Zevvle as a sustainable business

[Rjevski (Andre Borie)]

@Rika

That’s why we have industry regulators, and why you keep good relations with suppliers

In my opinion the telecoms regulation isn’t the best (not just in the UK though), it’s for example why broadband providers are allowed to mislead the public with false advertising regarding “fibre”, and why the payments and banking scene is much more healthy than the telecoms one. The fact that spectrum itself (which I guess is equivalent to a banking license) is handed out by auctions instead of “airtime” on that spectrum being billed is a problem as it prevents any new entity from entering the market.

As far as the relations with suppliers go, I’m not sure it can go that far considering the goal would be to out-compete them. You can be nice all you want but at the end of the day it wouldn’t make sense for them to offer you a deal that will allow you to out-compete them and become the best network ever. It’s similar to why telecoms try hard not to become a “dumb pipe” (despite that it’s what they should be) and will try all kinds of (often bullshit) marketing strategies to make their “value add” appear worthwhile to the customer while screwing them behind the scenes.

One of the main problems is that data pricing is inherently flawed, the excuse is that RF spectrum is scarce so data should be limited but that doesn’t pass muster in practice because data is billed regardless of the actual network load and congestion of the RF spectrum in a certain area, and in fact sometimes wastes spectrum (why can’t I have unlimited data in a village at 3am on a Sunday when everyone is asleep, and the tower is just there burning energy and rent regardless of whether anyone is using it? it is literally cheaper for them to give out free data in this case than to prevent someone from using more than what their plan allows to than to let the tower be unused while still burning energy). Not to mention how “data” can magically disappear forever if you don’t use it all in the current billing period.

[Rika]

@Rjevski

As far as the relations with suppliers go, I’m not sure it can go that far considering the goal would be to out-compete them.

I have some stories here best not shared in a public forum, but understanding the motivations of your suppliers can make them extremely easy to work with. If what you are saying is 100% the case, there would be zero reason for them to offer MVNO services at all.

Ultimately, they are a business looking to make money, so it must make some form of financial sense to them.

The question I find myself asking is “what do they get out of it?”. I don’t know the answer here but I would love to find out.

[Rjevski (Andre Borie)]

I guess if your are in a different league than them (broadband vs mobile) it makes sense for them to offer you MVNO services, it’s an extra bit of money (maybe not as much as what they’d get out of a retail customer, but still better than nothing if the customer were to go to a competing network instead) with low risk of you out-competing them on the mobile market because you’re focused on a different offering like broadband, which is why services like Sky or Virgin Mobile exist, but from a pure MVNO perspective that starts out as an MVNO (because there’s no other way) but that aims to be the “best” network I am not sure.

I guess one reason could be market research, they let generic MVNOs come in and see how they do, and if they do very well their either buy them out (I assume mostly for their brand, like Giffgaff) or just replicate the perks in-house and in the long term the MVNO will either pivot or die). Otherwise I don’t really know, it doesn’t make sense from a business perspective to let a competitor take over your market if you have the power to stop them (which is the case with a typical MVNO arrangement). I guess the timeframes we’re talking about could be a handful of years, so MVNOs could still make a profit and a decent chunk of cash for the founders, but in the end they will still be out-competed by the host. Maybe someone else with better insight into the industry can shed some light on this.

There are niche companies that offer different services (catered for M2M, etc) and are successful at being MVNOs but I think this is because they are indeed niche and reasonably will never compete with the host carrier’s main offering, so it’s win-win because the MVNO makes some money, the host carrier makes money with no risk of either one eating the other. But if suddenly the MVNO starts significantly eating into the other’s market share I expect the other to respond accordingly with either a more competitive offer (where they have the advantage) or reworking the terms of the deal to make that particular offering unsustainable for the MVNO.

[Rika]

@Rjevski

or just replicate the perks in-house and in the long term the MVNO will either pivot or die).

So you need something that they cannot replicate, or be unwilling to do.

Monzo’s once-unique technical features have been widely copied on paper, but other banks have long legacies and processes that make experimentation expensive. You just can’t clone culture either.

There are openings, though yes, you can’t really grow larger than your host network without either buying them (see BT+EE or Virgin Mobile+O2) or deploying your own infrastructure (like Three maybe?).

