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Author: @luvleensidhu

20 Mar

Crain’s Rising Stars in Banking & Finance

Luvleen Sidhu

Co-founder and chief executive officer, BankMobile

Luvleen Sidhu co-founded BankMobile with a fully digital customer experience and multiple-partner “bank-as-a-service” distribution model. It has since become one of America’s largest and fastest-growing mobile-first banks. BankMobile’s disruptive business model earned recognition from LendIt Fintech, which named BankMobile the Most Innovative Bank in 2019. Sidhu was named Fintech Woman of the Year in 2019. She made her case for changing the way banks do business in a book she co-authored, Why Can’t Banks Be as Easy as Uber? The book landed her among Amazon’s top 100 authors in business and money within 24 hours of its publication. Through the BankMobile Foundation, Sidhu funds budding entrepreneurs and organizations promoting financial literacy.

19 Mar

American Banker Feature

Where Luvleen Sidhu is taking BankMobile now that she’s in charge

Luvleen Sidhu, recently named CEO of BankMobile, one of the country’s first digital banks, says she is expanding it from a service for college students to a mobile bank that serves multiple segments.

Along the way, she plans to pursue more banking-as-a-service partnerships as part of a cost-conscious growth strategy.

BankMobile, the digital-only division of Customers Bank in Wyomissing, Pa., serves students at nearly 800 college campuses in the United States. It offers a digital checking account as a convenient place to store refunds of unused financial aid and other deposits.

But other consumers are using products created by the digital bank, founded in 2014, without even realizing it. BankMobile is the white-label partner behind T-Mobile’s checking account, T-Mobile Money, which made a splash in 2019 with its 4% interest rate on balances up to $3,000. According to the T-Mobile Money website, that 4% rate persists even as the Federal Reserve has slashed the federal funds rate to nearly zero.

“My goal is to have at least a million accounts opened every single year through our white-label strategy,” says Luvleen Sidhu, CEO of BankMobile.

The company is eyeing potential new partners and will soon round out its suite of services with a workplace banking program that features bank accounts, loans and financial wellness tools.

Seeking new partnerships is part of Sidhu’s strategy to secure a steady stream of loyal customers at lower cost. “There are a lot of companies that are constantly looking to attract, engage and retain customers, and we help them with financial services,” Sidhu said.

A former pre-med student, Sidhu got her first taste of financial services as a college intern of Lehman Brothers before its collapse. She became a full-time employee of Lehman Brothers the day of its bankruptcy, and ended up at Neuberger Berman side of the business as an investment analyst. She later headed up business development at the $11.5 billion-asset Customers — which her father, Jay Sidhu, has led since 2009 — before getting her MBA from the Wharton School. She and her father co-founded BankMobile in 2014, and in January she was promoted to its CEO from president and chief strategy officer.

BankMobile’s first foray into direct-to-consumer banking was disappointing, with small account balances and inactive users. In a bid to become more profitable, it shifted to a banking-as-a-service model and pinpointed colleges as its first partners, thanks to Customers’ relationship with the financial aid disbursement company Higher One.

“Instead of going on campus and paying millions of dollars to sponsor the football team and have a bank branch and ATM, we went in saying, hey, we recognize you have a pain point trying to send payments between yourself and your students in a compliant way, so we’ll take that over for you,” said Sidhu.

BankMobile Disbursements routes refunds from colleges to students, with a choice of how they receive their money: as a deposit to an existing account, to a BankMobile Vibe checking account or a paper check (this is an option at some schools).

With college campuses acting as their stand-in retail branches, schools do most of the marketing for them. This enables BankMobile to rake in approximately 5,000 new accounts each week at an average acquisition cost of $10 per customer. One third of their customers are single mothers, and two thirds are minorities, Sidhu said.

The bank’s all-digital service also means customers can interact with them as usual while more traditional businesses close due to coronavirus, and the company says it has noticed a slight uptick in activity among its Vibe customers in recent days.

Customers for life

BankMobile’s relationship with students should continue when they graduate, Sidhu said. “Instead of just becoming a payment company that disburses money between colleges and students, we thought this could be our customer acquisition strategy and create customers for life,” she said.

