Q&A with Brett King: How Innovators are Rebooting Banking

8-1-14-BKing-article.pngBrett King, who founded the bank alternative called Moven, made a name for himself with his book, Bank 2.0, which pushed banks to think about how they needed to transform themselves in the digital age. In his latest book, “Breaking Banks: The Innovators, Rogues and Strategists Rebooting Banking,” King offers up interviews with the disruptors and the people trying to keep banks from losing their shirts to the disruptors. Executives from the likes of PayPal, Google, USAA, the Bitcoin Foundation and peer-to-peer lending networks such as Lenddo make an appearance in this book.

How did you choose the title, “Breaking Banks,” for your book? Do you think banks ought to be broken?
The final chapter is called, ‘We’re not breaking banking; we’re rebooting and rebuilding it.” We are realizing that the way we used to bank, it’s not translating into the way we live right now. A classic example is if you are a Generation Y [graduate] getting your first job and going to a bank, the first thing the bank is going to try to give you is a checkbook, which makes absolutely no sense.

In your book, many expect mobile phones to transform the industry. In what ways does the banking industry get this wrong?
The key problem is that we’ve thought of mobile as another channel for the bank. We’ve either tried to get Internet banking on a small screen, or let’s stick a debit card in a mobile wallet so we don’t have to carry plastic. Those two things just mimic existing things. The really interesting thing is that we can do something completely different.

What is an example of that?
In the ‘60s and ‘70s, when you went to the bank to withdraw cash, you knew exactly how much money you had to spend. When you ran out of money, you didn’t buy anything. Now, we are having a resurgence in awareness and control coming through mobile. The most important question a bank can answer today is: Can I afford to buy this? The bank doesn’t see that as a useful engagement with a customer. But from the customer’s perspective, in terms of my money, that’s the most consistent and most important question you can answer for me. When you go into an Apple store, you would like to buy a phone, the first question is: Do I have enough money? Yes. Can I afford to buy this? Let’s say the answer is no. You have rent coming due. But the bank can say: You could buy it if we do this for you, which is in-store financing. Banks right now are having the epiphany that mobile and the Internet can be a revenue channel, but they have the issue of cannibalizing revenue from the branch, and how do we get the compliance and risk guys to agree to let us fulfill this revenue digitally in real time? This is an industry issue that we have to solve over the next few years. This is where the neo-banks [such as Moven and Simple] and the new players [such as peer-to-peer lending platforms] have an advantage, because they don’t have those hang-ups about what we have done in the past.

How much of a threat are these alternatives?
There are threats and opportunities. Ten years ago, the biggest sellers of books were Borders and Barnes & Noble. Now, it’s Amazon. If the traditional players can’t adapt their distribution method, then someone else comes in and fills that gap. A few traditional players survive. Some of the record labels still survive, for example, and the larger book publishers still survive, but the smaller book stores have tended to disappear.

I want to inject some skepticism into this, because does it really matter that most banks are not as good at selling online as Amazon? How much of a threat are these neo-banks given that regulators heavily regulate the banking system, and start-up capital is high?
The reality is that you are going to have a bit of a mix. You are going to have the bigger banks make that transition first, and downsize the number of branches and shrink the bank branches. For the smaller banks, unfortunately, there is going to be a lot of consolidation. As these alternatives [to banking, such as neo-banks] come in, they will work with the big banks who will offer FDIC insurance and compliance on the back end. It’s not going to be a wholesale reboot and all the banks disappear. It’s going to be a case where probably the larger banks survive and some banks will become a wholesale provider. It’s likely the fastest growing financial institutions in the United States or the world in the next decade will not be traditional banks.

I often hear people say that branches can be transformed to offer advice rather than transactions. But you say advice in the branch is no longer a differentiator, and you also are critical of attempts to give advice in the branch because the customer can view that as an attempt to upsell them.
If you think about what will build a strong relationship with the bank, it’s the bank’s ability to solve your problem or answer your questions. Once you are competing inside a branch against a [mobile] platform that can give you advice every day, you just can’t give advice enough or advice that is useful enough. That dramatically changes the economics of the branch. In five years’ time, it’s not going to be like the branch we have today. It might be like a small coffee shop or an Apple store where you have your Geniuses [to help solve problems]. It won’t be a heavy selling environment.


Naomi Snyder


Editor-in-Chief Naomi Snyder is in charge of the editorial coverage at Bank Director. She oversees the magazine and the editorial team’s efforts on the Bank Director website, newsletter and special projects. She has more than two decades of experience in business journalism and spent 15 years as a newspaper reporter. She has a master’s degree in journalism from the University of Illinois and a bachelor’s degree from the University of Michigan.