[Rjevski (Andre Borie)]

So you need something that they cannot replicate, or be unwilling to do.

Indeed, but anything can be replicated given the right amount of money, and even lack of skills/mindset can be replicated by just putting enough money on the line and maybe several failed attempts. Sometimes this might be a bit extra money for things like setting up a separate company like Natwest is trying to do with Mettle (although they are very late to the game, and IMO they have no chance against either Starling’s or Monzo’s business offering).

So the problem becomes “development cost of replicating the tech + management/admin cost to deal/bypass a legacy mindset or culture mismatch”. The latter can buy you some time (and you can make some good money as a founder or early employee), but ultimately the host will still end up eating you/buying you in my opinion. I’d love to hear opposing opinions (as it will give me some hope in my own attempt at this ).

deploying your own infrastructure (like Three maybe?)

My understanding is that Three was bankrolled by the parent company (which happens to have a lot of cash from unrelated services) and I am not sure whether it’s actually ever been profitable when considering the initial investment to bid on and win the spectrum licenses + build the infrastructure. Looking at their history they also arrived at a time when carriers had a lot more power and could offer new services like 3G and value-add services (like video calling, etc) so it could’ve helped, where as now carriers are dumb pipes (which is good from a consumer point of view) and 4G is already more than good enough for the majority of people.

PS: I’m logging off for tonight, but thanks for the insightful debate and I’d be happy to continue this tomorrow!

[embr]

@Rika

Monzo’s Prepaid card was operated entirely by a series of 3rd parties and the Monzo infrastructure was built on top of their APIs. This meant that Monzo could get a card into the hands of customers very quickly and start working on unique features such as the app.

(Another Monzo payments engineer here, I’ve been maintaining our card processing systems for the past two years. )

In my opinion, there’s something even more valuable we got from outsourcing prepaid card processing - experience. We built a Mastercard processor in a year. I’ve told that to other people in the industry, and watched their heads explode. But that’s not only because we threw some of the best engineers I know at the problem - but also because we’d had a long time to learn from our outsourcing partner.

What do these message exchanges work? What’s the anatomy of a transaction, when you get down to the wire? And when we started to outgrow our outsourcing partner, we could also learn from where they were struggling.

The first documents may have been signed and the first line of code written after we got our banking license, but the first bit of Mastercard trivia was posted on Slack, and the first diagram scribbled on a whiteboard, probably on the day the company was set up.

We never would’ve gotten off the ground without the prepaid programme, not just because we could attract investors. The prepaid programme let us build a mature platform and an app around a third party, a whole ecosystem of the things that made us unique, rather than having to start by building the lowest common denominator and working from there.

It let us build fun features, put them out there, see which ones worked and which ones didn’t. And it let us build a community that let us know, loud and clear, when we were on the wrong track.

I’m going to be very curious to see how Zevvle handles this. But I think they absolutely can handle it, because they’ll have the same advantage that we did.

[embr]

@Rjevski

Indeed, but anything can be replicated given the right amount of money, and even lack of skills/mindset can be replicated by just putting enough money on the line and maybe several failed attempts. Sometimes this might be a bit extra money for things like setting up a separate company like Natwest is trying to do with Mettle (although they are very late to the game, and IMO they have no chance against either Starling’s or Monzo’s business offering).

I think it was Jonas, Monzo’s CTO, who once said that even if all of our source code leaked today, we’d still have a reason to exist, because people can only copy where we are, not where we’re heading.

My high street bank now lets me freeze my card. I open the app, and I tap through a series of dialogues; it feels like I’m filing a “freeze card” form, and that’s probably effectively what’s happening on the backend.

That’s not because they can’t find good UI designers or app developers, who can make a toggle button and play a little frost animation over a picture of my card. They’ve thought about features in terms of forms for a very long time, they’re very good at it, and like any other technical decision, it was made for a reason.

To me, a millennial who grew up on the internet, time is short and forms are awkward. I expect anything which doesn’t have a confirmation, to be reversible. I can tap the “freeze card” button and see what happens. But if I lose both my card and my phone, I can’t walk into a Monzo branch and freeze it from there - with my high street bank, I can.

However, that’s just my point of view. My parents’ and grandparents’ generations grew up in a world very different to mine, and their expectations are different. Their banks made them a promise to hold onto their money when they were my age, and they’ve been honouring that promise, in largely the same way, ever since.

