Legacy Banks and Digital Startups See a Big Opportunity to Move Beyond Simply Storing Money

Shaking up the finance industry, from AI to community building

Luvleen Sidhu, co-founder, president and chief strategy officer at BankMobile, said she started the mobile-only brand as a solution to the massive costs that physical banks devote to customer acquisition. The average bank branch opens one net new checking account per week, equivalent to 52 new accounts every year, said Sidhu.

“That’s a very costly customer-acquisition strategy and it’s subsidized by fees, especially overdraft fees,” she noted. “We’re going after working-class Americans [and] millennials—those living paycheck to paycheck—to give them very affordable banking that leverages technology to make the banking experience as seamless as possible.”

For example, artificial intelligence is built into the BankMobile app to speed up the sign-up process so that customers answer a handful of questions before they’re approved for an account within a few minutes. From there, they can use the app’s camera feature to snap a picture of a bill to pay or apply for a line of credit. The strategy appears to be working: In three years, BankMobile said it has amassed 1.8 million customers with an average age of 27.

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The Future of Banking

Banking is and has been overdue for a makeover. For the most part, the majority of the banking industry is still antiquated but thanks to technological advances in the last couple of years, this is starting to change. I remember not so long ago standing in line for over 20 minutes to open my first bank account and thinking how ridiculous it was to wait so long to give someone else my money. Add to that, how many banks were charging so many fees, and consumers were starting to smarten up and realize that they did not have to accept that—the shift was bound to happen. As we enter into this first quarter of 2018, there are many changes that we will start seeing banks adopt. The following six are my predictions for the future of banking:

Banking is and has been overdue for a makeover #FintechClick To Tweet

The Use of Artificial Intelligence (AI) Will Increase

Artificial Intelligence (AI) will have a major role in banking for both the short-term and long-term. First, we will see AI help banks with fraud mitigation. Today, most fraud is detected through computer patterns that alert a fraud team who would then take the necessary steps to try to prevent or mitigate the threat. Now that technology has made access to money fast and easy, the transaction volume has increased exponentially.

With millions of transactions happening every day, AI will help gather behavior patterns as well as other data to validate a transaction in real-time. AI will also help reduce cost by introducing chatbots that are more sophisticated. These chatbots will analyze a customer’s behavior and add value to the customer by proactively providing solutions that will make their lives easier and preempt any customer service issues.

Lastly, AI will also help banks with operational efficiencies which will allow financial institutions the ability to do more with less.

Banks and Non-Banks Will Form Closer Partnerships

Fintech and banks currently have a myopic relationship. Banks want access to the cutting-edge technology that fintech has and fintech wants the customer base that banks have. This year both Fintech and banks will realize that in order to move the needle forward they are going to have to form partnerships with non-banks.

Traditionally, in order for a company to grow they either needed to expand organically or through the acquisition of another company but by using a leveraged growth strategy, Fintech and banks will see that by partnering with non-banks they can grow with less risk and less money. By tapping into a non-bank’s customer base, it will lower the bank’s cost of acquisition while providing more value for the customer. Banks will also realize that non-banks provide them with valuable data from their customer bases that they can leverage to provide a customized banking experience as well as a source for additional revenue streams.

There Will Be More Competition in the Digital Banking Space

Research has shown for a long time that the banking customer is changing and that there is no longer a need or desire to go into bank branches anymore.

Despite this research, because banks were too invested in their branches, they were reluctant to make the pivot into digital banking. Now that it is becoming evident that the branch-based customer acquisition model is not sufficient, you will see many banks follow suit.

Whether it’s JPMorgan Chase with Finn, or Greenhouse by Wells Fargo, big banks are entering into the digital banking space full force with the hope of attracting young consumers. Then you have digital banks like Ally, USAA and Capital One 360 who truly made a major effort in 2017 to attract millennials by tweaking their product, tone, messaging and branding to make sure they start penetrating that segment. We will continue to see that this year.

