Imagine a bank that keeps your money 100% secure. Imagine a bank that tells you where your money is at all time. Imagine a bank that gives you fair rates and charges you no hidden fees - in fact, imagine a bank with only one single fee. That bank is indó.
indó is in the final stages of acquiring a banking license in Iceland. The journey has taken almost 2 years, but in just a few months we will have the first challenger bank in Iceland, and the first real "narrow bank" in the world.
Total funding of the project from external investors so far is around EUR 1m.
indó will focus on people from the age of 30 to 55, well educated with above average income.
There are 360 thousand people in Iceland, 280 thousand older than 18, and indó's core segment consists of around 80 thousand people.
That being said, who does not love a better bank? Who does not want better rates, a really cool mobile app and being a part of something that is affecting positive change?
Problem or Opportunity
Why don't I have a say in what my bank does with my money when I deposit it to my bank account? Why don't I get a decent rate for lending my bank my money? Why do taxpayers end up with a regular bailout bill when banks mess up their risk taking?
When I deposit my money with a bank, I am lending the bank my money. The bank, in turn, uses my money for risky investments (which I do not know what are). While it is my money that is at risk, I get measly rates, while the bank makes money if the risks pay off. If they do not, then my rates get even worse or I (as a taxpayer) have to bail them out.
indó believes is paying fair rates given the risk the customers take, tell them exactly what their money is being used for by creating a safe (and fun) home for their money. It is banking as it should be.
Solution (product or service)
indó will deposits the money from its customers with the central bank. Thus the money is always 100% secure and not used for anything else (e.g. risky lending or investments).
Customers will know that the money is not being used for something they might disapprove of, and they know that nobody is taking any risks with their money.
By creating a super efficient banking machine, using the decades' worth of combined banking experience from the founders and a kick-ass team of some of the best programmers in Iceland, costs are kept to a minimum - not a single things is done that does not have a clear place and intent.
This is why indó can offer much better rates, amazing app and interact deeply with its customers in product development down the line.
Competition comes from the three incumbent banks in Iceland:
Arion banki: They are an incumbent bank faced with massive IT problems and high operational expenses. Privatized in 2018 after having been government owned since the collapse of the banking system in 2008, Arion has seen a series of write-offs since the middle of 2019 and is working hard to gain some sort of equilibrium in their operations. While big and very well capitalized, Arion (like the other banks) cannot match indó's 100% safe, 100% transparent current account within its current business model which relies on the pooling of various funding instruments (deposits included) to fund a variety of assets of different risk classes.
Íslandsbanki is one of two banks in Iceland owned by the government, and one of the three incumbents. After 2009 Íslandsbanki took the lead in product innovation and was rated as best in service for a few years. In the last few years, however, huge IT problems, expensive branch network and apparent loss of operational focus has caught up with them. The bank has been available for sale for almost 10 years with no apparent interested buyers and this has created a certain lack of strategic focus and lack of mandate for the current management. This existential crisis, coupled with crippling operational costs, command a lot of energy from the management which has been running in reactive mode for a number of years.
Landsbanki has a massive branch network all around Iceland and has not managed to streamline it to any significant degree. Landsbanki also services the rural areas proportionately more than the other 2 banks, resulting in different dynamics with regards to distribution channels and loan exposure. Owned 95% by the government, it has been stated firmly that the government will not sell its share, like it has intended to do with Islandsbanki, and therefore there is a certain "establishment" aura surrounding Landsbanki. Landsbanki is not perceived to be focusing on innovation but rather to maintain the status quo. Landsbanki is also plagued with the huge operational costs as the other two incumbents, but does not appear to have taken decisive steps to bring down costs and streamline operations. Landsbanki seems to be reluctant to innovate and embrace changes, rather relying on doing things "as they have always been done".
Advantages or differentiators
The incumbent banks are one-stop-shops. Customers can get all their banking products in one place. But that is a setup that they pay a lot for.
Banks are crippled by massive operating expenses, variously outdated IT systems, expensive physical branches, not to mention reputation that is in various stages of tatter.
Why can't customers just piece together their financial solutions from whereever they see fit? Why "must" I have my current account with the bank that lends me my mortgage? Why am I constantly pressured into using the credit card from the bank that I happen to use to save money for a rainy day?
indó will not offer all banking solutions. indó will offer a few - and indó will strive to offer those better than anyone else. For other products, check out others who are either our partners or not. As long as our customers get what they want and are happy - we are happy.
indó will have three primary sources of revenues:
1) interest rate differential on rates received and rates paid
2) transaction fee per debit card transaction (in line with competition) and assoiated interchange fees
3) revenue share in financial products offered by partners of indó
Initially, indó will focus on offering a current account to individuals through a mobile app for both iOS and Android.
indó will receive revenues consisting of interest rate spread (how much money to you have on your account), transaction fees (how often do you use your debit card) and interchange fee (how much do you spend).
indó will rest on three main cost pillars - compliance (which we take very seriously), IT (consisting of a veritable dream team) and marketing (we will make sure customers know about us and want to join us).
Given the streamlined operations and meticulous buildup of the company, costs are kept to a minimum and therefore profitability is achievable relatively early.
We estimate the current account behaviour of all potential customers and once indó is their primary current account, they will become a part of #teamindó unlocking all kinds of features and perks.
Money will be spent on
Completion of IT testing and customer acquisition.
Offer for investor
An investor will receive a substantial share in the equity. What share, exactly, depends on the amount invested, potential for creating non-monetary value for indó and cultural fit. While indó has a diverse investor pool currently, the founders have been very selective in accepting investors on board.
Let's face it, we are going up against the dinosaurs. They are big and they will want to defend their territory. If we fail to stay a step ahead, that is bad news. But the good news is that our job is to stay ahead of them and we all remember what happened to the dinosaurs in the end.
What if people do not want to switch to the new kid on the block? After all, trust is a huge issue and why trust the new kid? We love marketing and will make sure everyone knows we have arrived, what we stand for and what the benefits of joining #teamindó are. IT is what we do - we have some of the best IT people on our team and they will make the transition to indó seamless, and will also make using the app fun and engaging through obsession with details and gamification. And compliance is in our DNA - we take compliance and regulation very seriously and will go above and beyond in exemplary business ethics and conduct. Therein lies our competitive advantage!