Dozens: Overall Update + Community Changes

Definitely interested in the bond/ savings update from @Tatia, is there a launch time for the 1% yet?

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A flat fee to hold investment funds is a big win for people with big investments through someone like Hargreaves Lansdown who are paying a percentage fee. But that is a different market to who dozens have been targeting.

Maybe actually target those guys? If not through dozens then through a dedicated fund supermarket app built upon Project Imagine.

I never really considered Dozens to be it’s own profit centre. Always thought it was a “dogfooding” exercise for Project Imagine, which I saw as a white label bank. There are lots of regional building societies etc who don’t have the tech to deliver an app and that’s where I thought the money ultimately was

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That’s very true. I think there’s a huge target market issue here.

Dozens keeps saying that they want to target the first time investors, but the fee structure clearly is only beneficial to existing investors with a relatively big portfolio worth more than £28k (comparing to 0.25% percentage fee platform). The 0.50% fee (w/o Black) is about twice as expensive as a good percentage fee investment platform, so it’s hardly attractive to anyone with a smaller portfolio.

As where the Dozens Invest stands right now, I don’t think it has a chance. The investment platform market is pretty competitive, there’s platforms like Freetrade who doesn’t charge any fee at all on a restricted selection of funds, platforms like iWeb who charges zero platform fee but charges trading commissions on a wide range of funds, and there’s also a large number of platforms charge a flat or capped fee at £45 p.a. or lower. Not to mention that those platforms all have a wider range of funds than Dozens, and more feature rich than Dozens.

To really help people change from spenders to savers and investors, Dozens need to avoid competing on fees or features, but focus on educating and hand holding. For example, the DIY guaranteed equity bonds I mentioned above is one of the great way to get a saver to start investing without taking any risk (except inflation, but most people don’t know that) on their capital. If Dozens can’t commit to 5 years fixed term savings products because the long term funding uncertainty, you can at least give your customers a best buy table, and let your customers save the cash component with another provider. The beauty of this DIY GEB approach is it can be as simple as the user commit to save certain amount of cash for 5 years and earn some of the stock market returns without risking the capital, the app will ask the user to open a specific savings account and put the details of that account in. Everything else happens in the background. For transparency, you can show the maths to the customer who wants to see it, and they will know that their money is totally safe. What a great product? The user experience will be even better if you can make a deal with the best buy 5 years savings product provider to automatically open accounts on behalf of your customers.

Thanks @AC, @gt94sss2 and @RobD - as promised, it is my pleasure to introduce you to the latest thinking behind, and vision for, the Dozens SME business banking application.

It is the first time we’ve introduced the Community to our complete business banking vision so do forgive the length of the following. Please absorb today – I’m looking forward to receiving your input on where you think we’ve hit the mark, or could maybe do more – and we’ll pick-up comments, Q and A this week.

The inspiration behind Dozens SME business banking is as old as Project Imagine itself, and was always a part of the Dozens vision to build a complete circle of money which could support equitable, economic growth through both financially healthy consumers AND businesses.

The idea is that, by helping consumers thrive, businesses benefit too, be that through consumers’ robust spending or their personal savings and investments supporting investment in businesses to help them grow. These growing businesses then need to hire more employees, making consumers better off in turn and so the virtuous cycle continues.

Screenshot 2021-10-10 at 10.21.04

Not only has this view of the world meant SME business banking was always on our roadmap, but it has directly informed product visioning such that we are not just talking about some abstract circle of money where consumers only interact indirectly with businesses via the broader economy. No, the ultimate vision is that Dozens consumer customers could invest directly in Dozens SME business customers, P2P styles, via the app. Or Dozens consumers could receive exclusive offers from Dozens SME businesses creating a deeply integrated ecosystem through which all Dozens users benefit.

And it isn’t only us thinking about what SMEs need in their business banking solution. The product I will run you through below has been influenced by numerous surveys and conversations with real UK SMEs, starting with our Business Banking co-creation day way back in June 2019, and continuing since.

