Didn’t know this at all.
Niccole Braynen-Kimani of IMF point to Kazakhstan currency Tenge winning many awards for its design:
Startup app-only bank Mondo just made a crucial step in becoming an official bank after being granted a restricted banking licence by UK regulators.
Mondo is claiming the decision makes it the youngest-ever bank to be licensed in the UK, given that it only started up in February of last year.
Mondo aims to create a digital-only bank for the mobile generation that offers things like instant notifications of transactions and balances, a detailed Facebook-style feed of what you have spent your money on, and a breakdown of spending across the month.
Co-CEO and founder Tom Blomfield says in an emailed statement: “This is how the banking market changes, not with 800-page reviews from public bodies like the CMA, but with technology bringing new ideas to the table. We’re creating something that will completely revolutionise the way people think about their money.”
The 45-person company has been operating an early version of its product tied to a pre-paid card. It has proved hugely popular, with 30,000 customers spending £20 million ($25.9 million) on the cards since launch. Mondo also has a waiting list of 200,000 and the startupcrowdfunded £1 million in just 96 seconds earlier this year.
The restricted licence will let Mondo hold customer money for the first time – the crucial thing that makes a bank a bank – and let it test its products and services with a limited number of customers. Once regulators, the Financial Conduct Authority and the Prudential Regulation Authority, are satisfied, they will lift the restrictions.
Blomfield told Business Insider earlier this year that Mondo will alsohave to raise at least £15 million to get the restrictions lifted, as part of capital requirements. Mondo has to date raised £9 million and is valued at £30 million.
Mondo is one of a number of so-called “neobanks” in the UK: app-only banks with no branch network. Three others have so far been granted licences: Atom, Tandem, and Starling. Atom is the only one that has so far launched to the public, releasing a savings account earlier this year.
Mondo is also in the process of changing its name, after a legal dispute over its current one. The startup asked customers for suggestions 2 months ago and an announcement on the new name is expected in the next few weeks.
More on the name change here.
What does the app bank plan to offer?
While technology has changed every aspect of our lives, Blomfield says consumer banking has remained frozen in time. Banks continue to offer customers a static list of deposits and withdrawals rather than providing timely updates or useful tools to analyze spending or saving. In a world of instant messaging, many lenders don’t communicate in real time. Blomfield’s current bank (which he declines to name) took two weeks to alert him he’d overdrawn his account by £800 and then charged him £20. “The banks have their hands in your pockets constantly, taking money out,” he says.
The Mondo app is designed to tell you if you mess up. It lets you set up real-time notifications that say how much you’ve spent daily or whether you’re going into overdraft. If you need £500 to tide you over to payday, Mondo will tell you how much it will cost for a short-term loan instead of charging you after the fact.
Pulling out his phone, Jason Bates, Mondo’s 43-year-old co-founder and chief customer officer, shows his Mondo prototype app. He’d just had a burger with his wife at Five Guys in Soho, which turned up immediately on his account with a map of where he’d used his Mondo card. With a swipe, he demonstrates how you can turn off the card if you lose your wallet and immediately turn it back on if you find it. You can even block your card at pubs to encourage a dry spell.
By tracking your regular bills, Mondo can alert you if something is out of the ordinary, like a utility charge that’s higher than normal. This smarter use of data can help detect fraud, Bates says. “We see your phone is in Manchester but your card was being used in London,” he says. “We can block your card and send you a text saying: ‘Something is fishy. Can you confirm?’”
Though, one can always question the hype:
Blomfield and Bates say Mondo could charge much lower fees and still become profitable because its cost base is a fraction of what major banks shoulder. Old-style lenders are saddled with the expenses of maintaining branches and updating antiquated IT systems. Back-end computer systems that process transactions can date to the 1970s and have had meltdowns, says David Parker, head of banking at Accenture in London. Last year, British regulators fined RBS £56 million for a computer failure in 2012 that left 6.5 million customers without access to their accounts for weeks after a contractor updated software. The problems “revealed unacceptable weaknesses in our systems,” Philip Hampton, RBS’s chairman, said.
“It’s difficult to build an app that’s fantastic when you have an ugly core banking system,” Parker says. “The banks have to change quickly or they run the risk their customers will desert them.”
Not everyone is convinced tech-savvy banks will lure enough customers from the big four to become major players. New fintech banks may have a hard time attracting more than just “hardcore money geeks,” says James Moed, a consultant to fintech startups and a former director of IDEO, where he was a London-based financial services designer. “Most people find managing their money boring and regard banking as a utility,” Moed says. “I’m not sure great apps will motivate people enough to switch.”
Even so, mobile bank users globally are forecast to more than double by 2019, according to a 2015 KPMG report. Generation Y, the so-called millennials, born from the 1980s to the early 2000s, may be the most fertile hunting ground. Almost 67 percent prefer mobile apps for banking, compared with 46 percent of baby boomers, aged 51 to 69, according to PricewaterhouseCoopers. A study by Viacom’s Scratch research unit called “Sorry Banks, Millennials Hate You” found 71 percent of 18- to 34-year-olds would rather go to the dentist than listen to what their bank says.
Blomfield acknowledges that Mondo isn’t for everyone. “My grandmother would not use this bank,” he says. “But a big segment of the population would.”
Technology has challenged old banks every once a while but so far they have managed to remain planted. It will be interesting to see whether this time is any different..
Daniela Gabor of University of the West of England has a nice paper on political economy of repo markets.