Competition doesn’t stop there though. You still have niche financial products like Sofi that focuses on student loans or Stash Invest that focuses on investing, which are playing in the digital banking space. Now that they have acquired so many customers through focusing on a specific segment of the population they now will need to keep those customers by expanding their offering. They also will realize that their acquisition strategy was a good start but not enough to sustain an emotional connection with their customers.

Lastly, you have neobanks like Moven, GoBank, Simple and Varo who will continue to flourish and grow, but will be threatened by giants like Amazon, Google and Apple. If and when they enter the digital banking space, it will be cause for much alarm. Because these juggernauts have such deep-pockets and access to so much customer data, they can truly disrupt the banking space if they can get through most of the regulatory hurdles that exist today.

Neobanks like Moven, GoBank, Simple and Varo who will continue to flourish and grow, but will be threatened by giants like Amazon, Google and Apple #FintechClick To Tweet

Cybersecurity will Get an Upgrade

After the highly publicized and damaging Equifax security breach that affected approximate 145 million Americans, we will surely see a modernization and upgrade of cybersecurity.

Because banks need all of your sensitive and personal information in order to do business with you, they are also a perfect target for hackers and fraudsters who are relentless in their pursuit to defraud anyone they can get their hands on. With the Equifax breach affecting so many people, lawmakers are diligently working to stop these types of breaches from happening again by proposing charging hefty fines to companies that are victims of a breach. With this knowledge, banks will double down on their security initiatives and spend a good amount of resources modernizing their IT infrastructure to thwart off sophisticated hackers.

Banks will also raise their security standards when working with third party vendors to assure that threats don’t exist externally.

Blockchain will be Explored More to Create Efficiency

Blockchain, which is the technology that powers Bitcoin and other cryptocurrencies will garner major attention this year.

Banks will continue to explore how they can use the blockchain technology to streamline operational processes and cut costs. They will also explore how the technology can make them more competitive with fintech companies. Because of the speed and security of the blockchain, banks will leverage this technology to create and enhance new business models.

Right now, blockchain, for most is just this idea of what can happen but banks will really hone down on the technology to find tangible ways to use it to solve problems within their current infrastructure. We will also see increased partnerships with banks and regulators as both try to navigate how to use this technology in the highly-regulated banking business.

Lastly, there will be a race by banks to come up with blockchain-based solutions that will solve specific problems in financial services that can be adopted by other banks. One example of this is the fact that Bank of America has already filed over 20 blockchain patents with more to come.

Cryptocurrency will be More Prevalent

Lastly, we will see cryptocurrency become more prevalent and accepted more by merchants. Banks will also follow suit and figure out how and if cryptocurrency is a viable investment option.

While we will continue to see a lot of fluctuation in the cryptocurrency prices, banks will now realize that this is not just a fad but something that will be with us long-term.

Luvleen Sidhu is Co-Founder, President and Chief Strategy Officer at BankMobile, a completely digital bank, offering an entirely fee-free checking account, aimed at helping the underbanked, millennials and middle-income Americans have an affordable, effortless and financially empowering banking experience. She is also a member of the BankMobile Board of Directors and Director and Founder of the BankMobile Foundation. Sidhu, along with her father Jay Sidhu, co-authored, “Why Can’t Banks Be As Easy As Uber?: BankMobile And The Real Future Of Banking,” which reached #1 International Amazon Best Seller-status and landed the authors on Amazon’s Top 100 Authors list in Business and Money in less than 24 hours.  She has also been recognized in the industry for her accomplishments. She was named CEO Connection’s 2017 Mid-Market Young Leader and one of its 2017 Most Influential Women of the MidMarket; one of Bank Innovation’s top innovators worldwide in June 2017, 2016 and 2015; and ‘Most Innovative Woman in Banking – Greater New York’ and ‘Best Women Owned Financial Services Company – New York’ in Corporate America’s 2016 American Businesswoman Elite Awards, among others. Sidhu has been featured regularly in the media including on CNBC, Bloomberg Radio, Yahoo Finance, Fox News Radio and in The Wall Street Journal, Forbes.com, American Banker, Crain’s New York, FoxNews.com, among others. She is also a national and international speaker at industry conferences and at undergraduate and graduate programs, where she encourages financial innovation and entrepreneurship. Sidhu holds a Master of Business Administration from The Wharton School at the University of Pennsylvania and a Bachelor of Arts Degree in Government from Harvard College.