So, why is it me talking to you about business banking? Well, prior to joining Project Imagine in 2019 I worked for five years in UK technology Mergers & Acquisitions. What on earth does that mean? A good question indeed. This meant that I was helping UK medium enterprises attract investment to support their business growth, or assisting Founders to sell their businesses and realise their return.

But in more practical terms, this meant that I was working with Founder teams to understand their challenges, forecast business and finance requirements and help them plan for the future. This ‘planning’ would be critical to these businesses’ success, and the ability to do this is not an advantage enjoyed by all SMEs. Hence democratising this advantage has become part of my personal mission at Dozens and part of our product roadmap.

For now, that roadmap is comprised of three phases:

  1. Cross-segment and cross-asset business banking

From left to right, Screens 1 & 2 demonstrate our cross-segment (consumer to business) differentiation in action, where users of Dozens Business (who automatically become Dozens Black users too) can switch seamlessly between their personal and business lives, within one app. This is not as easy or common as it seems. While traditional banks have separate consumer and business banking apps, the experience is generally not a fully integrated one. And when Micro SMEs (being sole-traders or businesses up to 9 employees) are going to drive 95%+ of business current account growth over the next five years, having an offering which is built to span the personal / professional divide is a must.

What about cross-asset? What we’re talking about there is Dozens’ sweet spot. Just as we managed to differentiate Dozens in the consumer landscape by building an offering which spanned current account, savings and investment assets with instant money flows, we will give businesses the ability to organise their assets over those different asset classes to give them leverage to better organise their finances (Screens 3 – 5). An example of this is separating out money from the current account that is being held for spending in the future (e.g. VAT or corporation tax), so that they can not only visualise that spend separately, but earn a return on it while they wait to pay that tax bill too.

This is in addition to all of the spending and transaction enrichment information features which are provided in the current Dozens app, and we treat as hygiene for the business offering.

  1. Working Capital Management

This is where my personal experience, carried over from my Mergers & Acquisition days, really bites – Working Capital Management. This is a corporate finance label for financial planning and cashflow forecasting, but should be read as anything which helps businesses manage their finances on a forward looking, proactive basis (not just retrospective).

To empower this, we will aggregate all SME business financial information in the Dozens app, through accounting integrations and open banking. This last part means that even money held with other financial institutions including credit providers like Amex, can be viewed in the Dozens app (Screen 1). Our partners for offering this are already in place. In addition to this, delegated spending (expense cards), will be managed from the Dozens app giving SMEs a complete view of cash inflows and outcomes (Screen 2 & 3).

This is important, because only with complete visibility of a business’ finances can we power robust cashflow forecasting. However, with that visibility, we can provide businesses with a view of their financial future (Screen 4) including months where they will be short on cash, or others where they can invest to grow. And by building these forecasts in an editable way, we can empower business users to undertake their own scenario analysis to see how moving a spend to next month or borrowing might bridge their cash crunch. This is serious financial planning in action (Screen 5).

However, providing the tools to do this does not necessarily create the intent, and that is where bespoke financial education and insights come in (Screens 6 & 7) to help businesses understand the positive impacts of taking more pro-active and data-based approaches to managing their future.

  1. Smart lending

This is where it all comes together – both the circle of money I referenced at the start of my post, and the complete business banking proposition.

Having provided the tailored insight to enable businesses to plan for growth or borrowing requirements, smart lending would provide them with the means to procure that capital from within the Dozens app (see the bottom half of Screen 5, Working Capital Management).

Small business loans, merchant cash advance, invoice financing – these are nothing new. However, presenting them to businesses in a ‘smart’ way (i.e. as a solution to a cashflow or growth problem), and facilitating that credit with the latest in credit assessment, including proprietary and third party credit scoring data, is unique.

This approach is potentially incredibly impactful for SMEs. And if it is Dozens consumers backing the debt through P2P style lending, then we are creating that integrated circle of money which we set out to build from the start.

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The market leading 0.5% pa fee option continues to exist in Mango, its just Black that targets the segment above rather than leading through non financial products like metal cards and concierge services.

