Finance Workshop

Building a budget bank

The hardest part of creating a bank for people on low incomes appears to be running call centres.

27 Jan 2017

Most startup ideas tend to take aim at the affluent. In fact, it’s a growing concern that the fruits of innovation are commonly made by and for those people with lots of disposable cash.

One business that’s not following that script is Pockit, a bank specifically trying to lure people on low incomes or outside the banking system. Founder Virraj Jatania describes his target customers as people who have run into debts in the past or are new to the UK and need to run a simple current account.

He says the toughest challenge of the venture so far has been service. Many of the people signing up to Pockit have been burned by financial firms in the past, and in some cases, deliberately misled. It’s not surprising many are at best confused, often suspicious, and sometimes hostile.

Literacy has also been an issue. Many of Pockit’s target customers don’t speak English as their first language, while many lack basic financial understanding, having no previous experience of a bank.

Croydon call centre

Since launching in September 2014, Pockit has moved its call centre from India to an outsourced company in Southend. With service still floundering, Jatania decided to move customer services in-house in October. The company now employs 10 people to operate phone lines in languages from French to Albanian from its base in Croydon.

Jatania claims using an outside company was ‘expensive and unclear’, and bringing the function in-house has proved cheaper so far.

Doorstep lenders

Making money out of people on low incomes is apparently not such a big challenge. Many of Pockit’s customers have been ‘screwed over by doorstep lenders and pawnbrokers’, according to Jatania, meaning ‘monestisation is not an issue’ and, he implies, that it will be easy to undercut the options currently available. Bad credit histories (or a lack of one) have often precluded people on the lowest incomes from accessing conventional banks and loans.

Financial services to people on low incomes is still blighted by the controversy around Wonga, a company with big ambitions and a high profile that came under fire for its aggressive marketing to vulnerable people and the punitive interest rates it charged for its loans.

Two million ‘unbanked’

Jatantia says he is mindful of the Wonga story, and insists it ‘bears no similarities’ to Pockit, although his company is likely to offer loans, overdrafts and even mortgages further down the line, following this first foray into what is effectively a current account with a debit card.

The accountancy firm, Grant Thornton, recently revealed the cost of not having a current account in the internet age. It reported that two million adults in the UK don’t have a bank account, while the proportion of low earners without access is three times higher than people with larger incomes. The University of Bristol recently found this group ends up paying a £490 annual ‘poverty premium’ as a result of not having access to the best deals on the web and direct debit discounts.

Pockit claims it has attracted 100,000 customers and carries out 500,000 transactions a month.