If students choose to deposit their financial aid credits into the Vibe checking account, they will earn a 3% yield on balances under $1,001 and avoid the $2.99 monthly fee as long as they receive qualifying deposits of $300 or more each month (excluding financial aid refunds). Savvy academic and financial practices can also get them awards. Signing up for mobile alerts, setting a budget, maintaining a high GPA or other steps earn the user “stamps” toward a quarterly $10,000 sweepstakes as well as deals with merchants such as Apple and Target. Customers can also open a savings account.

Recently, BankMobile sweetened the pot with exclusive discounts from two other partners, the bill-negotiation service Billshark and the student educational service Bartleby.

Beyond its bank accounts, BankMobile provides personal loans in partnership with Upstart and student loan refinancing with LendKey. Its two no-annual-fee credit cards are available to the public, while a secured credit card, intended for students struggling to build their credit, is in the works.

Stephen Greer, senior analyst at Celent, pointed out that many consumers tend to jump around among credit cards rather than relying on ones offered by their bank. Still, “bank relationships tend to be very sticky,” he said. “If the experience to refinance a loan is good, I think a customer is more likely to stay with their bank.”

Michael Perito, managing director at KBW, said that Department of Education regulations require financial providers to present students card and checking acccount options in a neutral manner. That means the retention rate after students leave school have likely fallen short of expectations, he said.

But “ultimately, they acquire these students at a low cost, so they don’t need the highest retention rate,” he said. “It’s a self-filling bucket. After the seniors graduate, freshmen come in and refill the bucket.”

Hitting its stride

BankMobile reported its first quarterly profit last year: $890,000 in the third quarter on revenue of $24 million, Customers said. Revenue was slightly lower the following quarter, but BankMobile stayed in the black, the company said.

Sidhu attributed the back-to-back profits to year-over-year increases in organic deposits (or funds the students deposited above and beyond their financial aid refunds), stronger fee revenue and cost cutting.

“My goal is to have at least a million accounts opened every single year through our white label strategy,” she said.

At the end of 2018, after deals to spin off BankMobile fell through, Customers Bank said that it expected to retain the digital division for up to two or three more years.

The uncertainty has weighed on Customers Bank’s overall valuation, said Perito. “It’s hard to know what the real outlook is at this point.”

Sidhu said the bank is continuing to look for new opportunities, whether that means spinning out as an independent company or merging with another firm.

“We want to continue to be an innovative, world-class digital bank that focuses on our mission — to be affordable and transparent, in a way where we are also high growth and profitable,” she said.

17 Dec

Banking Dive Feature

Luvleen Sidhu is co-founder, president and chief strategy officer for BankMobile.

Fintechs frequently join forces with financial institutions to strategically scale products and services. These partnerships can create innovation opportunities in traditional finance.

In a What’s Going on in Banking study, 53% of C-level executives at midsize banks and credit unions believed fintech partnerships would be important in 2019. Thanks to advances in machine learning, artificial intelligence and cloud computing, banks can get the help they need to improve their menu of products while creating a frictionless experience for customers. Although these partnerships often make sense, they’re not perfect. Problems may arise from failing to properly follow financial regulations. And rapid movements in tech have yet to be covered by certain regulations. 

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BankMobile, for example, has built a successful partnership with Upstart to offer personal loans. Upstart’s focus on using artificial intelligence and machine learning to predict a borrower’s creditworthiness has been a game-changer. BankMobile can provide its existing customers with a new offering to help them save money and get out of debt faster. And more than two-thirds of the loans originated through Upstart were entirely automated and approved in real time. Partnering with Upstart has generated positive customer feedback, and the Net Promoter Score (NPS) score thus far for this offering is 82.

To gauge whether a potential fintech is right for your company, start with the following questions:

Does the fintech partner have a positive relationship with the appropriate regulators? 

In the U.S., fintechs need to follow federal and state laws. Some regulators support the need for tech companies to have simpler laws so they may innovate quickly. But the fast rise of startups and fintechs means that regulators sometimes play catch-up to cover these innovations in detail. 

Partnering with a fintech means having a proper plan to address existing and potential regulatory obstacles. It’s important to find a partner that has a good standing relationship with appropriate regulators. 

Ask the partner what kind of infrastructure they have in place to follow these rules. The following questions should be on your radar when navigating through the regulatory space: 

  • Are there current regulations that apply to the fintech’s specific product or service?
  • Do they need to have certain licenses? If so, do they already have these in place?