And you are right about the B2B strategy subsidising the consumer growth - we lost about £5m pa of b2b revenue (more than our burn excl new product dev!) overnight due to covid, otherwise we would be operationally profitable by now as an overall company. Also covid means the sales cycles for these kinds of deals has gone higher as digital spend focus has been on distribution (some app, any app) rather than true backend swaps or builds. Erosion of interest rates also means less cream on top for banks to choose discretionary spends with, so unless the backend is crumbling (very rare) its been reprioritised for the future rather than now.

Essentially what you are seeing from us is very similar to what you are thinking - just nuanced for market realities through and post covid.

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Only issue to making this real is that partners equally depend on long runways for these types of products - we are all incentivised to avoid messy wind-downs, including customers. You can always count on this team to choose customers’ interests and convenience/safety in all scenarios, and our culture is certainly not the ship at any cost that you see from others. Perhaps that will bite us - but like I said, if we survive, we will be big and sustainable, with that one elusive customer reaction that imho has evaded fintech so far - Trust. As expressed through high,
sticky, growing average balances.

Also, we are building a long term buy and hold, (but with easy flows both ways) Invest platform, focused on multiasset strategies augmented by high conviction multi-stock themes - not to be confused with trading (single stocks) or speculation (crypto). The world doesn’t need yet another trading platform but more people absolutely need to invest long term if countries like the UK are to avoid a massive pensions crisis in the years to come. So we are definitely not competing with Freetrade, we just need to find the right fund shelf per earlier discussions on this thread, and focus 2022 a LOT on that hand holding, so fined will be key as you say.

Would love to steer discussions towards Sam’s post and Business Banking now if possible, so I don’t break his flow with my responses. We will come back and address any unanswered questions at the end.

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Thanks so much for this. I can’t tell you how much I love this proposed new look for Dozens.

I also think that targeting the personal customer / sole trader market might be pretty smart. I wince a bit at the price point - but I’m not the target audience.

One request: I love screens 4 (cashflow) and 5 (reforecast) - and I think that I’ve been wanting something similar in a personal account without really realising it. I’d like to see somewhere that forecasts my balance after bills - and lets me model additional income / expenditure to see how that affects my cash flow. It could even play into some of the advanced financial services we’re talking about (cashflow smoothing, Lombard loans etc)… So, I think I’m just saying can you build this stuff in a way that can be easily repurposed please?!

I won’t go into this now - and it’s probably for a different topic - but I think a conversation about exactly what we (or @AC / PI) are trying to build here would be useful. We all have our own visions of the future, but I do get the sense that some of us (me included) have some strong opinions which may or may not match the direction of travel.

Thanks @SamDB

Your post and the screenshots illustrate the amount of work has gone into business accounts and it looks very promising

Initial thoughts/comments in no particular order:

a) Like @Peter I am not the target audience but also wonder about the price point, especially given the likes of Monzo/Starling/Revolut also offer a free tier to try the service and get businesses into their ecosystem.

b) When @Julia says that Dozens Black will be included, I can see that integration working for sole traders, but what about Ltd’s, trusts, charity/community accounts which will have a different legal structure?

c) Many firms may need more than one person to authorise a payment. Has that been considered?

d) Offering expense cards looked like a great idea. Will these be physical/virtual cards or both?

e) Are their plans for a website, as well as app access?

f) Interchange on business accounts can be a major revenue stream. I hope Dozens plans to retain this?

g) will it support multiple currencies?

h) what is Dozens family?

i) One real concern is:

P2P lending has become considerably less popular recently, with many P2P platforms failing and businesses unable to repay loans (not just due to Covid).

As such, and this comes down to who is the target audience discussion above, I feel that Dozens hasn’t targeted (to date) a customer base who would be comfortable with the amount of risk involved in this.

PS: just to add on Dozens Black and interchange - one reason I should oppose money going to a charity automatically, is the potential loss of Gift Aid.

One thing Pi/Dozens could consider operating some form of charity/fund raising platform, especially now that Virgin Money is withdrawing from the market. I feel this would fit in well with your stated ‘social’ mission.

