NEW YORK CITY — An early decision to pivot from a direct-to-consumer model to a business-to-business one was a critical step in the evolution of BankMobile, now BM Technologies, said the banking-as-a-service (BaaS) provider’s CEO, Luvleen Sidhu, during a fireside chat at the Finovate Fall conferenceTuesday.
The company, which was incubated by Customers Bancorp for five years before its spinoff in August 2020, was up against mounting competition in the consumer digital banking space from challengers like Chime and Varo, whose advertising budgets were difficult to match.
"We found out pretty early on that our pillar of being able to have a profitable, sustainable model — and as fast as possible — wasn’t happening. The cap was really high. We weren't getting the sort of engagement and direct deposit customers, which are critical in banking," said Sidhu, who co-founded BankMobile in 2014. "It's challenging when you have other challenger banks spending half a billion dollars on marketing, and that's why we pivoted."
After turning its focus to B2B, the company soon realized it could carve out its own space in the market by offering banking services to large nonbank entities.
"In 2016, we took a B2B approach and started implementing [BaaS], our strategy today, which I think over the last 18 months has become a buzzword in this industry," she said.
BM Technologies, as it was called after it was acquired for $140 million by special-purpose acquisition company Megalith Financial Acquisition Corp. last year, secured its largest partnership with T-Mobile in 2019, a deal that allows the wireless carrier to offer its more than 100 million customers a checking account.
The pivot to B2B quickly paid off, Sidhu said. In less than two years, T-Mobile Money became a $1 billion bank, she said.
Key to BM Technologies’ growth has been its ability to recognize early on the additional ways to monetize the company’s services and reach customers, Sidhu said.
"There are other ways we can monetize the strategy and still remain dedicated to our vision and our mission, which is to create a better banking experience for millions of Americans by utilizing technology," she said.
BM Technologies’ partnerships with more than 735 colleges and universities has also proved an efficient method of acquiring customers at a low cost.
"[Colleges and universities] disperse billions of dollars a year in financial agreements and other payments to their students. It's a pain in the butt and operationally and financially expensive for them to do," Sidhu said. "We take that over for them and in return, we've created an extraordinary customer acquisition model where we touch one in every three college students."
The company is able to acquire customers at less than $10, Sidhu said. Average balances are $8,000, and direct deposit accounts for at least 20% of the company’s portfolio, she added.
"It’s all about continuing to be innovative and finding new distribution channels … while still getting to that end product that the consumers love," Sidhu said.
BM Technologies is betting on the ability to enter into more partnerships like its T-Mobile tie-up as it looks to grow.
"There are nonbanks out there, especially larger brands, that have entrenched customer bases, and they are looking for ways to continue to attract and retain those customers, create more loyalty, differentiation, and they're looking for new revenue streams," Sidhu said. "T-Mobile was one of the first players to use financial services as a way to check the box in terms of those strategic opportunities."
BM Technologies is also one of 11 financial institutions partnering with tech giant Google to offer co-branded "Plex" bank accounts through Google Pay. The accounts are expected to launch before the end of this year.