Three months ago, Chris Gledhill was an innovation technologist at one of the UK’s largest banks, Lloyds.
While it was a great job, he told CoinDesk, it was also incredibly frustrating. The scale of the bank meant he had insight into clear problems with the financial system, but it also meant he lacked any ability to change them.
So, he quit. Now, with the help of three (unnamed) co-founders Gledhill is building a ‘blockchain-inspired’ challenger bank, Secco.
The aim is simple, he says: “To disrupt banking from the outside in, rather than the inside out.”
Banking on bitcoin
Bitcoin, like many FinTech projects, owes much of its origin story to the 2008 financial crisis.
Although bitcoin’s first users sought it out as an alternative to a ‘broken’ financial system, six years on its technology is now in the hands of their enemies: the banks.
Just last month, a further 13 joined startup R3CEV’s campaign to establish a set of blockchain standards for the industry. (Lloyds is so far absent from its list.)
For Gledhill, this and other efforts, including VC investment in startups, simply aren’t enough. He’s “largely frustrated” at the level of innovation seen both inside and outside the world’s largest financial services firms:
“It’s been incremental at best … They’re all saying ‘OK, let’s put it on the blockchain’, but nobody is having a real look at whether that’s still the ideal construct for how we go about financial services.”
“Even outside [the banks], the FinTech communities are innovating around existing financial protocols – making them cheaper, faster, better. They’re not trying to actually reinvent these things,” he added.
This includes things like loans, mortgages and current accounts – the contracts for which are often centuries old, according to Gledhill.
While he maintains it’s not enough to simply tag these products onto new rails, a growing number of blockchain startups and R&D teams are now attempting to do just this.
ItBit’s Bankchain and Blythe Masters’ Digital Asset Holdings are among those digitising financial assets, while startups like Everledger are targeting physical goods in the supply chain, or in CEO Leanne Kemp’s words, putting “bling on the blockchain“.
How Secco works
How will Secco be different, then? For a start, Gledhill said, it won’t be anything like the image of a bank you’ve got in your head.
Unsurprisingly, it won’t have branches – challenger banks don’t tend to – but it also won’t have an app, nor an interface to speak of.
Instead, Secco will operate as an ‘underlying’ service hidden in all the apps and social platforms we use day-to-day. The aim of the game is “customer disengagement,” Gledhill said.
“We’ve been almost deliberately disruptive in that we’ve taken what makes a bank today and pushed the needle in the opposite direction. The right answer is probably in the middle somewhere.”
It’s not all about money, either. Down the road, Secco wants its users to become ‘data brokers’ – treating their data as a currency to spend, lend and invest.
Secco and its users will each hold a cryptographic key, and both will be needed to confirm a transaction, in Secco’s in-house token-based digital currency, from which the bank will take a small cut.
The bank will be built around a distributed database, which functions in a similar fashion to bitcoin’s blockchain. The entire data of the bank is spread around everybody’s phone, so it’s owned by everybody and nobody.
However, it will run on something Gledhill calls a ‘blocktree’, currently awaiting patent, which he claims will solve a lot of the problems that come with bitcoin’s technology.
“The blockchain is a linear structure, it’s very rigid. A blocktree gives you the ability to branch off these separate, mini blockchains to do offline transactions which can be merged at a later date.”
Due to the patent process, Gledhill said he cold not divulge further details about the technology, but hinted it would be a fairly open platform for people to challenge Secco’s standards.
In recent months, a number of so-called challenger banks have arrived to take on the UK’s ‘Big Four’: Lloyds Banking Group, RBS, HSBC and Barclays.
While insiders have described the digital revolution as “seismic”, it appears customer habits in the nation could prove challenging to break.
Statistics from the UK’s Competition and Markets Authority indicate 37% of consumers have held the same account for 20 years or more. Meanwhile, only 3% switched banking providers in 2014.
If customers are loathe to switch their provider, how will they be convinced to go with an app-less, branch-less alternative?
Gledhill says it’s a tough sell, however Secco – which is currently “receiving interest” from investors – won’t drop consumers in at the deep end too soon.
Next year, the firm will introduce users to its initial product, Aura, a location-based app that gives users the ability to trade data with others in a range of 60 meters.
For example, a user could receive a restaurant voucher in return for a tweet, or a number of other non-financial transactions.
Although far from Secco’s utopian vision, Aura is needed to “lasso these giant concepts into something that makes sense for people,” Gledhill said.
“There is a customer journey we need to take people on, you’re not going to get everybody suddenly throwing away all their money … and become a data broker of themselves. We have to articulate that value for them.”
“If people are not sure what we are, we believe we are onto something. If they don’t think we are a bank that’s potentially a good thing.”
Canary Wharf image via Shutterstock.