The summary of the paper is here. She explains how we move from one crisis to another in macro/monetary policy. Emergence of Repo was seen as an end to fiscal dominance. But it triggered a new problem of financial dominance:
Prof Jayant Varma of IIM Ahmedabad has a nice post which gets to the crux of the negative interest rate issue.
He says as bonds have negative rates, the concept of yield/coupon etc is lost. So, investors are looking at bonds in terms of prices alone just like stocks. Whereas, investors are looking at stocks as bonds as they give dividends. So bonds are the new equities and equities are the new bonds.
This is like the prospect theory applying in monetary policy as risk averse bond investors are seeking risks in wake of losses:
David Stockman points to this amazing figures on rise in wealth of a few and inequality for others:
This is an interesting philosophical piece by Prof. Perry Mehrling. He says both financialisation and discontent with it are hardly new.
Just that we get mixed up in our understanding of money and credit. We like money for some of its features and credit for some other features. But in the discontent we just focus on money and not credit:
There is little doubt that these currencies as they gain ground could pull the carpet under the central banks monopolist chair. Central bankers who are habitual to tell the politicians and businesses about allowing disruptive innovations are going to get a bit on their game as well. More than anything else, it will be interesting whether central banks try and preserve their monopolies or let it go.
Tolle says digitial currencies will create problems for both banks and central banks. One key reason is the payment bit is going to get divorced from the deposits:
It always looked like but no one cared. Gordon Gekko argued along ago greed is good and has remained a dictum for the financial sector.
In a first-ever look at the internal economics driving private equity partnerships, Harvard Business School researchers have found that many of these funds can be torn apart by greed among founding partners who take home a much bigger share of profits than other senior partners, even when their performance doesn’t merit higher rewards.
This creates a ripple effect, where other senior partners become resentful, disenchanted, and leave their jobs, causing instability that spooks potential investors and could lead to a firm’s collapse. This pattern of unequal pay was much more extensive than anticipated among the 717 private equity partnerships studied by HBS finance professor Victoria Ivashina and Josh Lerner, the Jacob H. Schiff Professor of Investment Banking.
These rifts, far from being uncommon, are the average experience in PE partnerships, Ivashina says.
In their working paper released in March, Pay Now or Pay Later? The Economics within the Private Equity Partnership, she and Lerner found that a partner’s pay was often tied more to the person’s status than to performance. Previous success as an investor seemed to have little bearing on how much the partner earned. Founders in particular gobbled up a much bigger piece of the pie.
Senior partners who believe they aren’t compensated fairly are significantly more likely to leave a firm. These departures can give limited partners the impression that a private equity firm is unstable. That perception creates a wariness to invest, which means a PE firm often struggles in its attempts to raise the next fund.
So in essence, founding partners are damaging their own firms, in some cases beyond repair, by being greedy.
One still needs research to prove the obvious..
Julien Noizet of Spontaneous Finance has a piece on he topic.
The money multiplier has been really low in US for sometime now. Most imagined that with the Fed pumping so much money multiplier will jump significantly and we would have hyperinflation etc. But none of this happened. Why? In most such monetary thinking, we just ignore the functioning of the banking sector. Just like all sectors, banking too has its microeconomics and rigidities:
In this interview, Garbade explains how govt started predictable debt issuances. What is debt issuance? Well, govt issues bonds to meet its expenses. One way to borrow is whenever govt is short of funds, it announces it will borrow via so and so bond. This is the unpredictable bit which will create problems in markets. Govt is the prime borrower and any such sudden announcement will lead to scrapping of funds. If the market is facing crunch it will lead to higher interest rate for the govt itself.
A better way is that the govt forecasts its borrowing well in advance based on estimate of its income and expenses. It then uses the borrowing figure to work out a predictable calendar of borrowing in the coming quarters/years. This way market is well prepared to work out the funds available and plan accordingly.
But how did this thinking on predictable issuance start in US? This is what Garbade tells us:
But Lula’s term was anything but that. Brazil made major inroads in Global Economy Prospects. It is part of BRIC club, hosting both Olympics and World Cup Football etc.
The last thing one would like to put on this blog is tips to make money in stocks etc. But this bit from David Stockman is interesting. He is a big critic of today’s macro policies. He is one of those Washington insiders who has become a big critic of the nexus of Wall Street and Washington.
So, now he sees a big bust in US economy and has designed a trading program to help make money of this upcoming mess:
Now that the Federal Reserve has raised interest rates, we’ve reached a major turning point. One that will change the course of financial markets. That’s why David believes it’s urgent you take action now. In short, we’re facing the end of what David calls “The bubble finance era.” That means…
But David doesn’t believe that means you have to suffer. In fact, he believe this one of the best times for you to make money. And we’re confident his Bubble Finance Trading strategy is the best way for you to do it. And remember, the most lucrative gains are still to come as the Federal Reserve continues to raise interest rates.
We’ve done all the hard work for you. David has made the bubble finance trading strategy as simple as possible, saving you time and energy.
Well that is some in your face marketing telling how to make money when the world is crashing…
Howard Davies has a scathing piece on IMF and its forecasting abilities. Like a wolf it does not cry when there are expected fears (as in 2006) and cries when there are fears which apparently are not as much (as in 2016). Despite, repated such articles, IMF continues to catch our imagination. A job at IMF is almost a prerequisite to get a govt/central bank job in developing countries. He/She was at IMF after all is all that needs to be said..
Coming to the article, he picks on Apr 2006 report: