What it Takes to Build a Challenger Bank

In the age of new digital banks disrupting the banking industry, Kroo is on a mission to build the “greatest social bank on the planet.”

Kroo is an e-money app and debit Mastercard solution that’s on its way to becoming a fully licensed bank.

We wanted to know more about modern e-money solutions and how Kroo intends to achieve its missions, so we invited Thomas Robinson, Head of Product, to this episode of Disruption Talks.

Thomas explains how Kroo is meeting its mission to make payments frictionless, become a sustainable company, and a social bank that customers love. He shares more about his role, how collaboration is key at Kroo, and the challenges of building a bank.

What is e-money?

E-money or electronic money is a broad term that refers to how money is stored and transferred electronically. Essentially, it is an electronic form of cash.

Electronic banking systems facilitate transactions of e-money to make payments faster and easier. As a result, it has diminished the need for physical currency which has been outgrown in the world of ecommerce. E-money payment apps are now commonplace on mobile devices used by millions of people to purchase anything from a morning coffee to a bus ticket.

E-money can be held on cards, servers, or devices and when you pay for something, an electronic funds transfer (ETF) digitally transfers the money from one account to another via an automated clearing house (ACH) network.

The use of e-money has changed the banking world and opened the door to challenger banks that prefer a digital-first approach to managing money.

Kroo’s strong social mission

Kroo has a strong and ambitious mission – to build the world’s greatest social bank. Its founding principles are that money should be frictionless and stress-free, and a bank should be an “agent for good” in the world. While building a bank from scratch is tough, the Kroo team are determined to “do what’s right, not what’s easy.”

Kroo was founded by two creative minds in 2016 who wanted to address the common problems with banking. The founders believed that money was “siloed” before the likes of Monzo, Starling and Revolut came onto the challenger bank scene. Previously, when you paid someone money, you’d often send a text to let them know. It made splitting bills a little tough.

“They really had this vision, that money shouldn't be so opaque. It should actually be frictionless and not come with the anxiety that it had at the time and should move between people freely.”

This became the basis of Kroo’s mission. Now, Kroo has expanded on that to focus on three key areas:

• It should work for you as an individual (making financial education is a priority).
• It should work for your friends and family (money movement should be easy).
• It should work for the planet and society as a whole (sustainable, green solutions are essential).

Not only is Kroo dedicated to making money management simpler, it’s also one of the growing numbers of green-conscious companies that want to make a difference.

“We're thinking about how we can help our customers be better global citizens in that sense. We know that people want to do more.”

Kroo’s ambitious future plans in the e-money sector

As a growing e-money solution, there’s a lot in the pipework for Kroo. Thomas explains that Kroo currently has its e-money account with a debit card, but it also received a banking license in 2021. This license has some restrictions at the moment, so Kroo is looking to launch as a full bank with a current account and overdraft in the summer.

One of the biggest ideas currently on the slate is to launch joint subaccounts, which would allow you to move money between people quickly and easily. Kroo is also looking at ways to improve sustainability, for example, by calculating the carbon footprint of purchases and helping customers find ways to reduce it.

Kroo is already partnered with One Tree Planted, so if you refer a friend, Kroo will get a tree planted on your behalf. Kroo’s debit cards are also biodegradable as well.

Recruiting top fintech talent

Top talent is at the heart of any great team, and recruiting the right people is a big priority for Kroo. Thomas explains that finding people with the right skills is not the only consideration. Culture fit is just as important.

“How you work with people is fundamental to the success of the business overall.”

Thomas explains, he adds: “We spend a lot of time understanding the culture fit of a person. How do they work? Are they going to really bring value to the company?”

Since Kroo’s latest funding round, recruitment and growing the team is a big priority over the next year. However, the job market in London is just as competitive as the financial market.

As a result of this and the pandemic, Kroo has expanded its recruitment drive outside of the city. Now, Kroo has team members in the Northwest of England, London, and India.

Remote working is something that stuck after lockdown as well. It originally began with a trial of working from home on a Friday, but now it’s become a hybrid model where it’s optional for employees to come in.

“Where people are based is becoming less of a priority compared to their technical and cultural fit.”

What a Head of Product is responsible for

Working as the Head of Product can look different depending on the company. For Thomas, it’s about making sure the company strategy aligns with the product strategy.

The way Kroo handles this is by organizing the team into squads and tribes based around different areas of the business. For example, there’s a team that looks after the account experience, one for payments, one for platform security, and so on.

