Former First Direct and Egg
executives Steve Townend and Dominic Keen are setting up one of the
first mobile-only banks, claiming the channel can “redefine
transaction banking”. But critics believe banks that restrict
themselves to one channel will struggle to compete. William Cain

Riding the wave – some might say ‘bubble’ – of mobile
phone-based financial services, two senior UK banking executives
have developed what they say is an innovative mobile-only bank that
is targeted to acquire 100,000 customers in its first year.
According to the founders of the start-up – called MoBank – such
mobile-only banks are simply and logically the next phase in the
evolution of the global retail banking industry.

Steve Townend and Dominic Keen – who had roles in the
development of UK internet-only bank Egg and HSBC’s pioneering
First Direct – are working towards a March 2009 launch date.

Townend told RBI: “The service and design have to be
brilliant because the product is all about convenience and
choice… We are using mobile because it is a manifestation of
being new and different. There are a lot of companies in the
payments mix, but nobody is designing for customers from a mobile
perspective – [these other products] are an addendum to what they
already do: shoe-horning what they do into their existing

The “bank in your pocket” product will offer a savings account,
person-to-person payments, account aggregation, bill payments and a
virtual prepaid card. Its payments function will allow customers to
book cinema tickets, order fast food and purchase other goods and
services through the phone’s specially designed m-payments
platform. There are no plans, yet, to include contactless payments

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By GlobalData

Townend said MoBank’s proposition was based on customer
convenience and choice. He said its user-friendly interface
improves on current bank offerings which are “awkward and difficult
to use”. The revenue plan is for the business to make money out of
m-payments: users are to be charged £1 ($1.76) per four
transactions in the start-up phase to cover the business’s

M-banking expert Richard Crone, owner of US-based Crone
Consulting, said the development of mobile-only banks was similar
to how internet banking evolved in the mid-1990s. But he said it
was hard for start-ups to survive without the backing of a big
institution. Security First Network Bank and were the
pioneering internet banking businesses in the US, but both of them
eventually failed.

Institutions continued to invest in branch networks because they
were useful for opening accounts, cross selling and generating fee
income, Crone stressed.

Peter Simpson, chief marketing officer of IT company Monitise,
also said MoBank would struggle to compete by operating through a
single channel. It would face credibility issues early on if it
wanted to establish itself as a bank, he added. UK-based Monitise
makes its money by providing the technology for banks to offer
m-banking on mobile phones.

The more channels you have…

Simpson told RBI: “First Direct worked on the principle
that the more channels you have, the happier your customers are. I
think there is a real challenge in a single-channel approach and it
will be quite tricky to get right. The banks that work with
Monitise have an m-banking system which is in addition to their
other channels.”

Steve Townend, MoBank co-founderMonitise is currently expanding its business from the
UK into the US and is in talks with several banks in the country. A
recent RBI lead story showed how there was a wide
disparity in m-banking uptake between the largest banks in the US –
Bank of America had over one million active internet banking users
in June 2008, while Citi had just 20,000 (see RBI

Crone at Crone Consulting said Jibun Bank, a 50:50 venture
between Japanese telecom KDDI and Bank of Tokyo-Mitsubishi UFJ,
Japan’s largest bank, which began taking customers in mid-July
(see RBI 595), could probably lay claim to be the first
mobile-only bank.

It allows consumers to open accounts without signatures over the
internet through their mobile phones, although they can also sign
up at Bank of Tokyo-Mitsubishi branches or KDDI offices. Products
available include yen deposits, fund transfers to other accounts,
ATM withdrawals and payments through a virtual prepaid card

Jibun is projecting that the service will be profitable by 2011
with some 2.4 million people signed up and deposits of ¥1 trillion
($9.3 billion). A bank spokesperson told RBI: “Jibun Bank
will remain competitive with higher deposit rates and lower fees
than traditional banks. We do not see the customer number targets
as ambitious. We will focus marketing on the 30 million customers
of KDDI and the 40 million of Bank of Tokyo-Mitsubishi.”

Banks across the world have established mobile banking and
payments products as an extension of their distribution offering.
The most high profile launches have been in India, where people are
more likely to have a mobile phone than a bank account in some
areas of the country, according to a recent VRL KnowledgeBank
report (see RBI 579). It has also been a means for foreign
banks to gain customers in spite of branch restrictions employed by
the country’s government.

This year in India, Barclays launched Hello Money, Standard
Chartered launched Cardless Cash Withdrawal and ICICI introduced
iMobile. In South Africa, another market where there is a large
unbanked population, Absa launched CashSend, while Gulf Bank
introduced Mobile Plus in Kuwait. All of the products include fund
transfers between customers via text messages which can then be
withdrawn at ATMs by entering security codes.