Banks worldwide are going to start offering loans to customers without being explicitly asked to do so, via mobile applications that track user behavior, said Brett King, the CEO of New York tech startup Moven, which is pioneering the initiative.
Moven's partner banks in the U.S. — it already has a tie-up with TD Bank NA — will start unprompted lending as soon as the fourth quarter, King told S&P Global Market Intelligence on the sidelines of a Madrid conference June 6. The technology available in smartphones makes it unnecessary for banks to wait for individuals to apply for loans or credit cards, he said.
"We are moving away from product banking to utility, behavior-based banking," King said. "For example, you walk into a store and you get an instant financing offer. You walk into Trader Joe's in New York or Sainsbury's in London and we know how much you spend on groceries normally and we know you don't have enough in your bank account to do that, so we surface an emergency client offer in store."
Through collecting electronic data and analyzing it, banks are now experimenting with monitoring and fulfilling customer needs in real time, according to King.
"We won't be selling you a [previously agreed] line of credit any more or an overdraft, but we are surfacing credit to you experientially based on when and where you need it," he said. "This means that there is a fundamental shift in what constitutes a bank's capabilities to deliver to customers. It's not channels and products anymore; it's the ability to understand customers' behavior."
The first loans of this kind will be made in the last three months of 2017 in New York, and later rolled out in Europe and Asia, King said, describing the U.S. as his company's "laboratory" for new technologies that it then exports to other markets.
Moven partners with Kansas-based CBW Bank to issue debit cards in the U.S. and has also entered into collaboration agreements with TD Bank parent Toronto-Dominion Bank in Canada and with Westpac New Zealand Ltd., a unit of Australia's Westpac Banking Corp. King said Moven is also working with Indonesia's PT Bank Central Asia Tbk.
King said banking technology is going through a "blockbuster moment," aided by increasing customer uptake of digital services as well as regulations such as the EU's second payments services directive. Known as PSD2, the directive comes into force in 2018 and is poised to allow financial technology companies to offer services through third-party, state-guaranteed bank accounts without having to abide by tough prudential regulations themselves.
Western banks are ripe for change, he added, pointing to India, China and Kenya, where up to 70% of payments are made through unregulated apps, as an example of what the future holds.