New virtual bank Mox isn’t keen on conventional numbers, be it the metrics used for market share or the 16 digits on a card. There’s only one big one that bothers CEO Deniz Güven and he’s tearing up the rule book to eliminate it.
In scoping the market for a radical new approach to banking in Hong Kong, global financial player Standard Chartered compiled a list of things that frustrated customers about legacy systems. There were 87 separate pain points.
“And we’re not talking about complaints like ‘there are queues in front of the branches’,” says Deniz Güven, CEO of Standard Chartered’s new challenger Mox. “I’m talking about real pain points. The people of Hong Kong want to do banking quite differently. So, we are creating a service-led bank to solve the pain points.”
Mox is built on a new business model – a partnership between Standard Chartered, information and communication technology giant PCCW Global, telecommunications company Hong Kong Telephone (HKT) and Asia’s largest online travel agency, Trip.com. One of the first eight challengers to be granted a virtual banking licence by the Hong Kong Monetary Authority (HKMA), Mox (which started life as SC Digital), is alone among this disruptive cohort to be backed by a legacy bank.
Yet the need for established Hong Kong institutions to act on sweeping changes brought about by a new regulatory era was spelled out in a KPMG report only last year. It said: “The development of virtual banking in Hong Kong forms part of a larger ‘unbundling’ story in the banking sector. Our view is that this unbundling will eventually lead to a ‘rebundling’ of services in new and innovative ways as customers will ultimately prefer to use a single efficient interface for all of their banking needs.
“This rebundling will lead to a smaller number of winners in the market, likely comprising the few traditional banks that are able to adapt to digital technologies and open banking, new virtual banks and fintechs that are able to knit together seamless services through application programming interfaces (APIs) and other technologies, or some form of hybrid.”
Güven, former global head of design and client experience for digital banking at Standard Chartered, says the HKMA’s Smart Banking Initiative was indeed the trigger that shot Hong Kong’s oldest note-issuing bank into the virtual vanguard.
“We asked ourselves two questions: can we defend our market from non-traditional players with our existing operating model? Can we attack this market with our existing model? The answer was an obvious no.,” he says. “That’s why we started to think about launching Mox.”
The name telescopes mobile, money and experience and its journey began with a research project that reached out to more than 2,000 people from different client clusters. The 87 different pain points in Hong Kong retail banking that it revealed were in part, Güven believes, because ‘when it comes to end-to-end digital services, this is still a premature market’. And that’s despite Hong Kong being aaa cauldron for fintech innovation.
“Mobile banking penetration in Hong Kong is approximately 45 per cent. When I compare this to some countries in Europe or the US, I can easily see 65, 70, even 75 per cent,” says Güven.
That’s something Mox has set out to change by taking a somewhat different approach to how it segments the market: in that it doesn’t. Rather, it’s attempting to create its own cross-generational digital fan base with Generation Mox.
Güven explains the rationale: “If you are building a digital bank from scratch, a new operating or future operating model, you need to redefine the segmentation criteria. ‘Mass and emerging affluent’ resonates a lot if you are in banking, or if you are a telco business. But is this enough to define your customers?”
That’s clearly a rhetorical question.
“We take a behavioural approach with Generation Mox,” says Güven. “You can be 18 or 80, it’s not important to us; we try to understand customer needs and their pain points. Two people who are both 30 years old, might be expecting the same things from life, their spending patterns might be the same. But these are not related with demographic.
“Then there are income models. For banking, these are extremely important, but if you want to go for the long tail, if you want to serve underserved people, especially in a market like Hong Kong, you need to create something different.”
Underserved by the banking sector in a region with one of the largest concentrations of financial institutions in the world, with 154 licensed banks and 47 local representative offices crammed into an area 110 times smaller than New York? Really?
“Everyone has bank accounts here, everybody has a lot of plastic cards in their pocket; but if you are not affluent in Hong Kong, yes, you can feel really underserved,” says Güven. “So, with the help of digital technology, we are trying to create the same best customer experience for everyone. This is Generation Mox.”
No conventional demographic also means no conventional way of measuring success.
“Of course, I know my breakeven, and I know my financials, and I know my customer targets,” says Güven. “But we are not aiming to get market share, we are aiming to get ‘heart share’.”
It sounds like an emoji and it is very much aligned with the digitally engaged customers it seeks.
“Heart share will be the combination of many things – I’m not only talking about Net Promoter Score. For example, the people in Mox have a target to onboard a customer in a couple of minutes. Instead of aiming to attract 20,000 customers tomorrow, if they decrease that onboarding time by one second every month, that is going to create extra heart share. It is also really connected with the culture inside the bank.”
Mox took the decision to opt for a Cloud-native customer ledger approach with its core system provided by Thought Machine, security by Feedzai, and a number of other vendors providing additional services.
Güven is a firm believer that its Cloud-based technology stack brings with it distinct advantages over server-based banking. Chief among those are flexibility, portability and future-proofing.
“Changing the technology structure of an international bank, or even a regional bank, is like changing the engine of an aeroplane while it is flying,” he says.
“In Standard Chartered Group, we don’t want to change the big engine. We want to build small aircraft to attack some markets – and Mox is an example of that.
“The magic of Mox Bank is that we are a separate, standalone, licensed, owned bank and this is extremely important because it means we have the flexibility to run quickly and with a different culture.”
Among the first of several groundbreaking initiatives it’s promising when Mox rolls out fully this year, is the introduction of Hong Kong’s first numberless bank card, launched in association with payments giant Mastercard.
“In Hong Kong, the most important thing is security,” says Güven. “If people lose this card, nobody can use it, because there is no number on it. If you want to freeze your card, you can do it through the Mox app; and if you want to activate it, you just tap. Your mobile app is becoming your remote controller.”
Within eight days of Mox opening applications for its founders’ metal numberless card, it had received almost 20,000 requests, and that was achieved without using any paid media or commercials to publicise it.
It’s clearly already won their hearts.