Novo, a digital bank for small businesses, has launched several new products aimed at accommodating the growth it has seen by taking on users who migrated to the platform from Azlo, ahead of that startup's upcoming shutdown.
Novo, which launched in 2018, said it gained 20,000 former Azlo customers in the 2½ months since Spanish lender BBVA said it plans to shutter its two subsidiary digital banks: Simple, and the entrepreneur-focused platform Azlo.
The announcement came about two months after BBVA agreed to sell its U.S. retail arm to Pittsburgh-based PNC for $11.6 billion.
"We're focused on the things that make the most sense for the company's future whether on a standalone basis or a potentially combined basis with PNC," BBVA said in January. "As a result, today we're accelerating some changes and stopping work on others."
The surge in former Azlo users, which is expected to increase Novo's customer count to 60,000 by the end of this month, has spurred the digital bank to launch new features including invoicing and budgeting — services Azlo provides, said Novo CEO Michael Rangel.
"We spent a lot of time figuring out what the demographics of their user base were, how healthy the portfolio was, and if this was an extension of customers that we wanted to acquire," Rangel said. "These people were kind of left out in the cold. They're hearing, 'Your bank's shutting down and you have to go somewhere else.' So to try and build that bridge, we connected with the Azlo execs and said, 'How do we build the best home for your customers and welcome them with open arms?'"
While the new invoicing and budgeting features were not part of Novo's original product roadmap, Rangel said it became clear after meeting with Azlo's team that Novo needed to launch the products to accommodate former Azlo customers.
"We decided to build it and deploy it in a very fast, iterative period to start servicing and start extending those products to the Azlo customers themselves. That was one of the ways that we built out a better home for them,” Rangel said.
Novo also built a tool that gives Azlo customers a checklist of transactions coming in and out of their Azlo accounts that need to be switched over to their new Novo account.
Before PNC and BBVA's merger plans resulted in the planned shutdown, Azlo launched a subscription-based banking service in September that bundled the platform's invoicing and automated budgeting services for $10 a month.
Rangel said he has no plans to take Novo in a similar direction.
"We're not trying to charge one flat fee [Software-as-a-Service]," Rangel said. "We actually think of it more as an à la carte menu or an app store — paying for the apps that you want to build into your business banking experience. That's the cool stuff that we're thinking about internally and the exciting stuff that we'll start seeing more mentions of later this year."
Rangel said he thinks there will continue to be demand for niche-focused platforms like Novo that aim to serve the small-business market.
"You have the bigger challengers out there, like Chime, that are still trying to catch up to [the retail market], leaving the business segment much more underserved," he said.
The small businesses that Novo serves land between $25,000 and $500,000 in annualized revenue, Rangel said.
"There are a lot of tangential similarities between the Chime segment being paycheck-to-paycheck and a large part of the Novo customer base being invoice-to-invoice," he said.
Novo, whose deposits are held at Federal Deposit Insurance Corp. (FDIC)-insured Middlesex Federal Savings, said its platform processed more than $600 million in customer transactions last year.