They expect every action they take to come with an explainer, and a confirmation, that makes them feel comfortable giving their consent. When their banks add a new feature, they add a new form, because they have promises and expectations to uphold.

In my mind, the advantage of a startup isn’t that they don’t think in forms - in 60 years, “thinking in REST” might be the new “thinking in forms”. It’s that they haven’t yet made any promises, and they get to choose which ones to make.

You can run a mobile network without stores, or a bank without branches, and replace them with a smartphone. It means there are some people you can’t reach - but you can promise more to the people you can.

(Apologies for the double post; I wasn’t sure if somebody would make another post by the time I’d finished this one. )

[Rjevski (Andre Borie)]

This is a valid point, but I think the legacy banks can (and do - see Mettle for example) work around this by setting up a new brand so they are freed from the promises and expectations set by the legacy brand.

I think the main problem with mobile (and why it’s a harder challenge than banking) is that the host networks are the only gatekeepers thanks to the government and the current rules regarding spectrum allocation preventing any competition in that space.

What Monzo and the other banks did is build on top of Mastercard/Visa, and they are lucky in that respect because those are not the blockers to a better banking experience (they would in fact benefit from it, since MC/Visa are happy to be the “dumb pipe” in the background and have no interest in a consumer-facing business) which is why Monzo succeeded.

In mobile, the data pricing and billing model (and potentially technical limitations of the host network’s infrastructure) is the main blocker so all MVNOs are bound by that, which gives the host carriers full control over their competition and the ability to “cut out the middleman” and replicate (or buy out) that competition if they see that their product sells better because they are already in the consumer space and explicitly don’t want to become a dumb pipe in the background.

In fact, you can see that with Zevvle where they tried to do something different (pay as you go pricing with no bundles) and were forced to backtrack because it wasn’t sustainable, which itself is purely because of the pricing and billing model (the carrier itself is enforcing data buckets, which is why they’re per-SIM and you currently can’t share the data allowance across the entire account) imposed by their upstream carrier.

This is probably why despite all the venture capital available out there (and being spent on various startups, including very stupid and unsustainable ventures), nobody has attempted to disrupt the mobile space at scale because unless you get billions of funding (to win the spectrum auction and then build your own infrastructure) you will always be at the mercy of the host carrier who push you out of the market the second you start doing better than them.

Edit: speaking of stupid & unsustainable ventures, I think WeWork has the same challenges as an MVNO. WeWork does not own the properties, it rents them, so they assume all the risk associated with the business but ultimately the landlords are the real winners and would be able to raise their rents when WeWork’s lease is up for renewal if they see them doing well, or try to replicate the model themselves with their inherent advantage (which I expected to happen if WeWork, you know, actually worked from a profitability point of view). The only long-term exit for WeWork would’ve been to make enough money with the current system to be able to buy properties and then make back their initial loss. In the telecoms world this would be equivalent to obtaining the spectrum license and building out infrastructure.

[Rika]

@embr

In my opinion, there’s something even more valuable we got from outsourcing prepaid card processing - experience.

Very much in agreement here.

You find out very quickly where the pain points are, and figure out how to not make the same mistakes down the line. The v1 Mastercard processor was built in a year, but it was built on top of years of reading and experience with the prepaid cards.

@embr

It let us build fun features, put them out there, see which ones worked and which ones didn’t. And it let us build a community that let us know, loud and clear, when we were on the wrong track.

This was the best part of early Monzo, and I’m sad that it was lost over time.

@embr

I think it was Jonas, Monzo’s CTO, who once said that even if all of our source code leaked today, we’d still have a reason to exist, because people can only copy where we are, not where we’re heading.

It was. Your true value is in your direction and your people.

There’s that “Skate to where the puck is going, not where it has been.” quote that I often think of that applies well here, by having good people making decisions and making bets, you can start going in the right direction, and you can do it faster because you don’t have legacy weighing you down to start with so can sprint right to where you think you need to be (though it’ll be expensive on your energy and you’ll need to repay that debit before you can continue).

@embr

You can run a mobile network without stores, or a bank without branches, and replace them with a smartphone. It means there are some people you can’t reach - but you can promise more to the people you can.

