Bringing fairness to banking

Their use of inno­v­a­tive tech­nolo­gies allows them to pro­vide cut­ting edge fea­tures, effort­less account cre­ation and low­er fees. But are these new finan­cial ser­vices real­ly offer­ing a dif­fer­ent solu­tion ver­sus con­ven­tion­al banks?

To answer the ques­tion, we need to look at the busi­ness mod­el of a bank. You could think of a bank as a plat­form, bring­ing togeth­er bor­row­ers and depos­i­tors. How­ev­er, nor­mal­ly with a plat­form you’d expect a much low­er plat­form rent, noth­ing like the dis­crep­an­cy we see between the rates charged to bor­row­ers for over­drafts, cred­it cards and loans ver­sus the rates banks offer depos­i­tors for their cur­rent and sav­ings accounts.

Due to this high plat­form rent we assume banks must add extra val­ue act­ing as an advis­er to their cus­tomers, by help­ing to reduce debt and increase sav­ings. But as long as they rely most­ly on con­sumer debt for prof­itabil­i­ty, it will prove dif­fi­cult to con­vince share­hold­ers to invest in propo­si­tions that focus on help­ing cus­tomers to grow their mon­ey, rather than spend it.

“A sus­tain­able business’s com­mer­cial inter­ests should be aligned with the needs of its cus­tomers. To real­ly dri­ve inno­va­tion that deliv­ers cus­tomer ben­e­fits that go beyond a slick app and some­what improved trans­paren­cy, you have to start with the busi­ness mod­el,” says Ari­tra Chakravar­ty, founder of fin­tech start­up Dozens. Mr Chakravar­ty pre­vi­ous­ly spent more than a decade at HSBC cov­er­ing invest­ment bank­ing, strat­e­gy, chief oper­at­ing offi­cer and dig­i­tal roles.

He then left to found Dozens, a com­pa­ny built on a busi­ness mod­el that aligns busi­ness inter­ests with the customer’s finan­cial well­be­ing. Dozens’ finan­cial prod­ucts, app and ser­vices were designed in col­lab­o­ra­tion with 300 peo­ple across the UK to ensure it caters for a vari­ety of finan­cial needs.

By pro­vid­ing cus­tomers with sim­ple, dig­i­tal access to finan­cial lit­er­a­cy and open­ing up sophis­ti­cat­ed prod­ucts pre­vi­ous­ly ear­marked for wealth­i­er seg­ments of the mar­ket, Dozens looks to make sav­ing eas­i­er and more reward­ing for every­one.

“We get to invest time in cre­at­ing quite dif­fer­ent fea­tures for bud­get­ing and sav­ing because our busi­ness mod­el relies on it,” says Mr Chakravar­ty.

Dozens is not a bank, but it is the only UK fin­tech licensed as both an e‑money insti­tu­tion and an invest­ment firm. In that, Dozens’ offer­ing is unique as it is able to com­bine a cur­rent account with smart bud­get­ing and sav­ing tools, as well as an invest­ment man­ag­er, all in one app. With this inte­grat­ed approach, Dozens aims to sup­port peo­ple on their jour­ney, wher­ev­er they are, from spender to saver, or saver to investor.

A sus­tain­able business’s com­mer­cial inter­ests should be aligned with the needs of its cus­tomers

A great num­ber of peo­ple bud­get by check­ing their bal­ance every day, so Dozens’ smart bud­get fea­ture which sim­ply takes a user’s income and expens­es, and cal­cu­lates a bud­get that adapts allow­ing for fluc­tu­a­tions in spend­ing, goes a long way to enabling users to stay on top of their finances.

“If a cus­tomer has £20 to spend a day and they go over this lim­it, then obvi­ous­ly more mon­ey has to come from else­where. The bud­get fea­ture tracks how much you’ve over­spent then it recal­cu­lates your bud­get to bal­ance the dif­fer­ence across the week and keep you in cred­it. If you can focus on hav­ing a pos­i­tive week, you are much less like­ly to go into over­draft by the end of the month,” says Mr Chakravar­ty.

