Things of Note - June 28, 2019

Fun in Finance

Wrapping up the week with a variety of banking news from around the globe. It’s not digital banking, Neo-banking, mobile banking - it’s just banking.

APAC

Things are moving quickly in Singapore. At the Smart Nation summit on Wednesday, Prime Minister Lee Hsien Loong commented positively on the merits of virtual banks - saying “Some other countries have created frameworks to license new players with no banking parentage to set up digital banks, i.e. banks without branches or ATMs. The Monetary Authority of Singapore is now actively studying whether to allow this in Singapore and hopefully we’ll have something to announce soon.”

Well, two days later that announcement came with MAS Chairman Tharman Shanmugaratnam announcing up to five new digital bank licenses to be issued in Singapore to promote “greater competition and innovation”.

  • Up to two digital full bank licences, enabling a wide range of financial services and take deposits from retail customers - licensees must be companies with Singapore HQ and controlled by Singaporeans (foreign JVs possible).

  • Up to three digital wholesale bank licences, for serving SMEs and other non-retail segments - no Singaporean control requirement.


Singapore remains proud of their progressive liberalization of their banking sector.

Singapore remains proud of their progressive liberalization of their banking sector.

EUROPE

So competition and innovation are clearly good, right? Giving customers choice and spurring the incumbents on to transform their own services and experience.

But Fintech darling Monzo in the UK released their annual report this week showing that it’s still tough to balance product development, risk management and acquisition in a high-growth challenger bank. Let alone turn a profit.


More customers and more Monzonauts to service them acquired.

More customers and more Monzonauts to service them acquired.

Ahead of Monzo’s planned US expansion, they’ve grown their UK customer base to over 2million and hired another 413 ‘Monzonauts’ to take headcount to 713 total.

At least one more Monzonaut required - a permanent Chief Risk Officer - a role which of increasing significance as they explore alternate credit risk scoring models and expand their lending portfolio (£3.1m expected losses on a modestly increased loan portfolio of £19.2m).

Still the one to watch (not just on TV where they’ve launched their ad campaign).

AMERICAS

So Monzo is coming to the US where the digital arms of the incumbents are still figuring out their purpose in life whilst US Fed Chairman Powell is leveling the playing field by signaling rate cuts ahead.

The newest kid on the block - Goldman Sachs’s consumer finance play, Marcus - quietly announced they are paring back their attractive High Yield promotional rate from 2.25% to 2.15%.

Marcus by Goldman Sachs following Ally bank and lowering their promotional savings rate

Marcus by Goldman Sachs following Ally bank and lowering their promotional savings rate

Until the Fed actually cut, rate hunters do still have plenty of choice to grab another 10-20bps or so - my personal favorite, Redneck bank - “where bankin’s funner”.

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It is fun out there. With a little air cover from the FDIC; a forward thinking agenda in HK and Singapore and the efforts of Tom Blomfield’s Monzonauts and others, customers are already becoming the net beneficiaries and likely to remain so.