The benefit here is that the majority of people using a phone network are going to need a phone, and phones need a network. How you solve a circular dependency of needing a phone to buy a phone or pay for service will be a fun one to solve without retail stores though.

Before Monzo, you had to spend forever in a branch to open a bank account. Monzo turned that into a couple of minutes in an app (at best, sure) and you immediately have an Apple Pay/Google Pay card. Having recently been through a certain large UK carrier’s in-store onboarding where everything was so many forms, systems, and paperwork that got messed up to the point where I had to file formal complaints and provide pages of evidence to resolve, there is a huge room for improvement here.

Imagine a world where you have your current SIM in an iPhone, go through the Zevvle signup process, load an eSIM beside your current SIM, and through Ofcom’s SMS switching requirements, immediately start using it, then when you’re happy to switch, kick off the number porting process from your old provider in just a few taps with a pre-filled SMS link and a box to type the returned code in.

I think eSIM, VoLTE/WiFi Calling, Ofcoms switch changes, and RCS can be transformative to Zevvle in the same way that Apple Pay/Google Pay, changes to the rules on banking app APIs/cloud usage, The Current Account Switch Service, and more was to Monzo. Yes, these things exist and are implemented by the bigger players but it takes someone new and willing to take risks with their own technology stack to take full advantage of them.

[Rjevski (Andre Borie)]

I think this is a bit optimistic. With regards to eSIM, the existing carriers have a network of branches all over the country (some are in-house, some are outsourced to franchises, some with partners like Carphone Warehouse). It would cost thousands of jobs and thus be a very bad PR move for them if they suddenly modernized the system by pulling the rug under those and made it “too easy” to sidestep them, whether it’s through their own offering or an MVNO.

I agree that there is huge room for improvement, and all these jobs need to go. They’re on borrowed time anyway, considering modern phones are so good that they last much longer and the premium handset makers (Apple and Samsung) are opening their own shops. However, I don’t expect them to go without a fight as there are too many people whose paychecks depend on these shops existing and things being the way they currently are and some of these people are also the decision makers whose cooperation is required if you want to make changes.

I definitely don’t expect Zevvle to be allowed to pull off what you’re saying anytime soon. It would be irresponsible for the carrier to let a competitor brand have the spotlight on such a user experience breakthrough. If this were to happen, the carriers will do it first and MVNOs will be in several years later maybe (for example, MVNOs still don’t have Wi-Fi calling despite it being “boring” and normal now and no longer a new and hyped up feature), and as I said before I don’t think the carriers are too keen on pulling the rug under their shops by making the online UX too good.

Monzo didn’t have this problem because they didn’t need any help or cooperation with the existing legacy banks beyond what’s required by law (which is just payment interoperability). If Monzo needed the legacy banks, went to them and said “hey we’re gonna make this amazing app that’s gonna remove the need for all your branches, plus it’s cheaper than your offering and easy for customers to switch over, wanna help us?”, do you really think they would’ve had any kind of positive response?

[nick (Nick Goodall)]

@embr

To me, a millennial who grew up on the internet, time is short and forms are awkward. I expect anything which doesn’t have a confirmation, to be reversible. I can tap the “freeze card” button and see what happens.

With de- and re-activating SIMs (coming to the new data plans soon; works with the older tariffs); that instantaneous feedback is the gold standard. Unfortunately being out of the data/call/sms flow means we’re totally reliant on our supplier and EE, so it does take a few minutes.

@Rjevski

I think the main problem with mobile (and why it’s a harder challenge than banking) is that the host networks are the only gatekeepers thanks to the government and the current rules regarding spectrum allocation preventing any competition in that space.

Call me ridiculous but I’m optimistic it doesn’t have to stay that way. With the right people + the effort + a movement, if Ofcom are really about competition they’d be open to a different model; maybe a pay-for-what-you-use spectrum free-for-all, or something at least to lower the entry barrier.

@Rika

Imagine a world where you have your current SIM in an iPhone, go through the Zevvle signup process, load an eSIM beside your current SIM, and through Ofcom’s SMS switching requirements, immediately start using it, then when you’re happy to switch, kick off the number porting process from your old provider in just a few taps with a pre-filled SMS link and a box to type the returned code in.

eSIMs are the only real blocker here; the tech exists and already works with IoT SIMs. Our UX could do with a real designer though… in fact the SMS link flow could be a lot better already; I’ll set some time aside for that.