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We don’t need to stay in the student market’: How BankMobile wants to grow its offering and replicate its model

This CEO Proved Her Leadership, Growing Employees from Handfuls to Hundreds

By Kevin Daum

Inc. 500 entrepreneur and best-selling author@KevinJDaum

Silicon Valley has its successes, but is rampant with many more failures. You know the story. A tech startup with tons of promise gets funding, grows like gangbusters, and then promptly and epically collapses. Often, it’s due to poor management by the CEO/Founder. These entrepreneurs may have had great products, but they lacked the ability to manage surging growth. Truly great leaders see through the chaos of rapid expansion and change.

Even an impeccable educational pedigree – Harvard and Wharton – could not fully prepare YPO member Luvleen Sidhu for the demands of being the CEO during astronomical growth. Inspired by her own bad experiences with traditional banks, Sidhu began BankMobile in her living room as the country’s first fee-free, all-digital bank. She aspired to attract 25,000 customers in the first year, and met her target fourfold!

It’s only been three years since the launch of BankMobile, yet, now with hundreds of employees, Sidhu has already made it the largest, fastest-growing digital bank in the industry, generating $75 million in annual revenues and opening 350,000 accounts per year. This kind of dramatic growth is a dream come true for many entrepreneurs, but it comes with its own set of unique challenges for the CEO. Sidhu is proving herself more than competent. Here is her advice to navigate your company through the storm of growth:

1. Go Within and Sit Still

Being a CEO is hard enough when the company is well-established and stable. When a business is experiencing rapid growth, the job is even more difficult, and the CEO has to find a way to maintain balance in life and in work. “With the many things that are thrown my way on a daily basis, my meditation and chanting routine help me stay focused in order to make the best decisions. It’s a chance to really align with my goals and what resonates with my heart personally and professionally,” says Sidhu. CEOs need to be grateful for the present moment and the opportunities that come, however pressure-packed. A centered, calm CEO makes rational decisions, not emotional ones that can slow growth as quickly as it started.

2. Master Your Internal and External Environments

When a business experiences growth as rapidly as BankMobile, it is often a disruptor in an existing industry. It is important for disruptor companies to keep their disruptor attitude. Sidhu recalls the words of Peter Diamandis: “You must disrupt yourself, or someone else will.” Sidhu is highly aware of her own industry. “On almost a daily basis, I assess what our strengths are, what makes us different from other fintech companies, and how to use these differences to create exponential growth. I also assess what threats currently exist in the marketplace and how to mitigate those risks.” Make sure you are constantly challenging yourself and the norms of your industry, because the business environment is fiercely competitive. You weren’t the first disruptor, and you certainly won’t be the last.

3. Find the Right People to Lead

Every leader needs a strong team for support, particularly in times of change. “Creating and implementing strategy starts at the top,” explains Sidhu. “If management isn’t fully committed to our plan of action, it will be almost impossible for them to share the company’s vision with their teams.” Sidhu is particularly a fan of Jim Collin’s best-selling book Good to Great, which advises “getting the right people on the bus in the right seats.” Having management buy-in from the very beginning on the vision for the company is a critical part of success. If there isn’t a process to find the right people before rapid growth, it will be nearly impossible to implement during the chaos of growth.

4. Create the Right Company Culture

Success also requires the right culture at every level of the company. Sidhu warns, “If employees don’t feel empowered or motivated at work, that will bleed into the type of products and services we produce and how we interact with our customers.” The solution, she says, is creating a culture that is “empowering, inclusive, and transparent.” Culture rot can quickly ruin a company, even one with good people and good products. And in a company where growth is rapid, culture rot can spread twice as fast.

