Sramana Mitra: What is your business model? Are you acquiring customers on behalf of banks or are you acquiring customers on behalf of yourselves?
Luvleen Sidhu: We are acquiring customers on behalf of ourselves.We have two strategies. The first is a direct to consumer one that is pursued through PR, marketing and word of mouth. The second is a B2B2C strategy, where we collaborate with companies and institutions that have an employee or a customer base that they would like to provide access to financial services to and we become the bank they partner with. We sometimes co-brand. Let me give you an example.
We have partnered with 800 colleges and universities around the country. We are solving a pain point for them. These
colleges and universities often have to send payments between the college and the student. This is often in the form of financial aid refunds.
It could be that a student is working on campus and needs to be paid. They’ve dropped a class and owe the student money. This is a huge pain point for schools because of overhead costs and regulatory concerns. We come in and solve that pain point for them.
In return, these schools offer the students the choice to receive the money in an existing bank account or a BankMobile checking account which is, in our opinion, the best bank account for students. It’s the most affordable. There’re lots of features and functionalities that help with money management. This becomes a vehicle for us to be able to open about 300,000 to 400,000 accounts a year in a very attractive demographic of average age 27. Most of them are still in school and really have the opportunity to grow with us over time.
Sramana Mitra: You are acting as a bank.
Luvleen Sidhu: 100%.
Sramana Mitra: You have a set of banking services that are targeted to specific segments. It’s packaged and positioned to students to solve a specific use case, but you’re basically acting as a bank in that context. You have additional technology to address pain points surrounding that student workflow.
Luvleen Sidhu: Our central product is we offer checking accounts, high-yield savings account, personal loans, and lines of credit. We’ll be able to offer credit cards later this year as well as mortgages and auto loans. For the student, we have a passport program that helps reward them with what we call stamps for good financial behavior like paying bills on time, setting up your budget, setting aside money into your savings account, even good grades in school. The people that are doing really well in the Passport program, we enter them into a sweepstakes and one person every quarter wins $10,000 to pay off their student loan.
Sramana Mitra: It sounds like the bulk of the business is in the student demographic and the financial aid function?
Luvleen Sidhu: Today, yes.
Sramana Mitra: What is the structure of your company? Is this a venture-funded company?
Luvleen Sidhu: We got initial capital from our parent company. Right now, we’re a division of a bank called Customers Bank. They’re based in Pennsylvania. They are focused on business banking. We are their consumer digital arm. At this point, we have announced a merger with another bank. That’s going through the regulatory approval process. Then we’re capitalizing that bank once the transaction is approved through an IPO later this year.
Sramana Mitra: I’m going to ask you to lift yourself to the 30,000 foot level and talk about digital banking in general. Where are the open problems? What are the emerging trends? Where would you recommend new entrepreneurs to start companies?
Luvleen Sidhu: I think banking is very antiquated in terms of the products and service offering. Savings and checking have really been the backbone. It’s interesting to see how we can create hybrid products that are more transparent and easier to understand. Now we have artificial intelligence and machine learning to be much more proactive in our approach as well. We have Waze and Google Maps to help us get from A to B.
When people say, “I want to get from A to B in my financial life,” a banking partner should be able to help with that. That’s a huge gap right now, especially in this democratized level. I think with conversational AI, you can add that human touch and look at ways there. I think that biometrics, from a convenience standpoint, as well as authentication is something we should continue to be growing.
On the Internet of Things, we see a lot of voice banking startups that generally bring on that convenience factor even more in integrating voice banking into the customer experience. Internet of Things is more about how we use things in our everyday lives to be our vocal wallet. Whatever things we are using on an everyday basis that can help become payment vehicles for us is an interesting space.
Sramana Mitra: Great. Thank you for your time.
This segment is part 2 in the series : Thought Leaders in Financial Technology: Luvleen Sidhu, President of BankMobile