance concerns. First and foremost we have to comply with all of the governing regulations — especially with respect to money laundering, treating customers fairly and data protection. But, again, this is not a consequence of being a digital proposition, that is just a consequence of doing business.
There is certainly some risks that are more pronounced, but they sort of just manifest themselves in different ways. For us, if all of our engineers quit, or are unqualified, that is a risk we have to mitigate. But if you outsource this development the risk becomes that entity’s ability to do their job correctly. And even if you have no software, you still have to comply with regulations regarding how, and for how long, you store pieces of date. They are just now on pieces of paper. So the risk is different but it is still there. You still have to make sure, beyond a reasonable doubt, that a person is who they say they are and that their identification is authentic.
Insightive.tv: Do you consider yourselves, at Monzo, to be disruptors within the banking sector?
Jonas: This is one of those buzzwords — I think people like to think of themselves as disruptors. On the other hand, people label us as disruptors, so, on some level, it must be true. In my opinion, what we want to do is improve and augment the financial service system. One of the key decisions we have made strategically is to go through the hard work and get a banking licence, understand how the system works from the inside and determine how we can improve it from the customer’s perspective looking for a 21st-century bank.
It is not possible to participate in modern society without having a banking service that serves two purposes. One is as you store of money and the other is to allow you to process financial transactions. And this should be free and instant for everybody. Our mission is to be the provision of that service for as many people as possible. Our ambition and objectives are really global in that sense.
Jonas Huckestein is one of three co-founders of Monzo and current Chief Technology Officer. We sat down with Jonas to get an understanding of how digital contracts have impacted the business model Monzo is using to revolutionise financial services.
Monzo is a UK Challenger Bank with ambitions to provide fully digital current account services to a global market. They set a crowdfunding record in March, raising £1 million in 96 seconds — enabling customers to become shareholders through investment, and displaying a real desire on behalf of segments of the public for digital change within the industry. Monzo was granted a limited banking licence this year and will open a full range of financial services in 2017.
THE DIGITAL FUTURE OF CUSTOMER CONTRACTING series