Number porting could really do with an overhaul as well; in Belgium it happens within seconds for example.

@Rjevski

In fact, you can see that with Zevvle where they tried to do something different (pay as you go pricing with no bundles) and were forced to backtrack because it wasn’t sustainable, which itself is purely because of the pricing and billing model (the carrier itself is enforcing data buckets, which is why they’re per-SIM and you currently can’t share the data allowance across the entire account) imposed by their upstream carrier.

Those 2 are actually unrelated — it being unsustainable and an imposed billing model. Wholesale we do pay for per-SIM data buckets, but our billing is completely separate and free as a bird. E.g., our supplier don’t have add-ons or rewards; that’s something we’ve setup. Account-wide data is effectively the same as the previous PAYG model, but with less uncertainty and risk.

The reason for not doing it immediately was to get up-and-running quicker, plus get some experience with the bundle model. There were a few times when implementing the data plans I thought “This is awful, a shared plan would be such a better experience” so yes, we will do it! We need to spend some more time thinking through the pricing; not sure we got it right when we suggested shared-plans the first time.

@Rjevski

for example, MVNOs still don’t have Wi-Fi calling despite it being “boring” and normal now and no longer a new and hyped up feature

Sky seem to be the only MVNO with Wi-Fi calling (and Visual Voicemail, according to Apple at least). I’m not sure whether that’s O₂ letting them or Sky putting in the effort; maybe a bit of both?

I can say that with Virgin leaving BT, their MVNO arm is getting more attention, soo… watch this space!

[GalaxyAllie (Allie)]

@Rika

This was the best part of early Monzo, and I’m sad that it was lost over time.

I remember being interested in Monzo not super early, but still early-ish… it definitely changed a lot. I opened a new account with Lloyd’s today (who I left a couple years ago). I kinda needed another bank account anyway as Monzo doesn’t officially support payments from my employer (and that’s not something I want to be unsupported by my bank!), but… yeah… it was time. I’ll keep Monzo around as another account, but it lost most of its magic. It’s just another bank, albeit a better-designed one than most (really, Lloyd’s, I need to wait for a letter in the post to use online banking? Really?).

I signed up for Zevvle not because I need another SIM - I don’t. But I do want one. Not because I could afford to switch my main phone number over - Zevvle is far too expensive for that. But because the developer aspect and experimental nature enticed me. That’s something really valuable it’s important not to sacrifice in the name of growth.

[gt94sss2]

@nick

Number porting could really do with an overhaul as well

Wasn’t the current system - requesting codes via SMS and one day switching - only introduced less than a year ago?

[GalaxyAllie (Allie)]

@gt94sss2

Wasn’t the current system - requesting codes via SMS and one day switching - only introduced less than a year ago?

Isn’t that just for the front end process? In reality, the UK doesn’t have ‘true’ number portability (i.e. all-call query).

[nick (Nick Goodall)]

@gt94sss2

Wasn’t the current system - requesting codes via SMS and one day switching - only introduced less than a year ago?

Yep it was updated last July (Ofcom had a field day). I believe next-day switching existed before that, but it was more about improving the existing system by getting rid of notice-charges and not having to contact the network for the switching code.

It’s still a bit obtuse with how long it can take and the unpredictability, i.e. what time exactly will the number change? It’s understandably stressful

[Rjevski (Andre Borie)]

I know at least one carrier where number porting on their side involves an email (and possibly Excel files) being exchanged manually. I wouldn’t be surprised if this was the norm.

[embr]

I feel obligated to say, it could be worse - it could be the Swedish system, in which you until just recently had to snail mail your new carrier a power of attorney, and then had to wait close to a week for them to faff about with it.

(Recent improvement: You can now give the power of attorney online, and it only takes three days! Each of these is individually true… some of the time!)

[Colin (Colin Robinson)]

@nick

Our UX could do with a real designer though…

I think with the recent news @Monzo might have some going spare?

[GalaxyAllie (Allie)]

At least at the end of it you’ve actually transferred your number, unlike here - where it’s just forwarded forever.

[anon57251825]

Came across this blog article today from the owner of SourceHut, which instantly made me think of this topic.

Our model is customers first, investors never