digital banking Archives

Digital Banks Focusing More Than Ever on Serving New and Existing Customers

LendIt Fintech recently hosted a webinar called How Increased Engagement Will Impact Fintechs and Digital Banks

April 29, 2020 By Ryan Lichtenwald Leave a Comment

Now more than ever it is important for fintechs to be on the top of their game when it comes to serving customers. Customers from around the US now have no choice but to go all in on digital and the offerings they are discovering are quite compelling. It is a trend we first saw with the digital banks in Europe but it is now happening in the US.

This webinar brought together two big names in digital banking, Colin Walsh from Varo Money and Brandon Krieg from Stash. Both Varo and Stash are tapping into the estimated 180 million that are underserved here in the US. Niko Karvounis from Plaid connected the dots as they are the undisputed leader in providing the plumbing between fintechs and traditional banks. As more people are looking to digital banking, they have never had to deal with such an influx of new and existing customers engaging with their company, using their services at such high rates. So how are they handling it all?

Niko has been working on connectivity for quite some time, having first started Quovo back in 2013, a company which was acquired by Plaid in early 2019. At a time when the world is in chaos, customers rely on the interface that Plaid provides. It is something that folks in the fintech industry often take for granted, but is a core part of financial services transactions happening around the globe. It is apparent that the days of a standalone branch where a customer leverages every service from one bank are numbered. Today, customers can have many bank accounts and the companies that have realized this was inevitable are benefiting.

Both Stash and Varo Money leverage Plaid for connectivity which they both agree puts the customer first and reduces friction. Varo Money was one of the early adopters of Plaid’s service, realizing that the movement of money matters the most, allowing customers to access money conveniently and affordably. Keeping this flow of money moving reduces the anxiety felt by customers during these stressful times.

Varo Money is unique in that they are likely to become America’s first digital only national bank as they continue the final stages of the regulatory approval process. Their goal is to help Americans who need a better banking experience and help them become more financially resilient. Stash is based in NYC and has teams in South Carolina as well as London. Currently they have 4.5 million customers, and serve as an all-in-one financial home for 4.5 million Americans though Krieg shared that they want to help customers with whatever solutions they need.

During the coronavirus crisis all three companies have adapted to the changing times. Plaid took it upon themselves to roll out a solution for payroll data to help small businesses access Paycheck Protection Program loans. This ability to connect in this way is just another use case for the interface Plaid provides. Both Krieg and Walsh shared how they are ramping up their support teams to be able to continue to help the many new and existing customers who are increasingly engaging with the company. Stash has seen lots of new customers come in via referral, with a 100% increase in weekly deposits. On the investment side they have crossed $1 billion, which is an amazing feat given the average deposit is $28. Varo Money has adjusted their marketing to ensure that the messaging is both empathetic and informative. One of the changes they were able to make was the ability to accept treasury checks. They have also increased cash withdrawal limits and continue to share ways that customers can earn additional streams of income.

As customers have been coming to Varo and Stash in droves, their cost of acquisition has decreased significantly as many people reevaluate their banking relationships. Varo estimates that they are able to serve their customers at about half the cost compared to a traditional bank. Walsh expects this to halve again as they become a national bank. He believes Varo will be operating on the most modern tech stack in the country. This helps them eliminate fees and provide higher interest on savings accounts.

Panelists also discussed the current lending environment, how their demographics are changing, how they themselves are handling a remote workforce and how this crisis compares to 2008.

View the full recording

7 Ways Voice Marketing Enhances Digital Banking

On-the-go consumers get on-the-spot satisfaction with voice response

March 11, 2020 By admin Leave a Comment

[Editor’s note: This is a guest post from direct response marketing veteran Mike Gunderson. He founded Respond Fast™ in 2018 to create the first Voice Activated Call To Action™ (VACTA) technology using smart speakers and digital assistants to respond to offline media campaigns deploying direct mail, TV/radio spots, print ads, collateral, billboards, signage and product label/packaging. VACTA enables banks to easily set up and launch a campaign using a custom phrase or code for frictionless consumer response.]

Digital banking is all about making customer experiences faster, easier and more engaging. Voice response marketing through smart speakers and digital assistants is increasingly the go-to bank marketing channel for “on-the-go-go-go” consumers.

Make it frictionless
To access financial and account information, respond to calls to action and offers, register reviews, handle transactions or reach out for help, voice response marketing is gaining in popularity. Instead of having to type in a website URL, focus on a QR code, or click on a text link, all of which can cause respondents to procrastinate, the frictionless availability of smart speakers and digital assistants encourages in-the-moment action. That can make the difference between closing a sale and losing the prospect altogether.