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Instead of P2P, I’d rather see IFISA bonds like Triodos Crowdfunding or share purchase platform that has more transparent descriptions of risk…

I would strongly recommend you think twice about P2P lending.

P2P lending is indeed beneficial for the borrowers, but the same can’t be said about the lenders. P2P lending often looks like savings account, smells like savings account and feels like savings account, but they are NOT savings accounts. Many savers will undoubtedly unknowingly expose themselves to risks that they don’t understand and cannot afford to take.

The two major risks are geographical/geopolitical risk and credit risk.

  • The geographical/geopolitical risk is the simplest to understand, because most P2P lending platforms operate in only one specific geographical region, they don’t and can’t have a geographically diversified portfolio of borrowers. As a result of that, lenders are exposed to uncompensated geographical and geopolitical risk.

  • The credit risk is slight more complex that that. In today’s financial world, most high quality borrowers (established & profitable business with good credit rating) would prefer either issuing their own bonds or borrowing from banks who usually offers them a more favourable interest rate than P2P lending platforms. Even subprime borrowers often get a quotation from banks and then compare that to the P2P lending offer. The dominating reason for someone to borrow via the P2P lending route instead of banks is usually a cheaper rate. Banks aren’t ignorant nor stupid, they charge a higher interest for good reasons (profitability is one of them, but that isn’t everything). Therefore, if a borrower ends up choosing P2P, it’s usually because the P2P platform has underestimated their risk of late payments and default. This exposes P2P lenders to under-compensated credit risk.

I highlighted the uncompensated geographical and geopolitical risk and under-compensated credit risk, because they are unique to P2P lenders.

  • Banks don’t suffer from uncompensated geographical and geopolitical risk. Even if a bank only operates in one geographical region, they can still use swaps and other financial instruments to manage the risk exposure to the geographical region.

  • Banks very rarely suffer from under-compensated credit risk, because by lending to a business, they are putting their own money at risk. Therefore they are more motivated (and have more resources) to perform accurate, detailed and rigid credit assessment than P2P lenders who depends on the P2P lending platform which doesn’t have their own money at risk to perform the assessments.

Considering the above risks, I can hardly agree that P2P lending will ever benefit the lenders. Unfortunately, average savers (investors, to be accurate) doesn’t know this and probably will never understand this.

If you really want to help your customers, please lend to SMEs as a bank, and pay most of the interest to your customers who has savings account with you. You, as a bank, can understand the risks involved, and should have the stomach for it. If borrowers mass default on their loans in a concentrated period of time, the worst case for you is to run down your capital reserve. However, in P2P lending, your customers will see a large chunk of their money accumulated over many years (or decades) disappearing from their accounts.

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Any P2P products will technically be Investments not Savings - and also only be a stopgap for when we are not a bank.

Also the dynamics change if better credit assessment through integration with a transactional platform like Spend and metadata like CF forecasts leads to different credit ratings. This hasn’t been done before.

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I fully understand that, but I worry average “savers” may not. Because P2P lending (in fact, many forms of lending) has many similarities with cash savings accounts - they save (invest) a set amount of cash for a fixed period of time in return for a fixed amount of return, and the rate of return over time is measured by interest rate. It will likely lead to confusions and many may wrongly believe that they are saving rather than investing.

Roughly speaking, when will Dozens become a bank? If the plan is in under a few years, I don’t think Dozens really need the stop gap. The time to close the book for a 5 years loan defaulted in the 4th year and in the process of recovering can be very lengthy. It only makes (a bit) sense if the time scale is in 10+ years. Even that, I still don’t like the idea of making P2P lending products available to the user base Dozens is targeted at - savers and first time investors.

This may haven’t been done before by P2P lending platforms, but big banks are certainly doing it. Adding this information may help reduce the chance and scale of under-estimating credit risk, but it won’t eliminate it. As I said, banks have their skin in the game, but P2P platforms don’t. Therefore banks are more motivated to do it right. Even P2P platforms try their best to do the right thing, they often don’t have the resources big banks have. Having access to cash flow and forecast is only one aspect of it. Big banks also have access to industrial expertise, supply chain information, market research and many more which may not be easily available for a smaller player such as a P2P platform.

