Building the world’s first peer-to-peer bank
Money money money
**Update** Building a whole new bank felt like we’d bitten off more than we could chew. By 2017 we’d decided that there were enough issues with insurance to keep us busy and so Huddle Money, became Huddle Insurance. Today our business continues to be informed and guided by the ideas outlined below — the principles of fairness, aligned interests and efficiency — all of which can be driven by technology.
— — — — — — — — — — — — — — — — — — — — — — — -
Why is it so hard to manage our money? Why is there no correlation between the amount of money we have (or don’t have), and the stress that it causes us? And why does it feel like everyone who’s out there to “help”, is just trying to “take”? Money, it seems, has become too hard for many people to understand and control.
To begin with, budgets are becoming much harder to manage. In the past we might have had to deal with a few, regular household bills. But increasingly, we now have to juggle a plethora of weekly, fortnightly, monthly and quarterly payments for everything from mobile plans and insurances, to Dropbox and Netflix. When these are combined with typical household bills such as rent, rates and utilities, it becomes a nightmare to stay on top of everything. It’s no wonder then that around 65% of Australians don’t pay off their credit card each month and that few of us have the amount of savings we’d like.
And these are just the simple things. We’re also told that we need to make sure we have enough super (that’s retirement savings for readers outside Australia), that we should update our life insurance, and that we should optimise our taxes with things like negative gearing. Now, there are a few people out there who manage to do these things really well. However most of us struggle to keep even one of them under control. We struggle because it’s complex; we struggle because by the time we finish work, there are 20 other things we would rather be doing; and we struggle because there’s no easy, independent and free way to get help with all of this money stuff.
That point about independence, or impartiality, is an important one. Unfortunately, because of the way that most of our banks and financial services companies are structured, they can end up selling us a product even when it might not be in our best interests. You don’t have to look further than any daily newspaper to feel that this misalignment has been noticed by the masses, and it has contributed to a growing distrust of the model.
Financial Freedom: designing around a mission
When we started our journey, we didn’t know exactly the type of company we wanted to build. What we did know, is that we wanted to build a financial services organisation whose interests were aligned with the interests of its customers. This would mean we could really focus on helping people with the things that matter most to them. We wanted to challenge retail banks and break away from the existing model which revolves around selling debt to consumers. And importantly, we wanted to make financial products, such as insurance and loans, cheaper for our customers.
Those are all tangible and rational ideas that have helped us while conceiving the business and the product (more on that below). But to really make a difference, we know we have to target change at an emotional level as well. After all, money plays a huge part in all our lives, and it’s often entwined with our personalities and our life-changing experiences.
Over the years, we have watched and experienced first-hand the stress and problems that money can cause in people’s lives, and we wanted to create ways to help people free themselves from money-worries and the burdens of unnecessary debt. We called this idea financial freedom and we made it our mission to “help everyone experience financial freedom”.
To kick-start the design of the business, we asked the question: “what would a bank need to do to help customers experience financial freedom?”. We spent time talking with many different sorts of people (all of whom we thought could one day be our customers) about money and banks, stresses and worries, freedom and debt. Together, we landed 4 key principles that have stayed with us over the last year, and that are embedded in the business we’re about to launch:
- You win, we win.
This is at the heart of reinventing the business model for financial services. It means challenging the existing models for investment management, marketing, pricing, sales and even customer support, to better align interests between the business and its customers. We want to ensure that we only win when our customers and communities win. - Accountability through transparency.
The financial services industry seems to be plagued by accountability issues. This has left customers frustrated, and increasingly unsure of whom they can trust to help them manage their money and safeguard their futures. We strongly believe we need to reverse this trend. And what’s the easiest way increase accountability? Increase transparency. - Help me, I’m a human.
When it comes to money, countless studies have shown that we humans are predisposed to making bad decisions. So if we want to improve how we manage our money we need to focus on understanding why we make bad decisions and how we all consciously, and subconsciously, think about money. (For some of the best studies check out Daniel Kahneman or Richard Thaler.) - Trim the fat.
Managing money can be really expensive — it starts with account fees, broker fees, advice fees and management fees; then come currency exchanges fees, late fees and payment fees; and not to mention, worst of all, fees on fees. To achieve the mission, we must be able to provide our customers with access to financial services that cost less.
What’s a peer-to-peer bank?
We believe now is the first time in history that something truly incredible is feasible: a peer-to-peer bank. Why do we think this? Because 3 key ingredients have only been meaningfully developed very recently:
- First, we have the emerging collaborative business models (exemplified by Airbnb and Uber), that allow people to work with each other in ways that are not possible in a pure B2C model.
- Second, behavioural economics has provided a step-change in our understanding of the biases that govern our behaviour.
- And third, technologies, such as the blockchain and Artificial Intelligence, that are enabling us to achieve much greater transparency, trust and efficiency.
When we combine these to form a peer-to-peer bank, we hope they enable people to form communities in order to help each other in 4 keys ways:
- To provide and access better and more actionable financial advice
- To help each other make smarter financial decisions
- To reduce the stresses related to all things money
- To transact, borrow, invest and protect at a lower cost and with greater confidence.
Introducing Huddle Money
We will be launching Huddle Money in Australia in July 2016. In time, Huddle Money will offer new ways to access financial advice and information, and buy financial products like insurance.
Huddles will let you you share your data so that you can see what’s really going on with your money. They’ll show you if you’re paying too much for things like insurance or electricity. They’ll alert you if your savings or superannuation are underperforming compared to others. And they will help you achieve your goals.
Huddle Money will be powered by the Huddle Money community (our members), and a rewards program that will nudge our members into helping themselves and each other.
We’re excited about getting into market, and also about how we could help many Australians in the future. But, of course, we are just starting out on this journey, and we have a long way to go before we can achieve our goals. In the meantime we’d love to discuss your views, feedback and ideas on how we can deliver on our mission to “help everyone experience financial freedom”.
Drop us a line at help@huddle.com.au, Facebook, or here on Medium.