Consumers reach out to Google Home, Alexa, Google Assistant and Siri to get what they need more often and easily every day. Maria Allen, Unisys Vice President Global Head of Financial Services, describes digital banking that occurs “anywhere, anytime, on our own terms,” in her article entitled, “Embedded Banking: The Future of Digital Transformations.” Voice response marketing is truly driving banking that’s anywhere, anytime on consumers’ terms.

Here are 7 ways voice response marketing can favorably impact digital banking experiences:

1. Make it personal.
Customers today expect simple, personalized experiences that align with the frictionless nature of voice response. A recent Forbes.com article addresses the issue: “One regional bank realized that its new customers felt overwhelmed by the multitude of potential products and offerings. It redesigned its onboarding journey and incorporated a ‘Help Me Decide’ tool, which asks customers a number of questions about their individual needs and then generates a set of customized recommendations based on their responses. The personalized nature of these suggestions makes customers feel more competent and confident in their decisions, leading to a 4x increase in the number of new customers who actually complete the application process.” [Read more…]

Credit Sesame Adds to the Ever Growing List of Digital Bank Offerings in the US

Credit Sesame's new savings account pays no interest but rewards consumers if they increase their credit score.

March 10, 2020 By Ryan Lichtenwald Leave a Comment

Credit Sesame launched eight years ago to give consumers insight into their credit scores and provide education around their credit factors. The company is now expanding their product set to include digital banking. They join what seems like a never ending list of digital banks in the US. Interestingly, their closest competitor, Credit Karma which is being acquired by Intuit announced Credit Karma Savings last year.

With Sesame Cash, Credit Sesame hopes to leverage data about a consumer’s credit score to help them with cash management. It is a problem that many face with 84% of Credit Sesame’s approximately 15 million registered users living paycheck to paycheck according to CEO Adrian Nazari who was interviewed by American Banker. Credit Sesame will look at a consumer’s cash balance and repayment ability to make recommendations to lower costs, such as a new credit card or a lower interest rate loan. Unlike most digital banks, Sesame Cash will not pay interest but will instead reward users as they improve their credit score. Users will receive $5 if their VantageScore credit score increases by 10 points in a month or $100 if their score increases by 100 points.

Sesame Cash officially launched today to existing customers and will eventually roll out to the general public. The account is paired with a debit card and has no minimum balances, no monthly fees, no overdraft fees and also allows users to access their paycheck early. More features are to be added soon such as a smart bill pay service and an auto-savings tool which will round up purchases.

Is 2020 the Year Consumers Get Their Wish of Bank Account from a Big 4 Tech Company?

A recent survey showed just how willing consumers are to consider banking with Google, Amazon, Apple or Facebook.

February 26, 2020 By Ryan Lichtenwald Leave a Comment

The idea of Apple, Google, Amazon or Facebook getting into banking is not new. The possibility has been discussed for years with little to no information coming from the actual tech companies on when or if an offering would ever come to fruition. So far we’ve only seen ancillary products like the Apple Card, Google Pay or Amazon lending to their merchants.

American Banker recently reported that 64% of American adults would consider buying or applying for financial products from a tech company as opposed to a traditional bank or credit union. The Harris Poll, which surveyed 2,100 people found that users are willing to make the move despite reservations about information sharing at the companies. It is interesting that Americans have less trust for the tech companies and are concerned that they are not up front about how they use personal information, but potentially want to feed them with more data. In addition, 69% believe that tech companies are more likely to have a data breach than a traditional financial institution. It seems incredible the trade-offs some are willing to make, but points to just how unhappy some might be with their current providers.

What people are most interested in is a convenient product embedded with technology, something we would expect from any of the big tech companies today. The data skews as you would expect, with younger generations more likely to be interested in banking with a tech company, but still in the age range of 55-64, 52% said they would move to a tech company. Six of ten people noted that they’d be willing to allow tech companies to use their spending data if it meant they would get better service like better security, protection against fraud or other rewards.

The data included in the survey brings up the question of whether most consumers are simply tired of their traditional bank or if they are just accustomed to big tech serving them well in so many other aspects of their lives. As a millennial and someone familiar with all of the fintech offerings in the market today, I’d argue there is also a big gap of awareness of existing providers. Many would be better served by exploring some of the new offerings in the market today. I am less bullish on any initial offering from big tech being more compelling than what some other fintechs offer today.