More importantly, this doesn’t do anything to help reduce or diversify away the geographical and geopolitical risk. Being a risk that can be diversified away means investors are not compensated (rewarded) for taking on the risk. The result is lower risk-adjusted return for retail investors comparing to financial institutions and professional investors. If a retail investor really wants to participate in the high risk and (potentially) high return lending business, high-yield bond (a.k.a. junk bond) is often a much better choice.

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For reference, a few big P2P lending platforms in the UK are advertising the following interest rates:

  • 2.0-5.3%
  • 4.5-6.5%
  • 6.2%
  • 4.5%
  • 3.75-4.1%

As you can see the numbers are around 5%. This can be easily achieved by investing in a GBP hedged
global high-yield bond. Don’t forget the HY bond comes with the additional benefit of much higher liquidity. In plain English, it means the HY bonds are easier and quicker to buy and sale at their fair price, especially in bad market conditions. Try go around the Internet forums and find out how many investors are still trying to get their money back from some P2P lenders after the COVID-19 situation? You will be surprised by it.

The point I’m trying to make is, P2P lending may benefit Dozens as a business, but I can’t see how could invest in P2P lending benefit the retail investors - the Dozens’ customers. In my view Dozens isn’t a company making profit by putting their customers at disadvantage, and P2P lending clearly doesn’t fit in this.

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Still finalising some of the details on this @Peter, but will share soon. Is there something specific you’re hoping to see in this screen?

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Here’s one I prepared earlier…

I’m hoping for notes, ability to upload receipts (pictures, PDFs), the raw merchant name (as well as the enriched name), ability to manually add receipts / breakdown line items…

…but mostly just looking forward to seeing what you’ve done with it. I’m loving the direction of travel!

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Thank you @Peter - it is very pleasing to hear that the new look spanning multiple segments resonates with you, indeed we have invested a lot of time (read design and technology) and benchmarking in arriving at this point. Part of that benchmarking work was on price (@gt94sss2 this is relevant to your question too).

You are right that there are plenty of free business banking services offered by others, I am sure as a hook into their ecosystems. However, the problem with these ‘free’ accounts is that they (unlike these providers’ personal offerings) are typically limited in either maximum balance or maximum number of monthly transactions. Users quickly start having to pay per transaction over those thresholds, or to upgrade to a more expensive account to actually DO business banking. So, paying customers end up subsidising the free accounts, making the paid offerings more expensive (based on our cost benchmarking, ‘Challenger’ accounts actually end up costing users more than their High Street counterparts on a blended basis, once standard account volume / transaction activity is put through them). An even more cynical read might be that paying business users end up having to subsidise the free consumer accounts within these ecosystems, which we simply will not do. Dozens Business and Dozens Black for that matter, will always be about transparent pricing for what THAT user consumes.

Peter, with regards to your query about transferability of business features to personal, building cross-segment to consistent design and technology systems is one of our fundamental principles for ensuring cross-pollination of features - a long way of saying, yes, we will build this stuff in a way that can be repurposed for the right consumer use cases. After all, that margin between sole-trader and personal user is very fine!

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Thank you for the considered comments @gt94sss2. I’ve addressed the question on price in my response to Peter, and AC has covered P2P, but I have plenty to get into here directly.

b) Dozens Black CAN be included, but Business can always function as a standalone. There will be a separate KYB process which accounts for the additional complexity of Ltds, etc., ensuring that different legal structures (compared to only sole traders) can be supported by the offering.

c) For these types of businesses (i.e. those with more than one user), we will absolutely be empowering delegate users, with tiered rights and security requirements such as four eyes checks on payments. As a business ourselves, these ‘profiles’ are essential to the way we do our business banking and our own user persona has been drawn upon to inform the product.

d) These would be both physical and virtual, with additional per card charges for physical card issuances over a set allocation.

