Are we on the way to getting a Banking License

#1

Hi

I am interested in knowing more about the Dozens and its progress to obtaining a banking license.

I noticed reading the website you quote :face_with_monocle: “We are not a bank. We are authorised by the Financial Conduct Authority (FCA) as an e-money institution (FRN 900894) and also as an investment firm (FRN 814281). This means we can offer a range of financial products, which each have different levels of protection.”

Can you briefly explain how this differs from a customer point of view from a standard banking license? for example, protection rights (in relation to the Current Account only), what products you can offer etc? Happy for you to link out if this has already been covered. :thinking:

Secondly, it may sound like a dumb question, but why do you want to obtain a banking license? It would be good to know the overarching strategic direction for Dozens.

Finally, what is the aspiration for when you want to obtain the license?

Thanks! :smile:

#2

Regarding specifically this part, the following post may be useful to you.

I imagine this is because with a banking license dozens can hold our money themselves, and I believe that banks receive some interest from the Bank of England for the funds they hold (I could be mistaken though, I’m far from an expert on these things).

Also, the banking license would allow dozens to provide cash savings directly, and use those funds for whatever banks do with peoples cash savings (:man_shrugging:) which would allow them to pay interest on those cash savings.

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#3

Lending :ok_hand:t2:

#4

Worth noting that @AC has already highlighted that he wants to be cautious in how dozens approaches lending - he doesnt want to make money in the same way Legacy banks do by using these cash savings to create profit through means which impact the ‘financial health’ of the the customer (ie: overdrafts that charge - loans for things other than something like getting on the property ladder etc…)

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#5

Could he attempt to lend in a way that only impacted someone’s financial health positively?

For example, credit card for building with extremely low interest, an interest free period and no balance transfer charge. It’d help those who are going through rough times, potentially get out of them.

The thing about lending though is its always going to hurt someone eventually.

What happens if someone gets on the property ladder and they don’t repay their mortgage? Is Dozens going to do a student finance and drop the debt? No, they’ll send High Court bailiffs in and have the house repossessed and they’ll sell it or rent it out.

#6

Im not sure anyone expects a financial institution to forego defaults on loans in the name of ‘helping people’ but there is a strong difference in the more ethical approach to how dozens wishes to become profitable compared to the legacy banks (and many of the ‘challenger’ fin-techs)… I dont believe the plan is to move into credit cards (a) as this has very little positive impact on a persons financial health and (b) requires a huge amount of infrastructure and credit funding behind it

#7

I can say it’d have a very positive impact on my financial health as my report is garbage due to a lack of history

#8

Yes - credit cards can offer a means of improving your credit score if used responsibly but if you look at the number of credit card users who have gotten themselves into more financial problems versus those that have used them purely as a means to improve your credit score - I think it’s clear that expecting dozens to launch a credit card just for the benefit of enabling users to improve their credit score is not realistic… credit card companies don’t make money from people improving their credit score - they make profit from users that worsen their financial situation using the services provided and its exactly this kind of profiting through customer debt that AC has stated he wishes to avoid… which I totally agree with and is one of the reasons im such an advocate of the product/brand…

#9

There are actually many ways Dozens can do that if they wanted to, but without knowing Dozens plan for the future, who knows.

For example cash plus, is prepaid, however it offers lending facilities to those that have proven to operate the accounts without difficulty. It has things like direct debit protection, where it loans you the money to pay a direct debit rather than it bouncing, that is reported to credit reference agencies. So it knows you are going to be getting a salary paid in, so its sort of a short term loan, but isn’t a loan to most people, its just paying your direct debit.

There are a number of other examples I can use of other companies, that lend, but only lend to help, including credit cards, where you pay a deposit to the card company, they give you credit card with a credit limit, that is reported to credit reference agencies, no risk to the bank, it holds your deposit.

BT offer a similar scheme, if you have a bad credit record, you pay a deposit, it connects you to it’s network, its reporting to the credit reference agency monthly. There is no risk to BT, but its of benefit to the person. A few major companies offer similar schemes, they just don’t advertise them.

You have loqbox, you pay monthly, they report to the credit reference agency, its actually you saving with them for a year, but saving monthly.

So Dozens have many many options, buts about how those in charge see lending, and I have a feeling, Dozens will be of the mindset, to not lend, rather than lend proactively. Only time will tell.

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#10

Well, lending exists as a driver of economic growth. But ethically you should only lend to people so they can make an investment in themselves and come out ahead.

So don’t lend to someone who wants to buy the latest iPhone, or even to someone who wants food for the table to feed their starving family.

You lend to the farmer so he can buy a new tractor that will increase his productivity and earnings at a rate faster than the debt will punish him. Or to the person who can get a better paying job if only they could afford to buy a cheap 2nd hand car.

The problem is, Dozens probably have no way of determining if a loan will actually result in making someone richer or not.

#11

Perhaps Dozens should instead go for Sharia Compliant lending then, where instead of interest lending is given interest free (to people) and then to businesses is given for a share of their future profits, with no chance of making someone poorer if it fails.

Granted this means they should just not give loans to people in any form, besides perhaps a small overdraft to cover paycheque lapsed bills.