Banking on Disruption
Ask many people about their bank and you’ll get a groan: unrealistic opening hours, service with a frown, the choice between being flayed alive by commissions or handing over your first-born child… Fortunately, though, this dinosaur of an industry is teetering on the brink of evolution. And a local fintech startup is gearing up to join others giving the banks a run for their money.
In recent years, a new generation of digital-only neobanks has emerged. These are typically based on cutting-edge tech, have no physical branches and rent banking licenses from established banks. All this means vastly reduced costs and greater flexibility, which translates into commission-free accounts, cards and transactions or favorable exchange rates*.
The brainchild of CEO Jordi Dominguez and co-founders, bnc10 was born from the conviction that banking had to change. And that Barcelona, with its long banking tradition and great startup ecosystem, is the place to innovate. The name is text-speak for banco, while 10 is the top mark in an exam. Jordi says, “We wanted to be a bnc out of BCN.”
He goes on to explain, “While there have been a few attempts to disrupt the sector over the last 20 years, the technology wasn’t ready.” Now though, and with smartphones ubiquitous, “There’s been, I think, 20 billion USD last year thrown at fintech to try to take a stab at the next generation of banking.” Recent GDPR and PSD2 legislation have also opened up the market, giving new players unprecedented access to potential clients.
While they’re entering a crowded market this summer, Jordi is confident of demand. He cites 2,000 surveys indicating most people are fed up with their current bank, over 8,000 downloads of the app and 3,000 people on the waitlist.
So How Does It Work?
You can open a bnc10 account via smartphone in minutes and close it whenever you want. Deposit your paycheck and set up direct debits if you need, but there’s no obligation to do so. Send and request money via a contact’s mobile number, and get push notifications for every transaction. A debit Mastercard is provided for cash withdrawals and payments.
Customers—especially bnc10’s target of tech-savvy digital natives—are demanding greater transparency, flexibility and control. Expats in particular want excellent service and increasingly convenient options to operate on a global scale.
As part of their strategy, bnc10 uses AI and machine learning to track and analyze your spending. Jordi says, “You’re already giving the bank all the data, why doesn’t the bank use it to make your life easier?” As well as suggesting ways to save or budget, in the future he envisions intelligent, personalized solutions: buy one-click travel insurance when the app detects you’ve gone abroad; property insurance by the hour or day; helping autónomos (freelancers) by skimming IVA (VAT) off incoming payments.
How Do They Make Money?
bnc10 debit cards are free for customers, but vendors pay a commission when you use them. In the future, Jordi promises basic account features will remain free, but commissions will apply to “premium” products like travel insurance. Other neobanks like Revolut and N26, and indeed many non-financial services, operate similar business models with free and paid plans.
Building up large client lists and databases puts neobanks in a strong position to team up with third parties to offer financial products to their customers. Jordi sees traditional banks as potential partners and the competition as Facebook, Amazon or Google, “At some point, why can’t Amazon sell you a mortgage?”
Like other sectors, he predicts finance will change to reflect the realities of modern life, work and the sharing economy. “I look at my kids and wonder, are they going to be able to get a mortgage as we know it? Probably not,” he muses, adding, “We’re already seeing the business model of owning versus renting or leasing a car… we think that can also happen with mortgages and any other product.”
So, should you take the red pill?
Whether a neobank is for you depends on your needs and lifestyle. bnc10 has monthly deposit and spending limits of 5,000€ and 3,000€, respectively, to comply with anti-money laundering regulations. So it has limitations for some people, but could still be a handy alternative for travel or to move money. And if they can handle IRS FATCA reporting, as Jordi promises, it’ll be attractive to US citizens.
And Is It Safe?
While the branding promotes a free-and-easy image, neobanks have to take cyber-security seriously. They must also comply with regulations governing the banks they rent licenses from, or payment services providers they partner with. These are normally answerable to their respective national regulatory bodies. However, it’s an evolving field with variable international or cross-border business models so always make sure you understand exactly how your money is secured.
Whatever your feelings about Jeff Bezos becoming even more omnipotent, or your phone tracking your every movement, disruption, competition and choice are healthy for everyone. Witness the increasing availability of commission-free, no-strings accounts, banks like Evo reducing branches and incorporating AI and fintech alliances to improve their digital offering, and even giants like La Caixa targeting millennials. At DayOne’s recent Innovation Summit, Caixabank Director Carlos Trenchs underscored the need for banks to adapt to new market demands, integrate technologies to serve rapidly evolving sectors and support startups disrupting traditional industries.
As Jordi puts it, “The technology is ready, consumers are ready and even the traditional banks admit that now is the time and they have to innovate.”
*This is an overview only. Conditions vary from bank to bank and a range of providers is available. Potential customers should check for themselves.
Kate Williams is a freelance writer, editor, translator and Director of The Writer Stuff. She left her native England for Barcelona in 2003 and never looked, or went, back. When she isn’t writing or discovering all the cool stuff going on in the city, she enjoys hiking in the Catalan countryside, kayaking on the Costa Brava, and volunteers at a local animal sanctuary. You can read more by Kate here.