Don’t leave it up to the partner to do all the heavy lifting, however. Banks have a regulatory obligation to have a vendor management program with oversight over fintech partners. Make sure you either hire someone who is knowledgeable of rules and best practices, or dedicate a team member who can interface with the appropriate regulatory contacts. It’s important that the fintech partner keeps up with the latest regulatory practices as the industry grows and evolves. 

Does the fintech partner have a proven approach to combat fraud, particularly for new online-only accounts and identity verification? 

According to a Global Identity and Fraud Report from the credit reporting agency Experian, 55% of businesses reported an increase in fraud-related losses over the past year. Specifically, these losses occurred from account opening and account takeover attacks. 

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It’s crucial to stay ahead of cyberattacks. Find out what measures the partner has in place to combat fraud and how they are keeping customers safe. Ask about the type of investments or infrastructure the partner is using to respond swiftly and effectively to fraud-related issues. Advances in artificial intelligence and machine learning have helped in determining who might be a fraud risk. By looking at multiple aspects of a single person, it’s easier to weed out bad actors. For example, one can look at a variety of factors including the longevity of an email address which, when combined with other data points, could help determine the fraud risk for a potential new customer. It’s much harder to outsmart a highly multidimensional model than a rule-based linear model. 

Modern security measures can better authenticate actual customers without slowing down the process. Customers today expect a seamless and fast digital experience when signing up for new financial products and services. 

What is the long-term sustainability of the fintech business? 

It’s important for a fintech company to have a strong vision for the problem it is trying to solve. But that vision needs to be sustainable with a clear-cut business plan for continued growth.  

Investigate the following details to determine long-term sustainability: 

  • A five-year road map for revenue and funding.
  • Demand for the product or service.
  • A strategy to scale and continue to test and reiterate.
  • A plan for dealing with regulatory hurdles.
  • How the company stacks up against the competition.
  • Market opportunity and how that may change in the future.

Final words

Partnering with a fintech can help you provide the best service to customers. Whether it’s through integrations, plug-and-play or other financial planning mechanisms, banks are able to bring a modern digital customer experience to the forefront. Asking these questions early in the vetting process can help ensure a successful partnership and long-term sustainability.

16 Dec

Wharton Fintech Podcast Feature

In our latest podcast, Shompa Choudhury (WG ’20) is joined by Luvleen Sidhu, Co-Founder, President, and Chief Strategy Officer at BankMobile (www.bankmobile.com/index). In this extensive interview, Luvleen explains how BankMobile is leading the way in mobile-first banking by making banking more accessible and affordable. Luvleen also lays out the landscape for digital banking in the U.S. and explains how BankMobile’s B2B2C white label model allows them to create high volume customer acquisition at a low cost through partnerships with large consumer aggregators.

Established in 2015, BankMobile is a division of Customers Bank and among the largest and fastest-growing mobile-first banking platforms in the U.S., offering checking and savings accounts, personal loans and credit cards. BankMobile employs a “Bank-as-a-Service” (BaaS) model, which enables BankMobile to acquire customers at higher volumes and substantially lower expense than traditional banks. Its low-cost operating model enables it to provide low-cost banking services to low/middle-income Americans who have been left behind by the high-fee model of “traditional” banks. Today, BankMobile provides its BaaS platform to universities and large consumer aggregators, such as T-Mobile, and currently serves over 60 million members as a top 15 bank in number of consumer checking accounts.

Luvleen Sidhu is the Co-Founder, President, and Chief Strategy Officer at BankMobile. She is also a member of the BankMobile Board of Directors and Director & Founder of the BankMobile Foundation, where she identifies and funds budding entrepreneurs and organizations that promote financial literacy. Prior to becoming a well-recognized name in the industry, she earned her MBA here as part of The Wharton School at The University of Pennsylvania as part of the Class of 2013.

26 Sep

Financial Innovation Conference 2019

A keynote presentation from the co-founders of BankMobile, a division of Customers Bank and America’s fastest-growing mobile-first bank offering checking and savings accounts, personal loans and credit cards. BankMobile, named the Most Innovative Bank by LendIt Fintech in 2019, is a “customer-obsessed” bank with a disruptive, multi-partner distribution model, known as “Bank-as-a-Service” (BaaS).
Jay Sidhu, Chairman & CEO, Customers Bancorp (Customers Bank) (USA);
Luvleen Sidhu, President & Chief Strategy Officer, BankMobile, (USA)