The start-up bank that uses data to get close to its customers (but not too close)

There is no shortage of challenger banks and neo-banks but it is often hard to discern what is being challenged or what is genuinely new. Most are doing nothing more disruptive than creaming off revenues established banks are too lazy or dysfunctional to retain. The character of five-year-old Chetwood Financial is harder to categorise. Its leadership emphasises the personalisation of its products rather than the quality of its customer relationships. By refusing to take ownership of its customers, Chetwood inverts the logic of the traditional bank. It sees customers not as cross-selling opportunities but as individual borrowers or lenders. It sees products not as either profit generators or cross-subsidies but as customised answers to particular problems. Chetwood knows what its customers’ problems are because it has used data to find and understand them in the first place. It is a perspective that not only makes it easier to manage credit risk – indeed, it enables the bank to reward improved risks with cheaper money – but subtly shifts the purpose of the enterprise way from making money for shareholders towards manufacturing the best retail borrowing and savings products it can, at least for its chosen clientele. Dominic Hobson, co-founder of Future of Finance, spoke to Mark Jenkinson, founder and director of strategy at Chetwood Financial.

Questions being asked

1. The company was founded in 2016 and started operating in 2018. What was the path to obtaining an operating licence that you took?

2. Chetwood has been backed on a large scale, and from an early stage, by NYC-based hedge fund group Elliott. What did they like about your model?

3. Your model is a highly focused one in terms of the type of clients you want to attract. Can you describe your target client type or types?

4. How do you filter customers to get at the ones you want – where do you get the data?

5. What is the downside of being so focused in terms of customers (e.g. limited market size)?

6. What is the difference between the LiveLend and BetterBorrrow products?

7. Is your funding (SmartSave) entirely retail?

8. Are you planning to expand the set of savings and lending products you offer (e.g. into mortgages)?

9. What will you have to do differently if you do expand the product set?

10. Is your balance sheet leveraged at all or is it 100% matched/reserved?

11. What is your distribution strategy (e .g. price comparison sites, financial press)?

12. Do distributors care that you come and go from the market according to your needs?

13. How do you reward your distributors?

14. Companies can white-label your products. Does that form of distribution undermine the value of the business because you don’t own the customer?

15. You offer rate-reducing loans. How do you maintain your spread on the loan?

16. Chetwood is a totally digital bank – there is no call centre. Do you think you lose business as a result?

17. Do you see yourselves as a neo-bank or a challenger bank, or as something else (i.e. what comparative category do you put yourselves into)?

18. What is the advantage of running bespoke systems?

19. Is your model replicable in international markets?

20. Do you see anything happening in lending and borrowing in the Decentralised Finance (DeFi) market that intrigues or worries you?

21. Do you ever worry that your business is to some extent dependent on the conventional banking industry, with its current accounts and payment rails? Would its replacement by a pure utility encourage greater innovation?

22. If the marketplace moves towards an Open Data model, in which consumers own their own data and choose who gets to see which parts of it, will that be good or bad for your business?

23. How would digital identities help or hinder the growth of Chetwood?

24. Elliott will presumably want an exit someday. What form would you ideally like that exit to take?