Article

Are virtual banks the 'real deal'?

Is alliance with a surcharge-free ATM network a sufficient physical presence, or are bricks and mortar a must? 

December 5, 2013

By Robin Arnfield

Contributing writer

Online banking has become second nature to most Americans, and mobile banking is catching on fast. In fact, a recent Accenture study found that the number of consumers who think banks should make spending on mobile programs a priority is up 50 percent from 2012.)

So is it enough these days for an FI to establish an e-presence, hang its had on a brand differentiator of  real-time personal budgeting, and contract with an independent ATM network for surcharge-free access? 

New York-based Moven believes so. The virtual FI targets smartphone-centric consumers with a bank account that helps them manage their spending in real-time at the POS.

Moven provides customers with a mobile app for iOS- and Android-based smartphones, a MasterCard-branded debit card and an NFC sticker that they can affix to a smartphone for contactless payments. The virtual bank doesn't issue paper checks and has no plans to issue a credit card, although it is looking to introduce an overdraft or line-of-credit facility for creditworthy customers. Transaction processing is provided by FIS.

"Our app provides real-time feedback and analysis on customers' spending patterns on their smartphone screen every time they make a purchase," Moven President Alex Sion said. "Customers can either just view their Moven account using our app, or they can link their credit cards and accounts at other banks, so they get an overall view of their spending and financial health."

Every time customers use their Moven card at a merchant, Moven categorizes the transaction and emails a receipt showing how much they have spent on that category during the month. "Our app will tell you, for example, that you've already spent $200 on dining out this month, and this is pushing you into the red," Sion said.

Moven ties money management and spending decisions to the point of sale, which Sion argues is more effective than expecting consumers to do their monthly budgeting after they have spent their money. "The problem is that 80 percent of consumers don't have the discipline to budget," he said. "Our vision is to take the work out of money management, so that managing your money becomes as easy as spending it."

Currently, customers can only deposit funds in their Moven account through electronic transfers from their other bank accounts or through payroll direct deposit. Sion said it plans to offer bill payments and remote deposit capture of checks. Customers have access to a network of 40,000 surcharge-free ATMs.

Data

Using third-party data providers, Moven divides all of a customer's purchases and other transactions into three categories: discretionary spending, basic living expenses and savings. The discretionary spending and living expenses categories are broken down into individual categories such as dining out, travel, groceries and utilities, while the savings category shows the customer's balances across all of their savings accounts.

The Moven app has two features, MoneyPulse and MoneyPath. MoneyPulse uses visual clues (red, green and yellow) to provide a snapshot of how fast customers are spending their money compared to their spending patterns in previous months. A reading in the green means they are spending less than they typically do. In the red, and they are spending more.

MoneyPath provides a graphical timeline of a customer's spending patterns over the previous month. Moven customers can integrate MoneyPath with their Facebook account, so they can see how their upcoming social events such as celebrating a friend's birthday will affect their spending.

Integration with social media is an important element of Moven's platform, according to Zilvinas Bareisis, a senior analyst with Celent. Customers can either log on to their Moven account via Facebook or directly via the Moven website. In addition, they can make payments out of their Moven accounts to friends via Facebook, email or smartphone.

"Providing that they have good credit ratings, Moven would rather have customers with a large number of Facebook friends or a big Twitter following than people who aren't active in social media," Bareisis said. "It wants customers to recommend Moven to their friends."

Beta pilot

Formerly known as Movenbank, Moven was founded by CEO Brett King in 2011. King, an Australian banking consultant, is author of the influential books "Bank 2.0, How Customer Behavior and Technology Will Change the Future of Financial Services" and "Bank 3.0 — Why Banking is no longer somewhere you go, but something you do."

In August 2012, Moven raised an initial round of $2.41 million in seed capital from investors including London, U.K.-based Anthemis Group and Boston-based Raptor Group. Life.SREDA, a Russian venture capital fund, made an undisclosed investment in August.

Moven launched a beta pilot with U.S. consumers in May and is currently ramping up its marketing in readiness for commercial rollout in the first or second quarter of 2014. "We currently have a few thousand customers," Sion said. "We've kept tight control of the number of customers, because we want to keep improving our model and understand our customers' financial behavior before rollout."

Moven ultimately plans to expand outside the U.S. "Our platform is sufficiently scalable to allow us to offer Moven in other countries," Sion said.

Front-end

Like rival U.S. virtual banks Simple and GoBank, which also promise customer-friendly money management, Moven acts as a front-end to an FDIC-chartered bank. Moven customers' deposits are held by Kansas-based CBW Bank, while Simple uses Bancorp for its deposits.

Portland, Ore.-based Simple, which launched in 2011, offers the Safe-to-Spend feature, which helps customers understand what their real balance is, after subtracting pending transactions, upcoming bills and savings goals.

"Moven will definitely be a disruptive force in the personal banking industry," said Bareisis, author of the Celent report, "The Rise of the New Bank Account? The Quest for Transactional Account Primacy." However, Moven's disruptive effect on individual incumbent banks will depend on how traditional these banks are, he said.

Bareisis said Moven and Simple are radically changing customers' expectations of what they want from their transactional bank accounts, through innovations such as enhanced information services; next-generation personal financial management tools; user-friendly money management advice; and integration with social media.

However, a blog posting by Daoud Fakhri, a retail banking senior analyst at Datamonitor, warns that Moven may struggle to attract U.S. consumers in large numbers. Because Moven has no branches, Fakhri said, its real-time financial management information may not be sufficient to tempt U.S. consumers.

Fakhri said Datamonitor's 2012 Financial Services Consumer Insight Survey found that 90 percent of U.S. consumers regard a conveniently located branch as essential. Also, only 26 percent of consumers surveyed said they would consider switching to a bank with no branches. Datamonitor found that younger consumers, who are Moven's target market, are as conservative as older consumers in their attitudes toward bricks-and-mortar banks.

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