e) The release product would be app initially, with desktop to follow subsequently. Related to my response in c), the ‘way’ businesses actually bank is important to us, and there are some jobs / use cases where the user will simply be more comfortable doing this behind a computer.

f) The point of the subscription price is that we have a sustainable offering before any user related revenue-generating activities. On this basis, it isn’t a requirement that we retain business interchange, but we obviously reserve the right to should it be accretive to the overall value proposition.

g) Yes, we have the partnerships in place already to support multiple currencies.

h) Dozens family is the third horse in the Dozens product stable: 1) Consumer (‘Black’); 2) Business; and 3) Family. Just as an individual can integrate their business life with their personal (Black plus Business), they can integrate themselves with their family, creating a joint account, not only for you and your spouse, but for children too. A little like delegated Business expense cards with centralised control over limits, with Family, one could manage a kid’s pocket money with via the app and delegated debit cards. This proposition is in earlier stages of development relative to Black and Business, but completes the trinity of economic units: Individual, Business and Family.

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Yep great points @Roman - clearly you have spent a lot of time studying this, so would also love to talk to you more when the time is right. For now, I can confirm you are totally right about our mission and transparency constraints, and also that no product including P2P will be launched till we are sure of the structural rigidity and compliance alongside a customer value-add.

PS: For Save versus Invest, if its not principal
protected (like vanilla P2P), it can only feature in the Invest part of the app and not in Save/Grow. So to the first timers, it will compete for mindspace with ETFs not deposits.

This sounds like a pretty compelling product. I’m imagining a situation where you can provision new cards on demand, set payment limits for kids etc, a space for bills, then spending accounts for parents…

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From a less informed member of the community but one ‘invested’ in the basic thesis there is much to like here but most of it feels intrinsically linked to the runway challenge which I guess it was hoped to resolve for Dozens through PI B2B profitability which has been hampered by the ‘big cold’. Nonetheless it remains a challenge and, whilst other less transparent operations may have similar challenges, it is difficult to appeal to anyone other than the niche early adopter community, prepared to tolerate a degree of instability.

Looking at the refreshed app and the Zen approach (@Peter) there is much to like but superficial Zen belies the desire for true Zen, mindfulness cannot just be skin deep. As a proposition I would recommend Dozens to many but it still feels very Alpha / Beta in many ways and many are not prepared to tolerate that in their day to day banking. As such I have not attempted to persuade my family to onboard although hopefully only a ‘yet’ problem rather than a ‘forever’ one.

There have been discussions over vertical models and First Direct, once a disrupter, and yes it is possible for multiple niche offerings to offer something unique but I still welcome the comfy pair of slippers, even if they are not the best running shoes. In cycling there are endless discussions over how many bikes one needs with specificity driving people to multiple variations for different perceived benefits however when those gains are marginal and of little relevance to most users actually life can and should be far simpler albeit at a small cost. I would like to have Dozens as the sole financial app on my phone if it is good enough across the board, however that is delivered (integration of other services or delivery of own), but true to the Spend Save Invest journey. Just look at the basket case of apps and separate services one needs to understand as an EV driver, it is an impenetrability many will not penetrate effectively.

With respect to the business proposition for me it is fairly niche and I am unsighted as to the market opportunity. I am a director of a management company charged with the community aspects of the group of properties within which I live. As such we have limited transactions and a modest sinking fund. At present I enjoy ‘free’ business banking suitable for my needs but no ready means of making the sinking fund work for us. As long as I could get it to wipe its nose then I would move. My wife is currently self employed but I doubt if she would be interested in paying to separate her personal and business finances although it would undoubtedly make bookkeeping easier.

The developments around family seem very exciting, broadly aware of some of the other offerings now available. A little bit late for me to benefit personally but I can see it as an attractive proposition for young families and so as an albeit small investor it feels right especially linked back to my thoughts on zen and simplicity.

Quiet for a while so apologies for the rambling thoughts, others have added far more insightful feedback but I still like the general direction of travel, we just need to fix the runway so that we can start operating more / larger aircraft!

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