Jiko, the fintech startup that made headlines last year when it gained a national charter after purchasing a small Minnesota-based community bank, said it is pivoting from its consumer-focused model and accelerating its business-to-business strategy.
"We always had this idea that at some point we would open up the [application programming interfaces]. We knew from the beginning that it wouldn't just be for the app," said Jiko co-founder and CEO Stephane Lintner, adding banking-as-a-service (BaaS) was a vision the startup had "early in its DNA."
Shortly after Jiko’s acquisition of Mid-Central Federal Savings Bank, which is based in Wadena, Minnesota, Lintner said the startup began receiving numerous inquiries from other fintechs who were interested in leveraging its technology.
What makes Jiko’s services unique is that the platform replaces bank deposits with government-backed Treasury bills, which can be spent in real time by customers via debit transactions. The company says its debit card cash-back rewards program passes the interchange income back to the customer in the form of 1% cash back on qualifying purchases.
"So many people were excited about what we were doing and we got an immediate demand," said Lintner, a former Goldman Sachs trader. "So we started thinking strategically, 'Can we accelerate this?' And we all came to the conclusion that it was the right thing to do."
Lintner said the company poured all of its energy into opening up the platform as soon as it could, a project it spent the bulk of the past year on.
Several partners are already lined up, Lintner said, which are expected to go live in the coming weeks. The company is in active conversations with around 40 other potential partners, Lintner added.
Jiko’s banking app is still available for consumers to download, and the company plans to keep enhancing its features, but its main use will serve as a "showroom" for Jiko’s technology, Lintner said.
As an example of Jiko’s capabilities, Lintner pointed to a large transaction the platform facilitated this year.
In February, the company announced it processed a $4.7 million debit card transaction as part of its 1% cash-back rewards program. The company claims the single transaction, a tax payment to the IRS made with Jiko’s debit card, resulted in $47,000 cash back to the customer, deposited directly into the customer’s account.
"It shows that we can do large things — process large, million-dollar payments — and have a lot of money leave the bank because we have T-bills behind it," said Lintner, who claims the debit card transaction was the largest of its kind in history.
Lintner said he is confident Jiko’s B2B focus — or "B2B2C focus," as he calls it — opens up the startup to a large market.
"We have a massive opportunity to deliver our product and our vision at scale by embedding our digital product in your favorite brands. Because of who we are and how we built this, we basically have infinite scale," he said. "We really are one big infrastructure play that can power everyone up but still protect the consumer. ... We're not going to be spending large campaigns on the consumer, trying to get people to download the app or referrals — we’ll continue to do some of that — but the real focus is on our partners."
Jiko isn’t the first fintech to shift its focus from a direct-to-consumer model to a business-to-business one.
When faced with mounting competition in the consumer digital banking space from challengers like Chime and Varo Bank, BM Technologies — back when it was known as BankMobile — made a similar pivot.
BM Technologies, which was spun off from Customers Bank last year, turned its focus to B2B in 2016 after realizing it could carve out its own space in the market by offering banking services to large nonbank entities, CEO Luvleen Sidhu said at a conference in September.
The pivot paid off, Sidhu said, adding its partnership with T-Mobile helped the company grow T-Mobile Money into a $1 billion bank in less than two years.
Lintner said Jiko is seeing interest from lifestyle apps, new and established fintechs, as well as banks.
"We're having interesting conversations with banks — banks that have too many deposits and want to compete with the fintechs but are not sure how to do it," he said. "It's an interesting landscape. We're launching a few this year. There'll be a lot more next year."