A handful of fintechs have had massive success attracting users to their product, but banking relationships tend to be very sticky. I have experienced this firsthand. Having opened both accounts at Ally and Marcus, I still have multiple traditional bank accounts, one of which I first opened in high school. These old accounts are temporary storage for paychecks until I allocate funds elsewhere. Ron Shevlin recently called checking accounts “paycheck motels”. Shevlin argues that the checking account needs to be reimagined and from my perspective a simple checking account from any of the names in big tech simply isn’t compelling enough. Still, the mass marketing that would come from a launch may still benefit many since it is likely to be a better user experience than what many traditional banks offer.

So where do we stand today? Amazon was reportedly in talks back in 2018 with JP Morgan Chase on offering a checking account, but we have yet to see any further news. Late last year the Wall Street Journal reported that Google will soon offer checking accounts with their project with the code-name “Cache”. The partnership was rumored to be with Citi and a credit union at Stanford University. It will be interesting to see if the Google checking account reaches the market in 2020 as originally reported. With so many users already in the ecosystem of big tech firms I have no doubt that massive amounts of people will sign up for the first account offered. The digital banking space is already extremely competitive with big names continuing to launch in the US so it will be fascinating to see how it all plays out.

Revolut Raises Massive $500 Million Round at $5.5 Billion Valuation

Revolut's last round in 2018 which totaled $250 million valued the company at $1.7 billion.

February 25, 2020 By Ryan Lichtenwald Leave a Comment

By now we have become almost numb to the giant rounds raised by the challenger banks in the UK. It was a few weeks ago when we started to hear murmurs of a new round for Revolut. The $500 million Series D was led by TCV and values the company at $5.5 billion. Revolut has now raised an incredible $836 million. Interestingly, Revolut is deciding not to share names of existing investors who participated in the round. Absent from the release shared yesterday was whether the company had closed $1 billion in debt that was rumored to be led by JP Morgan.

Revolut now has over 10 million customers, centered mostly in Europe and the UK. They are also live in Singapore and are in beta in Australia. While Revolut has ambitions to expand to more countries they are focused on their launches in the US and Japan.

According to TechCrunch’s coverage of the round:

The total number of users has grown by 169% in 2019.
Daily active customers grew by 380% in 2019.
Revenue grew by 354% in 2018.
Revenue from premium subscription plans (Revolut Premium and Revolut Metal) have grown by 154% in 2019.

With the new funds the company plans to improve their existing product set and grow revenue. Revolut will announce new lending services for both consumers and businesses through Revolut for Business. Revolut currently offers services for customers in the UK which are not currently available in other markets.

Revolut CEO Nik Storonsky included the below comment in the press release:

“We’re on a mission to build a global financial platform — a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model. Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability.”

It is hard to digest the amount of money that is pouring into digital banking startups in Europe. Monzo, N26, Revolut and Starling all seem to be in a race to raise as much money as possible in order to grow their customer base all while expanding to new regions and launching new products. It is safe to say that this is the most interesting area of fintech to watch over the coming years.

Varo Breaks New Ground With FDIC Approval For National Bank Charter

Varo will be the first fintech to receive a National Bank Charter, simplifying the way they operate in the United States.

February 11, 2020 By Ryan Lichtenwald Leave a Comment

While there are always interesting things happening around fintech there is not often news which moves the needle for the entire industry. Because of the regulatory environment in the U.S. the digital banking startups have partnered with banks in order to offer banking services. While the digital bank may offer some compelling features and a user friendly interface, it is more of a skin on top of the actual bank which holds the funds and operates the core banking platform. At the end of the day it is the bank calling the shots, which is potentially frustrating for a nimble startup. Many fintech companies were holding out hope for the OCC Fintech Charter, but this potential opportunity was shut down by a federal judge in 2019. One of the options that remain is a national bank charter, though it comes with its own set of challenges.

In July 2017 it was reported that Varo was pursuing a National Charter. Varo first started operating their digital bank offering through a partnership with Bancorp Bank but their goal was always to be able to act as a standalone national bank. In fact CEO and Co-Founder of Varo Colin Walsh shared in our 2018 podcast episode that they started conversations all the way back in 2016 which demonstrates his clear vision for the future:

…Actually in the 4th quarter of 2016 that we started the conversation with the OCC and we said to them that we’re not interested in the ILC charter or state charter. We’re not really interested in the fintech charter because we’re collecting deposits, facilitating payments and making loans and that’s what national banks do and so we were very clear that we really wanted a full national bank charter.

