This interview is an interesting window into how financial technology is addressing specific niches within the banking sector.
Sramana Mitra: Let’s start by introducing our audience to yourself and BankMobile.
Luvleen Sidhu: I’m the Co-Founder and President of BankMobile. BankMobile is the largest and fastest-growing digital bank that serves the underserved and low middle income Americans and has a strong overlap with millennials as well.
Sramana Mitra: What kind of lending are we talking about? Is it peer-to-peer?
Luvleen Sidhu: We’re not a lending platform. We’re a bank. We’re a FinTech company that happens to have a bank charter. We really believe in the hybrid model. FinTech really brings the best of technology and user experience. Banks bring the credibility, stability, and access to low cost funding. We’re one of the first FinTech companies that happen to have a bank charter.
Sramana Mitra: Double-click down and tell us what you do. What customer problems are you solving?
Luvleen Sidhu: We launched back in 2015. It was really with this understanding that consumer needs and behaviors are dramatically shifting. In the US, there’re about 34 million households that are unbanked or underbanked. About a third of Americans today are living paycheck to paycheck. Almost 50% of Americans don’t have enough to pay for a $400 emergency.
The reality is, it’s the same segment that’s struggling that banks are charging $33 billion a year in just overdraft fees. It became very apparent that Americans are looking for an affordable banking solution. There’s a strong segment of society that’s looking for more transparent, affordable, banking alternative. At the same time, their behaviors are also shifting.
Americans, on average, are walking into a bank branch one to two times a year versus interacting with their bank on a mobile device 20 to 30 times a month. This combination of really looking at the need in terms of access and affordability of financial services as well as the fact that behavior is becoming much more digital in nature.
Sramana Mitra: Can we do a couple of use cases of how you go to market and what value you add?
Luvleen Sidhu: The question is why hasn’t this demographic, that’s historically been underserved, being served by banks? The main reason is that it’s not very profitable. That’s because of the overhead structure that banks have today. The costs associated with bank branches are being subsidized by a lot of the fees that banks are charging. Two, the customer acquisition cost of traditional banks is really high. It ranges from $300 to $1,000 per customer.
For banks to really go after underserved and underbanked millennials, it takes them a long time to be able to profitably serve that demographic. BankMobile, on the other hand, is focusing on utilizing technology and not be dependent on a branch-based of acquisition to really be able to acquire customers at high volumes and low cost. Not only is technology the center piece of it, we also have a direct to consumer strategy and B2B2C strategy to be able to acquire customers at low cost and high volumes.
This segment is part 1 in the series : Thought Leaders in Financial Technology: Luvleen Sidhu, President of BankMobile