5. Be Willing to Learn, Unlearn, and Relearn

When entrepreneurs meet with success, they can become isolated and set in their ways. Sidhu warns against complacency and over-confidence. “In many instances, my obstacles came by way of something that I thought I already knew. Never believe that you know it all. Change happens rapidly and constantly, so staying open to learning, unlearning, and re-learning is an important part of leadership.” With the right attitude, failure becomes an opportunity for betterment. Avoid clinging to your own preconceived notions or to how it’s usually done. This adaptability is particularly important when your company is growing fast.

6. Keep the Team Focused on the Big Picture

Sidhu likes to invoke Friedrich Nietzsche on the importance of focus: “The most basic form of human stupidity is forgetting what we are trying to accomplish.” The CEO of an expanding company is inundated with competing responsibilities, and it’s easy to lose sight of your goals. “With so many moving parts in running a business, it is easy to get lost in the day. It is important to have focus and never forget the big picture,” says Sidhu. “What is our why? How are our daily tasks helping to achieve our mission?” Don’t micromanage, but make sure you know that your management team is on the big tasks. What gets lost in the beginning of your company’s growth phase is difficult to resurrect later, so make sure your priorities are always in line.

7. If a Door Closes, Open Another One

When your company encounters a problem – and it will – look outside your industry’s box for a solution. BankMobile and other digital neobanks were struggling to acquire customers, and Sidhu wanted BankMobile’s solution to differentiate it from the competition. “Most of these banks were struggling with customer acquisition. We struggled for a short time as well trying to figure out our direct to consumer strategy, but then we figured out the secret sauce: distribution partners and white label banking.” Instead of using traditional, expensive, brick-and-mortar banking models of attracting clients, BankMobile went to the customers, finding banking partners with a built-in customer base in need of services. Don’t feel hemmed in by what your competitors are doing. Instead, intentionally try to do it differently and better. Treat every challenge as an opportunity, and you will constantly open yourself to new avenues for business and new relationships.

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How She Got There: Luvleen Sidhu, Co-Founder and Chief Strategy & Marketing Officer of BankMobile

Name: Luvleen Sidhu
Job Title and Description: Co-Founder and Chief Strategy & Marketing Officer of BankMobile
Website: www.BankMobile.com

What inspired you to start BankMobile?

Luvleen Sidhu: I remember opening my first bank account and I had to go into the bank branch and I waited there for 20-25 minutes. In terms of the line and the process it took to really open up the account, I just remember it being a completely frustrating, useless sort of use of my time—not really [that] great of an experience. On top of that, I remember asking her, “What other products and services do you recommend for me?” I was a college student at that time. She handed me this flyer that had a list of all their products and services on it and she was like, “Here you go. Take a look at this.” It just kind of opened my eyes to, number one, how antiquated and frustrating the experience is when you try to open a bank and deal with a bank. Number two, there’s zero customization or personalization. She just handed me a list of all the products that didn’t include anything customized to where I was in life. Three, understanding this industry more and more, I learned that it’s really unethical the sorts of fees that are being charged to people. Americans are being charged almost 32 billion dollars every year, and that’s just in overdraft fees. That’s more than what they spend on buying vegetables, three times more than what America spends on breast and lung cancer research. There are 68 million Americans [that] are underbanked and don’t have access to traditional finance services. The personal experience, plus this opportunity for the need of Americans to have access to affordable financial services, given that everything in life has a financial component and you really can’t succeed until you’re on a solid financial footing. Those are some of the things that got me inspired, got me excited about this opportunity to really transform this industry.

What does your current job entail? Is there such a thing as a typical day?

LS: One thing that I’m constantly focused on is how do we build our customer base. Number two, how do we get current customers to be very excited and loyal, and feel that we’re providing for them with a “wow experience.” That’s our mission. A typical day is really focused on what sort of marketing experience can we try to get people to know BankMobile, get excited about BankMobile. That includes everything from digital advertising to launching campus ambassador programs. Last September, we did grassroots marketing to street fairs in New York City, email campaigns and developed membership strategies because people might have the inertia to open an account even though they’re frustrated with their banking experience. So developing an easy, midway step like giving an email address and getting to know us so we can send educational finance content and learn what we’re about. It’s really about continuing to innovate to get people to know about BankMobile since we’re new, and get people excited about what we’re doing. Also, as the Chief Strategy and Marketing Officer, I kind of hit on the marketing side; but the strategy is why did we come into business? Our mission is to make banking fee-free. We’re the first bank in the country with absolutely no fees. Number two, effortless. Number three, financially empowering. What from a strategy point in terms of the products, services, technology and strategic partnerships can do to really get us toward fulfilling those missions? That’s what I work on, on a day-to-day basis.