Varo was given preliminary approval for their national bank charter by the OCC in September 2018, but subsequently withdrew their application with the FDIC to make revisions. Their latest application was refiled last summer and yesterday we learned that the FDIC has officially approved their application for deposit insurance, a first for a digital bank in this country. The company will still need to get final approval from the OCC through a pre-opening examination and the Federal Reserve for their bank holding application.

What makes a national charter so special is that Varo will be able to make loans in all 50 states without having to worry about state by state licensing which can be an arduous process. They will also be able to act as a standalone bank, not tied to their partnership with Bancorp bank. This includes checking and savings accounts along with other loan products.

However, their longtime desire to achieve a national bank charter came with significant cost. In an American Banker article Colin Walsh revealed that the process cost them an estimated $100 million. In addition they must capitalize the bank as Walsh shares:

The agency, as part of its Feb. 7 approval, is requiring Varo to provide about $104.4 million in capital to the bank.

The process was rigorous with the FDIC requiring detailed information on everything from their executive hires to their core banking platform to stress testing scenarios. From there, examiners visited Varo’s offices and obviously this has all been going on over the last several years.

This news sets Varo apart from any fintech operating in the United States. Not only was this a big risk for the Varo team but also for their backers such as Warburg Pincus, The Rise Fund and TPG who were willing to provide the capital for Varo to see the process through. When you’re breaking new ground in an area like this there are certainly no guarantees. It is hard to fathom the amount of time that went into this process and to contrast it with other regulatory schemes such as the UK where dozens of digital banks operate. Walsh noted that Varo opened 150,000 accounts in January but stopped short of disclosing their entire customer base. Varo has always been one to keep an eye on in the digital banking space but now they are the company that I’m sure many peers will be looking up to. Congratulations to the entire Varo team.

If you’re interested in reading more Colin Walsh shared a blog post titled Varo to Become America’s First Digital National Bank.

Nominations for the 4th Annual LendIt Fintech Industry Awards are Live!

The annual LendIt Fintech Industry Awards Dinner recognizes the leaders in fintech, nominations are open until February 29

February 3, 2020 By Todd Anderson Leave a Comment

One of the highlights of LendIt Fintech USA every year is our Industry Awards Dinner which will take place on the evening of May 14th. In its fourth year, the dinner highlights the great accomplishments of the people and companies that are driving the fintech industry forward. It is a celebration of the industry, for the industry, by the industry.

We are currently accepting award applications on the LendIt website. It is important to note, because we continue to get questions about this, you are supposed to nominate yourself and/or your company. So don’t be shy, let us hear from you. You have until February 29th to get your entries in and the more complete your entry the better your chances are of winning.

The LendIt team will be selecting the finalists for each category and then a team of independent industry experts will select the winners.

The dinner will be held on May 14, 2020 at Tribeca 360 in New York City and the event will celebrate 500+ Fintech influencers and innovators and their outstanding achievements in 15 categories. We encourage fintech companies from around the world to apply for the categories that are the best fit. You can apply for multiple categories.

Executive of the Year
Fintech Innovator of the Year
Fintech Woman of the Year
Innovation in Digital Banking
Most Promising Partnership
Top Technology Service Provider
Most Promising Fintech Region
Top Service Provider
Top Small Business Lending Platform
Top Real Estate Lending Platform
Top Law Firm
Excellence in Financial Inclusion
Top Accounting Firm
Top Consumer Lending Platform
Emerging Lending Platform of the Year

We have already confirmed thought leaders from the industry who will be judging the various awards categories. Beyond recognizing the success of the companies chosen as winners, the event serves as a unique networking opportunity. We hope to see you there in May!

Will N26’s Success Story in Europe Replay in the US?

N26 has now surpassed 5 million customers, but it remains to be seen whether their US business will take off

January 23, 2020 By Ryan Lichtenwald Leave a Comment

The digital banking space in Europe has been fascinating to watch. Customers seem much more engaged and willing to move to the various challenger banks that operate in the region. Reuters reports that N26 has crossed the 5 million customer mark, up from 3.5 million last summer. The incredible growth of N26 and of their peers doesn’t seem to be slowing down. N26 which was founded in February of 2013 added more customers in 2019 than in all previous years. Not only are the challenger banks attracting customers, they have also attracted massive amounts of capital. N26 has raised $683 million in total and was last valued at $3.5 billion.