A big part of Thomas’ job is to make sure all the teams work well together to produce a coherent experience for the customer while letting each team maintain a degree of autonomy. The OKR framework is key to making sure everything’s organized, and goals are met. Thomas shares:

“It's about identifying and prioritizing focus, and that might be on our operational stack, or it might be on the customer side. It might be on the platform itself. It's really making sure that alignment is kept throughout the business and ensuring that all of our stakeholders, from compliance to finance and customer service are all on the same page as well.”

Good ideas can come from anywhere

Part of what makes Kroo’s team management so successful is because cross-department collaboration is so highly valued.

In Thomas’ opinion, a “good idea can come from anywhere.” It’s not just down to the product team or management to lead the way in innovation. Each department only sees a portion of the business, but when working together, the team can achieve great things.

For example, to deliver a better customer experience, you need to talk to the people who deal with customers. They have invaluable insights that the product team can use and vice versa.

Building customer feedback into the app itself

It’s no secret that to build and fine-tune a digital product, you need to prioritize customer feedback.

Kroo does this so well that it’s embedded into the app itself. Rather than waiting for customers to get in touch, Kroo runs an automated survey tool within the app that asks customers questions.

This helps Kroo gather information on common pain points, what’s missing from the experience, and what customers enjoy. Whenever a new feature is launched, Kroo likes to survey a customer straight after they’ve used it.

Alongside customer surveys, Kroo also has some in-house researchers and a customer service department that does a great job of handling customer feedback and queries. On the more quantitative side, Kroo uses business intelligence tools and customer analytics.

The challenges of building a bank

Building a bank, according to Thomas, is “completely different to building any kind of business.” The main reason for this is that banking is such a highly regulated market, and so it takes a long time to get things signed off by the regulators.

Thomas compares it to building another type of digital tool. In most cases, you can start small. For example, if you’re building a product management tool, you can start off with the ability to create tickets and change their statuses. You can then launch, get feedback, and develop more features from there.

With a bank, there’s no option to start small. You’ve got to meet all the payment requirements, KYC regulations, financial and legal regulations, and so on. Banks also have to hold a certain amount of capital to ensure that it can process payments and facilitate money movement.

As a result, the bar to entry is so much higher, and that’s why Kroo is still working on becoming a fully licensed bank.

Thomas likes to think of the regulators as another stakeholder, much like an investor. You need to write a business application to them, have them approve it, and work with them to make changes just like you would with an investor.

“That’s another stakeholder which other tech companies wouldn't have to deal with traditionally.”

How to stand out in a crowded market

The fintech space is more crowded than ever, and so newer fintechs such as Kroo have a huge amount of competition to deal with. Like any competitive market, success is about standing out.

For Kroo, one of the challenges of standing out as a bank is that the industry is so regulated. This makes it easy to copy winning formulas.

One way Kroo differentiates itself is with its own built-in credit decision engine, which is based on Kroo’s customer data. This helps customers make better decisions about their money and lending that they may not get elsewhere.

Another way Kroo likes to stand out is by holding to its firm social mission. Kroo’s values are hard to copy for businesses that are focused entirely on profits.

“Customers want to identify and work with brands who match their values. This is how Kroo can differentiate.”

Understanding the role of product management

Product management has a huge influence and responsibility in driving the success of an organization.

Thomas says that in any company, there are company goals such as revenue, growth, and engagement, and the product side is about learning how to meet those goals. He describes it as a partnership.

“Let's say we want to scale to 200,000 customers by the end of the year. We'll take a look at all of our systems and processes and ask, where are the bottlenecks? And what do we need to improve? Whether that's on the customer side, or the onboarding side.”

This is where cross-department collaboration comes in use as well.

As Thomas remarks, “those closest to the customer understand their problems best.” That’s why his job as Head of Product is about uniting the power of different departments at Kroo.

With this collaboration, the product team can put together problem-solving hypotheses such as “solving X problem will drive engagement by 10%” which they can take to leadership to get the ball rolling.

However, Thomas believes that setting expectations is important as well. You have to align your expectations with everyone else in the team, so you’re all on the same page.

This discussion is part of our Disruption Talks recordings, where we invite experts to share their insights on winning innovation strategies, the next generation of disruptors, and scaling digital products. To get unlimited access to this interview and more insights from industry experts, sign up here.