A five time entrepreneur and the founder of international money transfer firm Azimo, Ricky Knox continues to compete in fintech. His latest venture, Tandem, is a strong competitor in the UK challenger banking market.
There aren’t many entrepreneurs who keep coming back to fintech and Ricky describes why he thinks financial services is so ripe for disruption. Tandem’s approach to helping its customers make financial decisions uses AI and we talk about technology’s role in managing money. We discuss how he’s handling growth and scaling and how he’s positioning Tandem — with products and services -- to compete in the future.
Why found companies in financial services
I look for areas I can make an impact, where I can change the world for the better. So, my telecoms business was bringing mobile networks to the some of the world's least developed countries. I built two remittances business -- helping some of the world's poorest get larger money flows more cheaply from the more developed world. I like industries with a degree of complexity and a premium on intelligence.
The challenges and opportunities in financial services
The high level thesis is that financial services will go exactly the same way as retail, media and other disrupted industries. We actually think financial services will fall harder because it's more like digital media than like ecommerce -- nothing needs to be delivered, cash is fading away, it's all zeroes and ones.
Indeed, the concept of disintermediation in financial services is overly simplistic. No one wants to buy financial products -- they just want to timeshift money or get the use of money. So you have an industry where the customer doesn't want his products yet the institutions that compete are very powerful. No one has really addressed the customer's relationship with his money and how you can provide services with a much more human-centered view of addressing the customer's underlying needs.
Tandem's approach to banking
We think that banking today is a waste of time and want to reinvent it. The first wave was around the checking/current account. When we were starting, everyone told us that people are happy with their bank accounts. We just don't believe that. People don't switch accounts because there are a lot of fears around switching. The fact that they don't switch doesn't mean they are happy.
The new day-to-day spend experience and the mobile-debit card combination have proven very powerful in bringing in new customers. For Metro Bank in the UK, which uses a branch model, it took about six years to get to a million customers. It's taking challenger banks 18 to 24 months to get to the same point and it's actually accelerating.
Banks as a personal financial assistants
Banking ultimately provides a very rich pool of data. Interpreting that data is far from easy. You've seen an entire industry of mostly failures in Personal Financial Management. Translating your transactions into something meaningful for customers is difficult to do. The holy grail is to take the data around a customer and combine that in a way that allows you to remove the burden of everything it takes in managing money and put it onto the bank or app.
Not just nudging or here's the next best action (which I've heard bankers talking about for ages which is like 'what shit can I sell you next?'), but actually define the problem, provide the whole financial context, and fit a decision into a customer's personal plan. There's an opportunity to reframe the role of the bank, turning it into a money assistant to help customers navigate through their financial lives. I expect people will still be reinventing this 15 to 20 years in the future -- it won't happen overnight.
Tandem is a data business. We're the only ones who started with Open Banking. With a print of your thumb, you can share all your financial data with another financial institution. Off the back of that, we're building solutions to help customers understand their money and make decisions.
On the savings side, almost all the challenger banks offer round ups like Acorns to help save and invest money. That's great but there's more to saving towards a goal. Tandem does a full cashflow forecast and lets customers set money aside. Accelerating towards savings goals, we explain to our users what they can and can't do in the context of cashflow to maximize savings. Understanding the cash flow is essential to almost everything we do.
When it comes to mortgages, we can do something similar. We can detect your rent, how much you're spending on rent today, and understand your free cashflow. We reverse that out to see what type of mortgage rate you can get and how big a house you can afford. The idea would be that we partner with other companies to help our users through the house buying journey.