Co-founder and CEO Valentin Stalf shared that growth was strongest in Germany, France and Austria and that Italy and Spain showed promise in achieving similar rates of expansion. While a breakdown of numbers by country wasn’t provided it is safe to assume that the US offering launched last year pales in comparison to their customer base across Europe.

N26’s US offering has little that is unique from the perspective of a US consumer. The N26 offering includes a cashback debit card, no hidden fees, savings ‘Spaces’ and free cash withdrawals. The most compelling feature is the access to your paycheck up to two days early which is also offered by US based companies Chime and Varo. When comparing side by side Varo’s offering is superior, currently offering 1.92% on savings with the potential to earn 2.80% by meeting certain requirements. For savers and those who don’t value the early paycheck access there are plenty of other interesting options for US consumers including SoFi, Marcus and Ally to name a few.

The digital banking space is the hottest area of fintech. It is also the most competitive with dozens of interesting offerings for US consumers. N26 has been incredibly successful at building their brand across Europe but it remains to be seen whether US consumers are going to jump on board. From my perspective they are going to have to beef up their US offering if they’re going to have a chance at the same success they have had in Europe.

FINNOSUMMIT Miami by LendIt Fintech is Two Months Away

Latin America is the hottest region on the planet right now for fintech so we are excited to bring the LatAm fintech community to Miami.

October 9, 2019 By Todd Anderson Leave a Comment

Investment in Latin American fintech is at an all time high. There is a huge amount of VC money flowing into this region and fintech is at the top of the list. The excitement is catching on all across LatAm with startups receiving funding in Brazil, Mexico, Colombia, Argentina, Chile and more.

This is why we decided to launch our newest event, FINNOSUMMIT Miami by LendIt Fintech, on December 3 – 4 in partnership with Finnovista. Our conference will capture the excitement of LatAm fintech by bringing together the startups who are reimagining finance in the region, the investors and the key players of this developing ecosystem.

Here at LendIt Fintech we take pride in producing industry leading content for our attendees. There are some clear trends we will be addressing this year.

Digital Banking Ecosystem

Banking is evolving and fintech is helping to accelerate these changes. This track will cover how banks and fintech firms are working towards creating a more inclusive banking system. Open banking, bank/fintech partnerships and digital only banking are helping to redefine how customers interact in their financial lives.

Lending Innovations

Expanding access to credit is one of the most fundamental needs in any developing economy. This track will discuss how companies are working with various data sources to extend credit to consumer and small businesses to help grow the regional economies.

[Read more…]

Can New Technology Providers Upend the Core Banking Market?

The biggest core banking providers have lost 20 percent market share in the last 5 years; will that trend continue and can new providers can real market share?

June 20, 2019 By Todd Anderson 1 Comment

Back in 2013 four core banking providers dominated the U.S. market owning a 96 percent share, that market share is now 76 percent as new players with fresh technology have entered the market. Banks and credit unions rely on core technology to process all deposits, payments, loans, most bank transactions and customer data.

With the advent of new technology there has been a growing group of companies looking to provide banks and credit unions with better options. Just in the past few weeks there were big investment rounds made into Alkami for $55mn and Synapse for $33mn.

The top four banking providers that dominated the market were FIS, Fiserv, Jack Henry and D+H (now Finastra). These providers have also started to innovate and provide new products in an effort to compete with new providers. Besides having a relationship with banks or credit unions for years these core providers have learned how their customers operate. This knowledge can help them to service customers and build a product set in a way that a new technology provider could not.

New firms like Alkami and Synapse have started to make inroads due in part to core providers providing technology that is not nearly as innovative. These new providers are, in many cases, not replacing core providers just yet, they are instead building tools that banks and fintechs can implement via API.

Banks have started to use more of the new technology because they feel a customer need to provide the best products or else risk losing them to bigger banks or digital only banks. For the better part of the last 30 years banks have been building new technology on top of legacy technology which has created a mess of systems.

This points to a wider trend in banking where traditional banks are being disintermediated by a group of smaller, more specialized companies. This trend also holds true in bank technology where fintech firms have started to provide certain technology that can help a bank or credit union provide a better experience and become more efficient

Even the bigger banks who are able to spend billions on technology use about half of their budgets to upkeep technology they feel is dated and does not work efficiently.

We have not yet reached the point where core providers are being completely replaced, especially as they are also innovating in an attempt to stay ahead. Losing 20 percent market share in 5 years is something they need to grapple with.