What is the best part of your job?

LS: I would feel that, to me, it seems really, I guess, cliché—but when I meditate. I meditate every day, and it’s a chance to really align with my goals and what resonates with my heart as a person. At the most basic level, my goal in life is to be happy and to make others happy as well. When you translate that into my professional life, the way that I move on that purpose is by creating this company and building this company that is truly going to get people to be on solid financial footing so they can achieve their own dreams and feel that joy in their own life. I’d say the best part of my job is going back to our core mission of making people financially empowered and helping people get to where they want to be in life so they can feel fulfilled and happy at the end of the day. Getting your finances sorted and being on a solid financial footing is the basis to be able to springboard and do that.

Who is one person who changed your professional life for the better?

LS: My dad and I work together. We’re co-founders. He’s actually a veteran banker, a seasoned banker as he ran a bank called Sovereign Bank that was bought by Santander for 17 years. He really knows the banking space very well. I, being a millennial myself, tech-savvy, and understanding the needs and demographics of this generation—which is the largest generation, and going to be the most profitable over time. Our powers combined have really helped in setting BankMobile with where we are today with over 100,000 customers after just one year in business. He helps me on an everyday basis not just by helping me understand banking better, and this world that we’re in, but also just being a better leader. I have the opportunity to lead a team while I’m here, and learning from him that so much of leadership is actually emotional intelligence. How do we manage our emotions? How do we manage our relationships? How do we empower those that we work with? How do we inspire our customers? Through his experience in life so far, I really am able to learn from him these techniques that make me a better leader and a better businesswoman.

What is one mistake you made along the way and what did you learn from it?

LS: Personally, I’ve actually dealt with a lot of chronic pain. I really let it spiral out of control where I didn’t deal with it for months and months. It became very painful. It’s something I’ve been battling with for 6 years now. The mistake I made was not taking care of my body and my health, and not prioritizing that. What I’ve learned from that experience and healing myself is that it’s so important to be healthy—your mind and your body, and to take accountability for that, and to be in balance. Once you heal your mind and body and pay attention to taking care of yourself, you have the balance and groundedness to really excel in all aspects of your life including the professional aspect. That was a huge learning for me that I needed to focus on basics to excel everywhere in my life, especially BankMobile.

What has been the most surreal moment of your career thus far?

LS: I would say that when we started on January 14, 2015, we made a public announcement to our investors and publicly on the street that we would have 25,000 BankMobile accounts after one year of being in business. For us, this is already a stretch goal because if you look historically at the growth that banks see after being open for only five years, they only have 1,500 accounts. We were thinking of multiples of this when we put out our goal of 25,000. So, really, a surreal moment for me was being able to get over 100,000 accounts in just a year. Not only were we able to achieve our goal that was already really a high bar but exceeded exponentially. To me, that just showed me that when you are driven by a passion or a mission that is greater than just profitability and being a successful business, but more driven by changing people’s lives and having a bigger purpose, the other things in terms of accounts and profitability sort of follow. Having that in our mission was the driving force behind our growth.

What advice would you give to a 20-something with similar aspirations?

LS: I would say, as boring as it sounds, it’s so important to never give up. I feel that there’s so many times in life, whether it’s in your personal life or your professional, when you’re at a low point. It’s so easy to feel defeated, to feel hopeless and to not push forward. I feel that the biggest gift in life is this change in philosophy in life that I’ve had is to feel happier, wiser and stronger—mentally and physically. If you are on a mission for moving forward, moving your life forward in every way that you can each day and never giving up, that would be the most powerful lesson and I believe nothing can stop you with that attitude.

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