You’ve heard this story before: A finance refugee, exasperated by the industry’s byzantine fee systems and clunky digital experiences, sets out to build a better bank. No fees, no branches, and design-savvy online products.
For Simple, those lofty goals translated into 100,000 users and a $117 million sale to Spain’s second-largest bank, BBVA, last February. The exit was nothing to scoff at, but it also wasn’t the large-scale disruption Simple’s backers had first envisioned.
Now startup BankMobile is taking up the same banner, with its own twist: targeting millennials.
It’s no secret that millennials are unhappy with their banks. They’ve flocked in droves to peer-to-peer payments solutions like Venmo, which complement traditional checking and saving accounts, and they mercilessly bash banks in brand surveys.
“They’re not looking out for me and my money,” says a twentysomething man in a BankMobile-directed focus group that doubles as a marketing video. “All my banking I try to do online.”
To bring that millennial voice to the company, BankMobile chairman and CEO Jay Sidhu, a consumer banking veteran, has hired his daughter, Luvleen, to lead strategy and marketing. On the day of their carefully rehearsed launch announcement, he stands at the lectern in a blazer and slacks before she takes the stage, dressed in a black T-shirt with neon-green BankMobile branding and leather-paneled pants. They take turns running through slide after slide of data pointing to the inevitable decline of bank branches and the readiness of consumers to switch providers.
The kind of authoritarian trust that banks once inspired through impressive street facades and similar methods is no longer relevant, Luvleen says. “Instead of trusting big institutions, we’re trusting reviews from our friends and our family,” she tells me following her presentation.
The question, of course, is whether millennials will give BankMobile the glowing recommendation that it needs in order to succeed. The startup offers a laundry list of mobile-savvy features designed to persuade customers to take a leap and sign up, from picture-based bill payments to text alerts for transactions. To open an account, new users simply snap a photo of their driver’s license.
“We’re really proud of our product,” says Luvleen. “The design is cooler than any bank out there.”
That may be true, but it won’t necessarily win over consumers. Research has shown that bank customers still value the flexibility of branch access, even as their habits shift toward the speedy convenience of digital interactions. A Bain & Company report published at the end of last year showed that mobile is now the primary channel through which customers “visit” their bank, with 35% of bank interactions taking place on a mobile device. However, digital-only customers are less valuable, according to the consultancy: They are less loyal, and they buy fewer products.
Big players like JPMorgan Chase have taken that advice to heart. “What we’re trying to do is give customers choice to interact with us when and how they want to,” says Gavin Michael, Chase’s head of digital for consumer and community banking. “Whether it be a mobile interaction or a branch interaction, they all work together.”
Michael says that 40% of Chase’s customer base logs in to view account information via mobile device at least once a month. Nearly 20 million customers have downloaded the bank’s mobile apps.
Peter Wannemacher, a banking industry analyst at Forrester, says mobile-only plays are “headline-grabbing,” but not “a compelling enough strategy to steal much market share.”
“The big banks have done a pretty good job in the last three years of upping their mobile game,” he says. “The three biggest activities that mobile bankers do and want and value are account information, paying bills, and moving money. Traditional banks at this point offer those three, and the majority make it relatively easy.”
Wannemacher sees a greater opportunity for startups in specialized products that consumers are willing to pay for, such as real-time payments. For millennials in particular, who may forget about a bill until the day it’s due, paying $20 upfront in order to avoid late fees and a credit score hit may seem like a bargain.
As for BankMobile, the startup has real-time payments on its feature wish-list, along with products like auto loans that would complement its bare-bones checking, saving, and credit-line offering. But the Sidhus and their team are confident that the existing version will be compelling enough to win over 25,000 millennials during the coming year.
“When you provide a real benefit, people do make a change,” says Jay. His booming, confident voice belied his roller-coaster career: He spent years at the helm of Sovereign Bancorp, which flew high until the housing crisis brought the savings and loan to its knees. Once valued as high as $12 billion, it sold for $1.9 billion in 2008. But if signing up for a BankMobile account takes as much time as creating an Instagram post, he may be right.