In addi­tion to its bud­get­ing tool, Dozens also offers a vari­ety of ways to save, like their roundup fea­ture: cus­tomers can choose to save by round­ing up trans­ac­tions and cre­at­ing auto­mat­ic sav­ing rules, such as “save £1 every time it rains” or when some­one tweets. While these fea­tures might only appear to help users save a small amount, this amount – and the change in behav­iour – builds up over time and helps spenders save in the long term.

“Habit­u­al spenders find it nat­ur­al to get their account bal­ance to zero, but when they have switched on these rules, sav­ing is smooth and effort­less, and so they are helped on their jour­ney to becom­ing a habit­u­al saver. It’s all about bring­ing sav­ing a lit­tle bit clos­er to the customer’s life and then try­ing to make it fun,” says
Mr Chakravar­ty.

Dozens also looks to make invest­ing more acces­si­ble for those peo­ple who have already built some sav­ings. Research by YouGov, Dozens and See­drs this year found that almost half of con­sumers don’t know what inter­est rates they are get­ting on their sav­ings, and more than sev­en in ten peo­ple do not have invest­ments.

Mr Chakravar­ty notes: “Banks hold­ing retail deposits aren’t struc­tured in a way which incen­tivis­es them to help cus­tomers invest some of their sav­ings into high­er-return prod­ucts, even if it’s right for their risk appetite and finan­cial sit­u­a­tion. Any funds moved away from cur­rent and sav­ing accounts means a small­er lend­ing book and so less rev­enue.”

To sim­pli­fy and open access to invest­ing, Dozens offer 5 per cent per annum list­ed fixed inter­est bonds. How are Dozens able to offer a fixed inter­est of 5 per cent? Because they treat the 5 per cent as part of the cost of build­ing an entire offer­ing around small savers, mak­ing inter­est rates a top­ic of dis­cus­sion again. Dozens look to fur­ther open up the world of invest­ing by mak­ing it eas­i­er and more acces­si­ble with their the­mat­ic port­fo­lios and a sim­ple onboard­ing jour­ney: “With inter­est align­ment in mind, we don’t charge plat­form fees if your invest­ment goes below its orig­i­nal val­ue. So on those days you lose mon­ey on the invest­ment, we don’t charge, mean­ing we only do well when you do.”

It’s not just the finan­cial space Dozens is look­ing to dis­rupt with the prin­ci­ple of fair­ness, it’s the work­place as well. Mr Chakravar­ty is look­ing to rede­fine the cul­ture of a finan­cial insti­tu­tion. The uncon­ven­tion­al team behind Dozens is almost two-thirds female and approx­i­mate­ly half the employ­ees do not have a finance back­ground. Com­mu­ni­ca­tions, all the way to salaries, are com­plete­ly trans­par­ent and prod­uct devel­op­ment always starts with under­stand­ing the diverse team’s finan­cial needs, and then expand­ing this process to the Dozens com­mu­ni­ty across the UK.

As finan­cial inclu­sion is key to Mr Chakravarty’s mis­sion, the firm is also invest­ing in non-dig­i­tal cus­tomer research. They cur­rent­ly run ini­tia­tives such as “The People’s Mon­ey Sur­vey”, a tour of the UK where Dozens seeks to under­stand people’s finan­cial needs and which ser­vices are need­ed, and a pop-up in part­ner­ship with West­min­ster City Coun­cil on Har­row Road, a strug­gling high street in Lon­don, to learn from local busi­ness­es and res­i­dents about how finan­cial ser­vices can help revive the street.

It may seem like a no-brain­er that a busi­ness’ and cus­tomers’ incen­tives should align, but in the finan­cial indus­try it’s unheard of. So, have these finan­cial ser­vices actu­al­ly offered a new solu­tion? Unlike many chal­lengers, Dozens is going beyond sim­ply offer­ing a user-friend­ly inter­face and is tru­ly com­mit­ted to fun­da­men­tal­ly trans­form­ing the finan­cial indus­try so it is fair­er towards cus­tomers.

When invest­ing (exclud­ing our 5 per cent per annum fixed inter­est bonds) your cap­i­tal is at risk. Find out more at www.dozens.com

When investing (excluding our 5 per cent per annum fixed interest bonds) your capital is at risk. Find out more at www.dozens.com